Edited Transcript of CMG earnings conference call or presentation 4-Feb-20 9:30pm GMT

DENVER Feb 21, 2020 (Thomson StreetEvents) — Edited Transcript of Chipotle Mexican Grill Inc earnings conference call or presentation Tuesday, February 4, 2020 at 9:30:00pm GMT

Chipotle Mexican Grill, Inc. – Head of IR

* Brian R. Niccol

Chipotle Mexican Grill, Inc. – CEO & Director

* John R. Hartung

Chipotle Mexican Grill, Inc. – CFO

* David E. Tarantino

Robert W. Baird & Co. Incorporated, Research Division – Director of Research and Senior Research Analyst

Evercore ISI Institutional Equities, Research Division – Senior MD & Fundamental Research Analyst

UBS Investment Bank, Research Division – Director and Equity Research Analyst of Restaurants

Goldman Sachs Group Inc., Research Division – VP & Derivatives Research Strategist

Sanford C. Bernstein & Co., LLC., Research Division – Senior Research Analyst

Good afternoon and welcome to the Chipotle Mexican Grill Fourth Quarter and Fiscal Year-End 2019 Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ashish Kohli, Head of Investor Relations. Please go ahead.

Ashish Kohli, Chipotle Mexican Grill, Inc. – Head of IR [2]

Hello, everyone, and welcome to our fourth quarter and fiscal year-end 2019 earnings call. By now, you should have access to our earnings press release. If not, it may be found on our Investor Relations website at ir.chipotle.com.

I will begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements, including projections about comparable restaurant sales growth, new store openings, our effective tax rate and expected G&A expenses. These statements are based on management’s current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Qs for a discussion of risks that may cause our actual results to vary from these forward-looking statements.

Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the Presentation page within the Investor Relations section of our website.

We will start today’s call with prepared remarks from Brian Niccol, Chief Executive Officer; and Jack Hartung, Chief Financial Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session.

And with that, I’d like to turn the call over to Brian.

Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [3]

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Thanks, Ashish, and good afternoon, everyone.

We had a strong ending to 2019 as Q4 marks the eighth consecutive quarter of accelerating comparable sales, which highlights that running great restaurants with the right leaders and the right culture delivers outstanding performance. Our guests love what they see in our restaurants, and our team members deserve all the credit. They are more passionate and committed than ever to delivering on our purpose of cultivating a better world.

For the quarter, we reported sales of $1.4 billion, representing 17.6% year-over-year growth, which was fueled by 13.4% comparable restaurant sales growth that included 8% transactions growth; restaurant-level margins of 19.2%, which is 220 basis points higher than last year; earnings per share adjusted for unusual items of $2.86, representing 66% year-over-year growth; and digital sales growth of 78% year-over-year, representing 19.6% of sales.

Full year results also showed great progress, with sales growing 14.8% to reach $5.6 billion driven by an 11.1% comp with 7% transaction growth; restaurant AUV above $2.2 million; margin expansion of 180 basis points to 20.5%; and digital sales of $1 billion, which grew 90% versus the prior year.

These results were driven by the same 5 key fundamental strategies that I’ve mentioned previously: number one, making the brand more visible and loved; number two, creating innovations, utilizing a stage-gate process; number three, leveraging our digital make line to expand access and convenience; number four, engaging with customers through our loyalty program; and number five, running successful restaurants with a strong culture that provides great food, hospitality, throughput and economics.

While Chipotle had an excellent 2019, what excites me the most is that we are just getting started. I believe we have the opportunity to continue to expand AUVs, margins and store count over time. Our strategy has plenty of runway that should help drive healthy comps in 2020 while also improving flow-through.

Let me provide you an update on each of these strategies, beginning with our marketing programs, which are designed to increase transactions and grow sales by driving culture, driving a difference and ultimately driving purchases. We continue to iterate our national For Real TV campaign to showcase our real ingredients, fresh food and the culinary skills of Chipotle team members in action. These ads are honest, transparent and highly effective at driving awareness and reminding customers what makes Chipotle great and a brand they love. This campaign is connecting with our customers as evidenced by significant increases across almost all major drivers of brand strength, including trust and favorite brand in our consumer brand tracker.

Our various marketing initiatives across both traditional and digital channels were successful in attracting new users to Chipotle as well as motivating existing customers to come more often. Importantly, we saw healthy transactions growth in 2019 without relying on short-term promotions. Although our overall marketing budget relative to 2018 remained consistent at 3% of sales, the promo portion was actually reduced by 15% and follows a sizable reduction in 2018 as well.

