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Why Chipotle isn't being hurt by California's crackdown on restaurants amid COVID-19 spike

Brian Sozzi
·Editor-at-Large
·3 mins read

California’s decision to crack-down again on eating inside of restaurants because of spiking COVID-19 infections hasn’t yet hurt Chipotle (CMG) in what is its largest market.

The same appears to be the case for Chipotle in other states that have reimposed dine-in restrictions.

“Virtually all of our restaurants have a patio so we are able to keep the patio open. If you want to order in the restaurant and pick up and have a place to eat there, they can eat on the patios. The reality is even in the areas where the dining rooms are still open, the vast majority of our customers are coming into order through the line and they take their food to go. So it’s not really having much of an impact at all,” Chipotle CFO Jack Hartung told Yahoo Finance’s The First Trade. “We are hoping in California that this re-trenching will bend the curve a little bit so things will open up going forward. So far, no real impact on us.”

About 17% of Chipotle’s 2,650 global restaurants are in California.

While Chipotle made its name on coming inside to sit down and eat giant burritos, it has proven to become an expert at delivery (thanks to deals with GrubHub, Uber and Postmates) and ordering-ahead technology during the pandemic. In turn, that has kept Chipotle’s financials more than above water compared to scores of restaurants struggling right now.

A temporary closed sign sections off a Chipotle restaurant for social distancing to protect from the coronavirus  in Los Angeles on Monday, July 20, 2020. Mayor Eric Garcetti conceded Sunday that Los Angeles reopened too quickly and again warned that the city was "on the brink" of new shutdown orders as the coronavirus continues to surge in California. (AP Photo/Richard Vogel)
A temporary closed sign sections off a Chipotle restaurant for social distancing to protect from the coronavirus in Los Angeles on Monday, July 20, 2020. Mayor Eric Garcetti conceded Sunday that Los Angeles reopened too quickly and again warned that the city was "on the brink" of new shutdown orders as the coronavirus continues to surge in California. (AP Photo/Richard Vogel)

Chipotle reported that second quarter digital sales surged 216.3% from the prior year as sales shifted online. Same-store sales in July are tracking up 6.4% after dropping 9.8% in the second quarter with gains being seen for orders inside restaurants and digitally.

“Big picture, Chipotle is firing on all cylinders and we don't see anything from [earnings] that will call into question its long-term trajectory,” said Deutsche Bank analyst Brian Mullan.

Apparently neither does Chipotle as it plans to push forward with new product introductions such as organic drinks and cauliflower rice (yes, cauliflower rice).

“It’s delicious. So we are excited about it. The buzz about the cauliflower rice from our customers is fantastic. Now they are in the trial mode. If it goes well, we will want to see a test for a couple of months. If it sustains and does a great job, which we are optimistic about — we don’t have a date in mind - but it will be in other markets in the not too distant future,” Hartung added.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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