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Delivery gave Chipotle sales a lift. But that's a problem

CNN logo CNN 10/21/2020 By Danielle Wiener-Bronner, CNN Business
a person holding a sign: Chipotle is testing higher delivery prices. © David Paul Morris/Bloomberg/Getty Images Chipotle is testing higher delivery prices.

Delivery is soaring in popularity as people order in instead of going to restaurants in the pandemic.

That's not entirely good news for Chipotle.

The company said on Wednesday that while delivery helped send its revenue up 14% in the quarter ended Sept. 30, the costs associated with that hurt its profit. Shares of the company fell about 4% after it reported the results.

Chipotle CFO John Hartung said that to help improve the economics of delivery, the company is testing out delivery price increases — anywhere from 7% to 17% on delivery menu items.

One reason that delivery is so expensive for Chipotle and other restaurants is that third-party delivery platforms, like Grubhub and Uber Eats, can charge commission fees of about 30% per order. The fees mount when the portion of delivery sales rise compared to dine-in or takeout orders, as they have during the pandemic

It also doesn't help that people have been ordering lower-margin foods, like steak, when they get delivery, Hartung said. They also order fewer beverages, which have high margins, and take advantage of freebies like tortillas. That means free tortillas could be on the chopping block, he added.

Chipotle said that nearly half of its sales for the quarter came through the company's digital platforms, which include its app, website and third-party providers. The company's net income was $80.2 million for the quarter, down from $98.6 million a year earlier.

At restaurants open at least a 13 months, sales grew 8.3%.

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