There’s no doubt that marketing helped drive impressive sales during 2019. And based on the plans we have in place, I expect more of the same in 2020. Chipotle will continue to have a presence in national media where and when it makes sense. We will be a part of culturally relevant events, and we have an always-on social and digital program. Our marketing efforts this year were elevated because we used the stage-gate process to develop innovation that leads food culture and meets guest requests.

We are pleased to have rolled out several successful menu items that were validated by this process. This included our pre-configured diet-driven Lifestyle Bowls, which were launched in January 2019 and received terrific feedback as they showed that whatever lifestyle or diet you want to pursue, Chipotle’s real ingredients are a perfect fit. We recently enhanced this platform by adding a new Supergreen salad mix composed of hand-cut romaine, baby kale and baby spinach as well as a Whole30 chicken to provide guests with specific dietary goals more options.

The other noteworthy new item was carne asada, which was launched in September and will transition out by the end of the first quarter. This premium steak continues to exceed our expectations. As a result, our supply chain team is exploring options to see if we can add this as a permanent menu item at some point in the future, contingent, of course, on us finding enough supply of high-quality ingredients that meet our Food with Integrity standards.

As you think about 2020 and beyond, our goal is to continue introducing 1 to 2 new menu items on average per year. Our pipeline remains robust with Queso Blanco, quesadillas and beverages currently being tested in various markets. In fact, Queso Blanco has recently been validated via the stage-gate process, allowing for a national rollout and replacement of our existing queso shortly.

Additionally, we have several items in the early stages of testing. We will keep you updated on their progress over time. The key takeaway here is that the stage-gate process is working as expected and gives me confidence that future innovations will delight our customers, ensure a seamless integration into our current operations and derive a financial benefit.

Let’s move now to the third key initiative: our digital platform designed to reduce friction while increasing convenient access. The progress we’ve made here continues to be a standout story. Over the course of 2019, we significantly upgraded our capabilities by completing the rollout of digital pickup shelves, digitizing our digital make line and expanding our delivery capabilities to over 98% of our store base. During Q4, these efforts resulted in digital sales of $282 million, which grew 78% year-over-year and represented 19.6% of mix. In just 3 years, we have quadrupled the digital business, achieving over $1 billion in sales during 2019.

Moving forward, I’m really excited by the latest addition to our digital flywheel, the Chipotlane, which is off to a great start. Customers love the fact they don’t have to get out of their cars as well as having a pickup time that is significantly faster than a traditional drive-thru. We continue to see overall digital penetration for a Chipotlane restaurant in the high 20s with the majority of this being driven by our highest margin order ahead and pickup transaction. We will more than double the number of Chipotlanes in 2020 because our guests love the convenience and it strengthens our economic model by making our highest-margin channel more accessible.

The next potential piece to enhance our digital offering is a new restaurant design that helps evolve our mobile pickup shelves to an integrated digital pickup portal. We recently began to test several formats, including one with a walk-up window across from Wrigley Field in Chicago. This 2,000-square-foot restaurant is slightly smaller, has fewer seats, a customer-facing grab-and-go beverage case and digital pickup shelves near the front door for easy access. By better suiting our restaurants to accommodate the digital business, we will be able to provide a better overall experience for our guests.

Now that we have many of these digital tools in place, 2020 will be about using them more efficiently and really leveraging our rewards program, which currently has more than 8.5 million enrolled members and is one of the fastest-growing restaurant loyalty programs in history. While in 2019, we focused on member growth, in 2020, we will not only further increase enrollment, but more importantly, look to optimize the use of database marketing to incent behaviors as we build out our CRM capabilities.

Personalization and engagement are the cornerstones of our evolving loyalty strategy. We are encouraged by the early signs of transaction increases across all frequency bands. We expect this lever to become a bigger driver in the future as we gain more experience gathering customer insight while continuing to expand our digital ecosystem.

This brings me to the most foundational ingredient of having a successful restaurant company: operational excellence, which comes from great leaders, building great teams who create equally great guest experiences. We continue to focus on outstanding execution by being brilliant at the basics. This requires a significant investment in our more than 83,000 employees with regard to career development as well as offering industry-leading benefits. Recent enhancements such as debt-free degrees, crew bonuses and mental health benefits help differentiate the Chipotle brand. Nowadays, employees want more than just wages from a potential employer. They are seeking the right culture and the right skills to help them grow, both professionally and personally. Additionally, our purpose around Food with Integrity and cultivating a better world also provides us a competitive advantage in this tight labor market.

