Dive Brief:

• Chipotle is testing radio-frequency identification technology at its Chicago distribution center and about 200 restaurants in the Greater Chicago region to improve its traceability and inventory systems, the company announced last week. The fast causal chain partnered with Auburn University RFID Lab to develop the test. 
• The RFID labels will be used on meat, dairy and avocados from five Chipotle suppliers. Ingredients being tested will have RFID-enabled case labels that are scanned with RFID readers, which complement existing scanners in restaurants. 
• This RFID technology, which will be used to trace food from suppliers to restaurants using serialization, is designed to allow Chipotle to respond to food safety and quality concerns more efficiently.

Dive Insight:

Chipotle has come a long way since it faced several food safety issues from 2015 to 2018. During this time, over 1,000 people were sickened by E. coli, and management's lackluster response led to a slip in sales. The company agreed to a $25 million settlement with the Department of Justice in 2020. As part of that settlement, Chipotle committed to continuing to improve its food safety policies and procedures. The RFID technology will make it easier for the company to respond to any food safety issues.

"RFID labels transform inventory management into an automatic, digital function that optimizes restaurant operations and gives our Restaurant Support Centers access to inventory data in real-time," Scott Boatwright, chief restaurant officer at Chipotle, said in a release. "This integrated technology is improving our employee experience in participating restaurants while also benefiting our supply partners." 

Chipotle's suppliers added the RFID technology using the burrito chain's specifications. The company said it expects suppliers will save time on inventory management and stock rotation, reduce human error and improve expiration date visibility and accountability. The chain is using its stage-gate testing process for the RFID tech and will incorporate feedback from employees and suppliers before it looks into a systemwide rollout. The company has been developing this program for two years, Laurie Schalow, chief corporate affairs and food safety officer at Chipotle, said. 

An RFID system could also potentially reduce food waste, which will be key given ongoing issues related to rising food costs and supply chain disruptions. Many restaurant employees manage inventory manually, so an RFID system could help employees better track inventory and reduce time spent doing checks. Some systems can send alerts on products nearing expiration. 

Chipotle's food costs increased 60 basis points to 31.6% in Q4 2021 compared to the previous year's quarter, CFO Jack Hartung said during the company's Q4 2021 earnings call. Labor costs also rose 100 basis points during Q4 to 26.4% compared to the previous year's quarter, Hartung said. 

Combined with a labor scheduling tool, which the company is also rolling out, the back-of-house RFID technology can improve overall operations and boost customer satisfaction. CEO Brian Niccol said during the earnings call that its labor scheduling tool uses artificial intelligence and analytics to help employees avoid running out of product.

"If we can give them tools where they don't have to worry about making too much or not making enough, it just makes their job so much easier. It eliminates one stress. They don't want a disappointed customer," Niccol said.