Chipotle hopes new $50m fund will continue its ‘technological transformation’

US fast-food chain Chipotle has launched Cultivate Next, a venture fund that will invest in early-stage startups developing food and restaurant tech that lines up with the company’s own growth goals.

Cultivate Next, run by Chipotle chief technology officer Curt Garner, will invest in startups at seed to Series B stages with solutions that can improve employee and guest experiences. The fund’s initial size is $50 million and financed solely by Chipotle.

On background:

The launch of Cultivate Next comes after several years of Chipotle testing and implementing numerous restaurant tech initiatives across its business:

• In partnership with Miso Robotics, Chipotle is currently testing an AI-powered kitchen robot named Chippy to prepare tortilla chips.
• The company has also implemented an AI and analytics tool from Zip Schedules to manage staffing and scheduling requirements.
• Chipotle is testing radio-frequency identification (RFID) tech for inventory systems at its Chicago distribution center and about 200 Chipotle locations in the Chicago area.
• Last year, the company invested in self-driving delivery startup Nuro.
• On Chipotle’s recent fourth-quarter earnings call, CEO Brian Niccol said the company’s “technological transformation” has been an important growth driver over the last few years.

Why it matters:

According to the company’s fourth-quarter earnings call, Chipotle plans to grow to 7,000 restaurant units over the long term and will invest in the kinds of innovations that can foster such growth. This is where the Cultivate Next fund comes into play.

“We are looking to make investments that will increase guest access to Chipotle as well as elevate the human experience for our teams,” Garner told AFN over email. He adds that this could be “anything from innovations in farming and supply chain, to advanced robotics, and beyond, as long as it helps further our mission to cultivate a better world.”

Chipotle has not yet provided more specifics about the types of companies it will look for beyond them being early stage. The fund is currently accepting companies on a rolling basis.

Garner adds that Chipotle is “open to growing the fund” beyond its initial $50 million and has the option to accept outside capital.

Bigger picture:

Cultivate Next launches as the restaurant industry continues its long, slow recovery from Covid-19 while facing rising inflation, and higher food and labor costs overall. The latest report from the US-based National Restaurant Association predicts food, labor, and occupancy costs will “remain elevated, and continue to impact restaurant profit margins in 2022.” This will put even more pressure on businesses large and small to find ways to slash margins and increase efficiencies from the front of house to the back.

Even more recently, foodservice-focused research firm Technomic flatly stated, “Make no mistake: 2022 is all about labor, supply disruption, and inflation.” However, Technomic noted in the same blog post that “while these issues will continue making headlines across global markets, they will also spur lasting innovations that will ultimately put foodservice back on the path to long-term prosperity.”