Within our restaurants, we believe the general manager is the most important position to improving operational health and ensuring a great customer experience. During 2019, this emphasis on our general managers resulted in exceptional food that is being prepared more consistently, better stability with turnover being reduced by around 35% and nearly a 10% improvement in our Max 15-minute throughput KPI, aided by training and a laser focus on the 5 pillars of throughput. This success reinforces that continuing to develop, grow and invest in our GMs is the right approach to creating an environment that allows our employees to be in a position to win not only today but also in the future. We’ve made good progress this year on our operational goals but still have plenty of opportunity as we strive to be better today than we were yesterday, a message we will reinforce at our All Manager Conference in March.

In closing, I believe our strong performance this year highlights that our strategies are working and the Chipotle brand is thriving. I am really proud of what we accomplished in 2019 and want to thank all of our employees for winning today and creating a bright future. We’re building a successful, durable model, and by staying focused on our priorities and executing flawlessly while providing customers with the unique Chipotle experience, I’m confident we will be successful for many years to come.

With that, here’s Jack to walk you through the financials.

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [4]

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Thanks, Brian, and good afternoon, everyone.

Once again, we delivered outstanding financial performance in the fourth quarter as comps and margins continue to expand, highlighting our strong economic model. Sales were $1.4 billion in the fourth quarter, an increase of 17.6% from last year. Comp sales grew 13.4% in the quarter, which includes no net impact from our rewards program. Deferred revenue from our rewards program was essentially offset by a refined breakage rate assumption for chips and guacamole as we gather more historical data. Moving forward, as we begin to lap the launch of our loyalty program, we expect quarterly deferrals to have a modest impact on our comp.

Restaurant-level margins of 19.2% expanded 220 basis points over last year. And earnings per share adjusted for unusual items was $2.86, representing 66% year-over-year growth. The fourth quarter had unusual expenses related to our transformation as well as legal reserves that negatively impacted our earnings per share by $0.31, leading to GAAP earnings per share of $2.55.

For the full year, sales increased 14.8% to $5.6 billion on a comp increase of 11.1%. Restaurant-level margins were 20.5%, an increase of 180 basis points. And we generated earnings per share adjusted for unusual expenses of $14.05, an increase of 55% over last year. Unusual expenses mostly related to transformation and legal reserves negatively impacted earnings per share by $1.67, leading to GAAP earnings of $12.38.

We’re pleased that our unit economics strengthened in 2019, with average volumes now exceeding $2.2 million and restaurant margin reaching 20.5%. This margin included temporary pressure from carne asada and avocado pricing, without which our restaurant-level margins would have been just over 21%, which is within striking distance of the 22% margin potential at a $2.2 million AUV. The growth in AUVs and margins in 2019 is evidence that our strong economic model remains intact, and we expect continued growth in both of these metrics during 2020 and beyond.

The Q4 comp at 13.4% was driven by an acceleration in transactions as 8% of the comp came from greater guest visits. We also saw an increase in check of roughly 5.4% driven by price and mix, the latter being driven by carne asada and digital orders, which have a higher average check.

Looking to fiscal 2020, where comparisons will no doubt be tougher, we’re optimistic that based on the healthy sales trends thus far in Q1, plus the 2% price increase taken in December, combined with our future growth initiatives, that a mid-single-digit comp is achievable for the full year.

During the fourth quarter, we opened 80 new restaurants, a record number of openings for a quarter, bringing total new restaurant openings for the year to 140. Productivity of these units is in the high 80% range, the highest in the company’s history. I’m really proud of the hard work put in by our development teams and our operations teams, especially given the significant back-end loading that occurred in 2019. We opened 46 Chipotlanes in the quarter, resulting in 66 Chipotlanes at year-end. And as Brian mentioned, we’re excited by the early success of these Chipotlanes, and we’ll continue to aggressively open more moving forward.

For 2020, we anticipate opening 150 to 165 new restaurants, with more than half including a Chipotlane. While these openings will once again be weighted towards the second half of the year, we expect a modestly better balance in comparison to last year. About 35% of these openings are expected to occur in the first half of 2020 versus only 25% in the first half of last year.

