Can Smarter Kitchens Help Chipotle Protect Its Margins?

Chipotle Mexican Grill, Inc. CMG is doubling down on operational efficiency amid a challenging consumer backdrop. The company has increased its focus on modernizing kitchen operations to support long-term margin expansion. 

To offset rising costs and drive higher productivity, Chipotle is rolling out a suite of high-efficiency kitchen equipment, including a produce slicer, dual-sided plancha, high-capacity fryer and three-pan rice cooker. The enhancements are designed to reduce prep time and labor friction while ensuring culinary consistency. Management noted that restaurants already utilizing the produce slicer are demonstrating improved throughput, better labor deployment and more standardized ingredient quality.

Chipotle is targeting full deployment of the slicer by the end of second-quarter 2025 and plans to expand the broader equipment package to 100 existing restaurants in the full year. The company is optimistic and anticipates the initiative to enhance productivity and supply-chain savings. 

CMG is also progressing on two internally co-developed technologies — Autocado, an automated avocado prep tool, and an augmented digital makeline. Both have undergone multiple testing cycles and recently returned to the field for further in-store validation. The company remains optimistic that these innovations will unlock additional productivity gains without compromising its food-with-integrity model. 

While Chipotle anticipates margin efficiency from these investments, a portion of the savings will be reinvested in the business to support team deployment during peak hours and elevate the in-restaurant experience. These reinvestments align with the company’s “guest-obsessed” philosophy and its strategic goal of preserving culinary quality while scaling effectively.

Peer Comparisons

Shake Shack Inc. SHAK is executing a parallel operational revamp, focused on margin expansion through process improvements, labor model redesign and supply-chain optimization. In the first quarter of 2025, Shake Shack reported a 120 basis points (bps) increase in restaurant-level margin to 20.7%. Shake Shack is rolling out combo-based digital menu boards across 40 drive-thrus, simplifying order flow and boosting guest satisfaction. Management is guiding for a 50 bps increase in its restaurant-level profit margins over the next three years.

Sweetgreen Inc. SG continues to bet heavily on automation through its Infinite Kitchen format. In the first quarter, Infinite Kitchens demonstrated strong unit economics. Sweetgreen plans to unveil this format in 20 of its 40 new openings in 2025. The company is also mitigating tariff risk on kitchen components, with about 15% of each Infinite Kitchen's cost exposed to Chinese imports. Sweetgreen anticipates achieving a restaurant-level margin of approximately 19.5% in 2025.

The Zacks Rundown for CMG Stock

Chipotle’s shares have gained 5.8% in the past three months against the industry’s decline of 2.2%.

From a valuation standpoint, CMG trades at a forward price-to-sales ratio of 5.39X, significantly higher than the industry’s 4.00X.

The Zacks Consensus Estimate for CMG’s 2025 and 2026 earnings implies a year-over-year uptick of 8% and 17.7%, respectively. The estimate for 2025 has remained unchanged in the past 30 days.

Chipotle stock currently has a Zacks Rank #4 (sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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