Earnings   //   July 20, 2021

Chipotle’s new recruitment strategy signed on 5,000 new employees

While Chipotle’s sales are rising quickly, its main goal right now is continuing to find enough workers for positions at the 200 new restaurants it plans to open in 2021.

One of the biggest areas of focus for the fast-casual restaurant chain this quarter was testing out ways to appeal to new workers, and retain existing ones in an increasingly crowded job market. To win new talent and outpace other fast-casual chains, Chipotle raised its minimum wage, recruited via social media and invested in a mental health app for current employees. Thanks to these initiatives, Chipotle hired 5,000 new employees and opened 56 new restaurants over the second quarter.

This was announced on Tuesday afternoon, during the restaurant’s earnings report. There, Chipotle disclosed that revenues increased 38% year over year in the second quarter of 2021 to $1.9 billion. Chipotle benefitted this quarter from increased digital sales — up 10% year-over-year and now accounting for 48% of total sales — and better margins from its increased menu prices.

Chipotle announced in February that it was planning on opening 200 stores — its biggest expansion since 2016. But Chipotle is looking to court new workers amidst a nationwide worker shortage across low-wage retail and food, with food companies from McDonald’s to Subway attempting to hire new employees for tens of thousands of positions across the U.S.

The new hiring strategy

In May, Chipotle announced vacancies for 20,000 roles alongside a pledge to raise wages to between $11 and $18 an hour, averaging at $15 nationwide. In the same announcement, the company also introduced referral bonuses for employees who brought in new team members and emphasized employees’ ability to advance to top manager positions with $100,000 salaries in under three and a half years. This quarter, the company reported that it had 102,000 employees as of June 30, up from 97,000 employees as of March 31st.

“We’re providing industry-leading benefits including a new virtual mental health platform, expanded debt-free degrees, attractive wages that were recently increased to an average of $15 per hour, specialized job training and development and significant career advancement opportunities,” said Brian Niccol, chairman and chief executive officer during the retailer’s Tuesday earnings call.

In addition to raising wages, Chipotle is also looking to recruit talent in new ways on social media. Earlier this month, Chipotle joined Target, Sweetgreen and others in recruiting on TikTok’s new TikTok Resumes service.

The program moves applications from paper to video, asking prospective employees to explain their “resume” on their TikTok page. While many roles on the platform are one-off postings for salaried video or social media marketing positions, Chipotle has the most listings on the TikTok Resume platform of any brand or retailer, with 117 entry-level restaurant team member openings listed as of July 20.

“Given the current hiring climate and our strong growth trajectory, it’s essential to find new platforms to directly engage in meaningful career conversations with Gen-Z,” said Marissa Andrada, chief diversity, inclusion and people officer in a press release about the initiative. “TikTok has been ingrained into Chipotle’s DNA for some time and now we’re evolving our presence to help bring in top talent to our restaurants.”

Brandon Rael, a client delivery transformation leader at consultancy Reach Partners, applauded the strategy. “It’s high time we reimagine what the modern digital-first resume and portfolio of work look like,” said Rael. “While [TikTok resumes] certainly won’t replace the [traditional] resume or talent search model, it will inject a necessary level of creativity and uniqueness that resonates with Gen Z.”

This follows Chipotle’s efforts in May to recruit candidates on instant messaging and chat platform, Discord. A Chipotle digital job fair on Discord — the first of its kind — drove 23,000 job applications, reported Business Insider.

Finally, the brand is also hoping to retain its new and existing talent via a virtual mental wellness platform for employees. In partnership with corporate wellness solutions company Aduro, Chipotle launched Strive, a 1:1 coaching and support app that gives employees the opportunity to win gift cards and save money on health insurance after meeting set wellness goals. The efforts, explained Andrada in a press release, were inspired by employees’ usage of Chipotle’s pre-exisiting mental health benefits during the pandemic.

“The competition for workers is significant and will worsen despite the expiring unemployment programs from the Covid-19 pandemic,” said Mohamed Amer, a board and startup advisor and former vp of executive communications at software company SAP, over email.

Rising costs

These recent moves did come with a financial toll. At the same time that Chipotle is raising wages, it also raised prices on its items by 4%, or about 30 to 40 cents across its menu. CFO Jack Hartung warned about a price hike to menu items to accommodate increased wages at the company’s first quarter earnings in April, and the company officially enacted the hike in June.

In this quarter’s earnings call, Niccol said the brand has experienced “very little resistance” to the price raise from consumers.

Wage increases aren’t the only big shift Chipotle experienced. Rising ingredient costs are also a growing concern across the food industry and Chipotle’s revenues were slowed by the rising costs of avocados, announced Chipotle’s second quarter earnings press release. However, at an industry conference in June, Hartung said the company didn’t have any concrete future plans to raise prices because of rising ingredient costs and confirmed the uncertainty of an additional price raise during the retailer’s second quarter earnings call.

“The company’s most significant challenge for the next year or so is managing the inflation risks on the ingredients and wage fronts while ensuring that demand is not impacted negatively by raising prices on the existing premium pricing model,” said Amer.

To end the earnings call, Niccol expressed confidence in Chipotle’s hiring strategy. “I’m convinced, more than ever, that we have the right team, the right culture, and the right strategies to allow Chipotle to be a premier growth company for many years to come.”