Food costs for the quarter were 33.1%, a decrease of 10 basis points from last year due primarily to a menu price increase and lower avocado pricing that was partially offset by the higher cost of several other ingredients, including about a 70 basis point headwind from carne asada as it was available for the entire quarter. On a sequential basis, avocado pricing continued to moderate given greater supply coming from Mexico as we begin the more plentiful harvest year. For Q1, we expect ongoing moderation in avocado pricing as a result of increasing supply, but we believe this will be partially offset by higher carne asada costs, resulting in cost of sales being in the mid-32% range.

We expect food costs for the full year to be in the low to mid-32% range based on better avocado pricing and further supply chain efficiencies being partially offset by what appears thus far to be a normal cycle of protein inflation.

Labor costs for the quarter were 26.5%, a decrease of 60 basis points from last year. This decrease was driven primarily by sales leverage, partially offset by labor inflation, which continues to be in the 4% to 5% range, including the cost of benefits, such as debt-free tuition. We expect Q1 labor costs to be in the mid-26% range, with sales leverage and wage inflation being the biggest factors.

Other operating costs for the quarter were 14.8%, a decrease of 70 basis points from Q4 last year due to sales leverage. Marketing and promo costs were 4.1% in the quarter, similar to Q4 of last year, but a 210 basis point increase sequentially to support carne asada and our Free Delivery Bowl promotion. For the full year, our marketing investment was 3% of sales, as expected.

Looking at 2020, we once again anticipate spending around 3% of sales overall for the year, with Q1 being in the low to mid-3% range compared to the 2.5% we spent in Q1 of last year in order to support our ongoing menu innovation.

During the quarter, we booked $10 million for legal reserves related to the U.S. Attorney’s investigation that began in January 2016. This brings the total reserve to $25 million. We believe this amount is a reasonable estimate of what we may be expected to pay to settle this matter. While there can be no assurance that a settlement will be reached, we have been cooperating with the investigation, and we’re in active discussions to possibly resolve this matter.

G&A for the quarter was $112 million on a GAAP basis or $106 million on a non-GAAP basis, excluding nearly $4 million net related to several legal matters, including the $10 million reserve I just mentioned, and about $2 million related to transformation expenses. G&A also includes approximately $75 million in underlying G&A expenses, $25 million related to noncash stock comp, $4.5 million related to higher bonus accruals from our strong performance and related payroll taxes and $1.5 million related to our upcoming All Manager Conference. Underlying G&A was in line with our expectations as we grew headcount responsibly to support our growth.

Looking to Q1, we expect to continue hiring people to support future growth and invest in our emerging digital platform. This will lead to Q1 underlying G&A support in the range of $77 million to $80 million, and total G&A is expected to be around $120 million. We expect stock comp to be around $23 million per quarter, although this amount could move up or down based on our actual performance. This is slightly lower than Q4 as the 2017 equity bonuses roll off post vesting and are replaced with new 2020 grants which are valued at target without any performance adjustment. We also expect to recognize between $3 million to $4 million of employer taxes associated with shares that vest at the beginning of our fiscal year. Lastly, we’re expecting to recognize about $13 million of expenses in Q1 related to our upcoming All Manager Conference.

Our effective tax rate for Q4 was 28.3% on a GAAP basis and 27% on a non-GAAP basis. The difference was due primarily to tax implications related to transformation costs. For fiscal 2020, we expect our underlying effective tax rate to be in the 26% to 29% range, though it may vary based on discrete items as well as any stock option exercises.

Our balance sheet remains strong with cash and investments totaling $909 million as of December 31. And similar to Q3, we repurchased about $38 million of our stock at an average price of $773 per share during the quarter. For the full year, we repurchased $188 million at an average price of $684 per share.

In closing, we’re pleased to report a strong ending to fiscal 2019, including 8% transaction growth, which highlights that our strategies are resonating not only with high-frequency customers, but also with medium frequency and new customers. Continuing to enhance convenience and access while optimizing our digital, marketing, menu and operations will help ensure the Chipotle brand remains healthy moving forward. Thank you to all of our employees for their hard work and their dedication this year, and let’s keep it going in 2020.

With that, we’re happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question will come from David Tarantino with Baird.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division – Director of Research and Senior Research Analyst [2]

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Congratulations on a strong year. My question, Jack, is about the margin performance at the restaurant level. Just wondering if you could comment on the flow-through that you saw in Q4 and throughout the year. And I think you mentioned that at a $2.2 million AUV, the expectation would be that you’d have margins in the 22% range, and you’re a bit below that. So can you reconcile some of the factors that are driving that and what the algorithm might look like going forward as you grow the unit volumes?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [3]

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Yes, David. First of all, we still think that the margin potential at $2.2 million is right around 22%. There are a couple of things that were headwinds during the year. One, we saw some really, really high avocado costs during the summer. That had an impact. And then we also had carne asada, which, I think, as you know, for most of the quarter, we priced carne asada at just $0.50 above steak, and it costs us about $0.35 to $0.40 or so. And we did that intentionally as a transaction builder, but it did have a temporary negative impact on our margin.

Now during the quarter, we did take a price increase. We increased carne asada another $0.25. We got a $0.75 upcharge, and we didn’t see any degradation in demand at all. So we think there’s room when we do additional premium offerings like that, that we can price them at full margin.

The other things going on, David, that also have, what I would call, temporary headwinds is we just started our loyalty program last year. We did a great job of acquiring well over 8 million customers into the program. With that acquisition comes the discounts. And yet, we haven’t really monetized that asset yet. So that has a little bit of an impact on the margin as well.

Then our delivery business is growing well also. So all these things are what I would call temporary or cyclical headwinds that we can overcome all of them. We still feel confident that when we get to $2.2 million, we can generate a 22% margin. We get to $2.3 million, we can generate a 23% margin. We think that potential still exists within the model.

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Operator [4]

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And the next question will come from Nicole Miller with Piper Sandler. We’ll move to our next question. That’s Katie Fogertey with Goldman Sachs.

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Katherine Irene Fogertey, Goldman Sachs Group Inc., Research Division – VP & Derivatives Research Strategist [5]

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I have a couple of questions here. So first of all, with bringing the Supergreens onto the menu in January and kind of expanding the Lifestyle Bowl offerings that you did in 4Q, can you give us a sense of how your bowl versus burrito mix is changing here and how that is evolving? And any kind of color that you can give us on labor and margin efficiencies as you move to the bowl away from the burrito. And I have a follow-up.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [6]

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Sure. So yes, the reality is our business continues to show a slight migration to bowls. The thing that’s great about that is, that’s our fastest product on the Chipotle menu. And it also provides, I think, the customer the greatest value proposition because of all the customization that they see right in front of them with all of our ingredients right in front of them.

So the good news is the Supergreens proposition has been well received. It’s performing in line with expectations, and the customer feedback on it has all been very positive. So it’s perfectly in sync. And I think we talked about this earlier. One of the things we heard early on from our customer was, they would like us to improve our salad, and that’s what we’re doing with the Supergreens salad mix.

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Katherine Irene Fogertey, Goldman Sachs Group Inc., Research Division – VP & Derivatives Research Strategist [7]

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Great. That’s helpful. And do you have a sense of the mix of the bowls versus burritos?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [8]

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The rule of thumb is 2/3 bowls is the way to think about it. And then the next piece is burritos followed by tacos. Tacos are the smallest.

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Katherine Irene Fogertey, Goldman Sachs Group Inc., Research Division – VP & Derivatives Research Strategist [9]

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Okay. And then on the delivery cost side, we’re seeing more and more restaurants pass on the delivery cost to the customer and not seeing really any kind of impact to demand. And you kind of talked about having some room to move on carne asada and not seeing the customer — not seeing any traffic hit there. Is that a potential opportunity for this year for you guys to pass on some of those delivery costs to the customer?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [10]

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Yes. Look, I think the good news is our value equation is really strong at Chipotle. So we have room if we find that the economic proposition requires us to pass along some of these costs in the delivery channel or if we want to bring out some elevated ingredients. The good news is, our value proposition is really strong and the elasticity would allow us to do it. Currently, we like the economics that we have, and we’re more in the acquisition mode of using delivery as a tool to get people into our digital ecosystem. So the good news is, we’ve got the right value proposition that if we wanted to flex it, we could.

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Operator [11]

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Next question, we’ll move back to Nicole Miller with Piper Sandler.

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Nicole Miller Regan, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [12]

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Can you hear me okay now?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [13]

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Yes.

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Nicole Miller Regan, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [14]

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I apologize for that earlier. I wanted to ask about how you think about directing the balance sheet. So when we look back on last year, clearly was better at every quarter versus where you started guiding the year and what the Street expected. So maybe some of the things that you didn’t do, so not necessarily an acceleration in development. How do you view that as a use of cash? The share repurchase hasn’t necessarily increased and would you use leverage? And then when might a dividend be appropriate?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [15]

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Yes, Nicole. Let me start with buybacks. We bought, I think it was like $168 million during the year, $38 million during the quarter. Our cash balance did grow during the fourth quarter. We actually suspended our buys during the quarter for a while as we got into serious negotiations with the government. Our counsel advised us to suspend that for a while. With this release, we’ll be able to get back in the market. So I think what you’ll see is we will be opportunistic as we look at the share price and we look at our balance sheet to do buybacks at the appropriate level.

In terms of investing in return-generating assets, the best investment we could make is into our Chipotle restaurants. And I would not expect us to do a stairstep increase in the openings, but you will see an increase over time. Our pipeline is building very, very nicely, and that’s going to be a great return for us.

We’re also going to dabble in remodels this year as well. So we’ve got several hundred restaurants that need a refresh so that they are more digital-forward. So we’re going to experiment with that. And if that goes well, which we’re optimistic about, that will be another opportunity for us. And I would expect that would be a return-generating asset as well.

We, from time to time, Nicole, talk about dividends, but it’s not really on the radar screen right now. We think that we’re more in growth mode and opportunistic buyback of our stock and not dividend generating. That might change in the future. But right now, we’re not considering a dividend.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [16]

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The only thing I would add is, we have $1 billion digital business that continues to grow nicely. And where we see opportunities to invest in continuing to push the digital access in our business, we’re going to do that because it makes a lot of sense for both performance today and performance in the future.

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Nicole Miller Regan, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [17]

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And just a follow-up. What’s the practice on leverage? How do you feel about it? Would you deploy it?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [18]

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No, Nicole. That’s financial engineering. That’s something that I think is more appropriate for a more mature, slow-growing company. So I would not expect us to put leverage on the balance sheet.

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Operator [19]

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And our next question comes from Sara Senatore with Bernstein.

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Sara Harkavy Senatore, Sanford C. Bernstein & Co., LLC., Research Division – Senior Research Analyst [20]

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I have one question and then a follow-up, please. First, on just menu innovation. You talked about the Supergreens performing in line with expectations. But if I think about carne asada, I think it probably exceeded expectations, which is why you’re bringing it back permanently and maybe was, we’d estimate, maybe was much of a mid-single-digit mix or lift. So how should we think about menu innovation going forward? Was that sort of a unique experience and we wouldn’t expect to see these kind of big hits or do you just think you could have more opportunities that would be as meaningful? And then I have a follow-up, please.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [21]

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Yes. So obviously, we’re really delighted with the carne asada performance. It’s evidence that our stage-gate process towards innovation really is working. And the thing that was great about carne asada is we stayed true to our principles around Food with Integrity and bringing out great quality meats. And when the customers got to try it, they loved it and they came back for more.

So we’re working right now to figure out, can we get a supply so that we could make it permanent. And if we can secure that supply, then we’d probably make it permanent, but we haven’t been able to finalize that point yet. So customers loved it. The performance was great. As we figure out our supply scenario on this, we’ll figure out the right time to bring it back. And if we can, we’ll figure out a way to make it permanent.

But regarding the innovation going forward, what I love about this brand is, we have the ability to, I think, give people access to food that they don’t get access to anywhere else. And I think that’s why we got the response that we did on our Lifestyle Bowls, the response that we got on carne asada, Supergreens, and that’s what we’re going to continue to push against. And Queso Blanco is the most recent product that’s gone through our stage-gate process that now we’re ready to bring this to market and replace our existing queso. I think we’ve mentioned, we’ve been working on quesadillas and some beverages.

So the thing that’s great is, I think we’ve got a cadence that’s building. And as I mentioned before, we’re not going to be moving to a place where you’re doing something every 4 to 6 weeks. That’s not our business. That’s not who we are. You can expect us to do 1 or 2 of these initiatives on the menu because it’s the right cadence for operators to execute really well. And it’s also the right cadence, I think, to give our customers the variety that they’re looking for in our business.

So I love what’s happening in our menu, and I love what’s happening in our pipeline. And I think this stage-gate process is proving to be a very effective tool.

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Sara Harkavy Senatore, Sanford C. Bernstein & Co., LLC., Research Division – Senior Research Analyst [22]

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Okay. Great. And then my follow-up is just, I think in terms of the guidance, mid-single-digit comp, I think, Jack, historically, you’ve kind of guided to whatever the current run rate of volume is and not assuming much of an acceleration, but is it safe to say that quarter-to-date, you’re still seeing kind of low double-digit comps? I mean, that would be the implication, I think, if I…

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [23]

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Yes. The way I would say that, Sara, is that the dollar sales that we saw in the fourth quarter continued into the first quarter, but the comparison is different. So yes, the comps are strong. Just keep in mind, we’ll have to compare to a 13.4% in the fourth quarter of next year. And then when we run through the carne asada, we’ll lose some check as well. The carne asada added about 150 basis points to the average check. So we’ll see that as well. We’re optimistic we’ll keep all those transactions, but that will have a bit of an impact.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [24]

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Yes. The only thing I would add to that is, we mentioned that the brand has got, I think, really excellent momentum. And I tried to highlight that in the script by talking about how we’ve seen trust and favorite brand metrics really move forward.

And so I just want to make sure people understand. I think the reason why we had the quarter that we had is not because we had carne asada, and it was just one thing that drove this business. I really do believe our operations are running better than they ever have been. We still have an opportunity to be even better. But our operations are running better. They’re running faster. The food is more consistent. We have lower turnover, and I think we’ve got better execution. You think about all the progress on digital, and then I think the progress we’ve made on allocating our marketing dollars so that it is driving purchases without using discounting as the crutch. And then obviously, layered on top, we had a nice menu innovation around carne asada.

So I just want to make sure people understand, it’s not a one-trick here on why I believe we’ve got 8 points of transaction growth and a 13.4% comp as a result of it.

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Operator [25]

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The next question will come from Andrew Charles with Cowen and Company.

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Andrew Michael Charles, Cowen and Company, LLC, Research Division – Director [26]

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Brian, you mentioned during the quarter an openness to work with other third-party delivery providers beyond the national partnership you have with DoorDash and also the agreement you have in place with Postmates. And I’m curious, what would lead you to pursue working with other delivery providers as well as does your agreement with DoorDash indicate you would see higher commissions if you were to onboard another delivery partner? And then also a follow-up for Jack.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [27]

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Okay. Yes, look, I think the reason why I said we’re going to be open to it is, at the end of the day, we’ve got to give access to our customers where they want Chipotle, when they want Chipotle and how they want Chipotle. And I think the delivery channel is proving to be one of those access points. The relationship with DoorDash has been great. Working with Postmates has been great. We’ll see how things unfold going forward. But I do think, ultimately, the delivery marketplace is not going to be an exclusive proposition. I think the delivery marketplace is going to be about giving customers access accordingly.

So we’re continuing to talk to all the players. And when the right opportunity presents itself, we’ll figure out whether or not we bring on additional players or not. But yes, we’re open to it. And the real driver of it is, we want to deliver on the needs of our customers.

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Andrew Michael Charles, Cowen and Company, LLC, Research Division – Director [28]

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Sure. And then, Jack, beyond if you would see a higher commission from DoorDash if you were to onboard another provider, looking at labor, it looks like labor dollars per store growth accelerated quite a bit. Our model suggests about 10% growth, which is well in excess of the 4% to 5% labor inflation you called out despite the accelerated digital growth, which is obviously more favorable for labor, what do you attribute this acceleration to? Is it the incremental benefits? Is it the greater number of crew members to handle the greater traffic? Just curious for modeling purposes how we should think about labor in 2020.

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [29]

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Yes. It’s traffic-driven. So if you just take a standard 10% increase in labor when we have 8%. Keep in mind, we have 8% in terms of transactions, but we also had mix, which means we’re cooking more food as well. So we only had a 2% price increase. So the rest is more food, more customers that we’re serving. It does take more labor. And so our labor is more partially fixed, partially variable. Frankly, during the quarter, our labor performed the way that it should have. We saw 60 basis points of leverage even though we had about 140 basis points of inflation and then benefit headwind. So we had to come up with a couple of hundred basis points of leverage based on the price increase and based on the higher transactions.

We also during the fourth quarter, keep in mind, we opened up a record number of restaurants. And so that’s another piece where just with that alone, you’re going to add labor, not just to staff the 80 restaurants, but we also have to train those folks before the restaurants open. And we tend to have an allocation or allowance for more labor hours early on in the first week or the first several weeks because people are learning and we don’t know exactly what the sales are. So there’s a number of things why you see higher labor in the fourth quarter.

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Operator [30]

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And the next question is from David Palmer with Evercore ISI.

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David Sterling Palmer, Evercore ISI Institutional Equities, Research Division – Senior MD & Fundamental Research Analyst [31]

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Congrats on a great year. Interesting that your digital mix increased by 7 points in that fourth quarter. Your same-store sales growth was obviously a lot higher at over 13. So you can see how the new product news is letting you not lean as hard on delivery and digital order growth to drive the comp. Looking into this year, how do you see your growth contribution going forward? You mentioned a new product. But then again, you’re also talking about ways to engage that loyalty member. Then I have a quick follow-up.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [32]

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Yes, David. So the way we’re thinking about it is, marketing combined with our CRM is a real opportunity to grow the business, both with new users and existing users. And then as we think about our digital business, one of the things that I’m really excited about is our order ahead business. As we continue to get people into our digital system, they really see the benefits of, one, joining the rewards program; but two, just the convenience, the ease of access by using, whether it’s the website or the app. So we believe there’s going to be continued growth there.

And then obviously, I continue to believe that there’s more growth out of our — just running our restaurants better. As we continue to improve on our throughput, that just basically continues to be a multiply effect, right? It’s like carne asada, the digital business, none of it would be nearly as effective if we don’t have strong execution on the basics with our restaurants.

I feel like every one of these calls, people are always like, well, what was the one thing? And what’s the one thing to drive comp going forward? I really continue to believe the strategies that we’ve outlined all contribute to our ongoing growth model. And we’ve got [at least] on — some will provide more certain times of the year, and others will provide more at other times of the year. But in the end, that’s why we had the year that we had. And that’s why I believe we’ll continue to perform going forward.

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David Sterling Palmer, Evercore ISI Institutional Equities, Research Division – Senior MD & Fundamental Research Analyst [33]

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And maybe the quick follow-up on that is related to, I think, a conception that going into this year, you’re going to be lapping free delivery windows. And you’ve done those margin-dilutive ways to onboard consumers. And I guess the question I would have is, once you have them on board, I think you said 8 million strong, how do you convert them into more digital users? Do you feel like you can maybe have your cake and eat it too with margins and sales as you grow that digital user base? And I’ll pass it on.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [34]

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Yes. Yes. Look, David, obviously, what you just articulated is how we want this to play out, where we continue to invest to grow the database. The good news is, I think going forward it’s going to be more balanced between an acquisition as well as kind of driving behavioral changes. And as our digital business continues to grow, as Chipotlanes become more prevalent, we think there’s opportunity for us to become even more efficient in how we provide people that great Chipotle experience.

And the one thing I would mention is, Jack said this at the very beginning, like the bottom line is, we hold ourselves accountable to make the economic model consistent with what we’ve been talking about. You get to $2.5 million, we’ll have 25% margins. And we think we see a clear sight of path on how that all happens through a combination of initiatives and then just being really, I think, smart about how we manage the P&L accordingly. So it’s a great situation to be in where we’ve invested and now we are going to be able to take advantage of those investments in the digital space. But I think it also plays out in a lot of different ways that people access the Chipotle brand. So obviously, we’re very proud of where we are, but I’m really excited about where we’re going is kind of the summary.

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Operator [35]

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The next question will come from Lauren Silberman with Crédit Suisse.

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Lauren Danielle Silberman, Crédit Suisse AG, Research Division – Senior Analyst [36]

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I want to ask about the loyalty program. So now with the 8.5 million members less than a year after launching, what do you think makes Chipotle different than maybe some of the competitors as it relates to customer acquisition? And thinking about the trajectory of membership growth going forward, any color on kind of when you start to turn on more of the personalized marketing?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [37]

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Yes. Look, I think Chipotle is a unique restaurant company. And any time we have found that we provide people the ability to have more engagement or more access, they want to be a part of that. And I think that’s why the rewards program has had such quick adoption. I think it’s a testament to the fact that we are committed to Food with Integrity. We’ve got a great value proposition, all the reasons why you love Chipotle, okay?

Now the thing that’s great is we have 8.5 million customers, and the personalization really is just getting started. So I’m already seeing some of our tactics go into the marketplace. And what’s great to see is we’re seeing it have an effect on just about every cohort that we’re targeting. And we define those cohorts both on purchase frequency as well as, I would call it, lifestyle.

And so I think it’s going to continue to be something we’re going to want to invest to continue to grow. But at the same time, we’re now taking that universe and really using it as a smart way to grow the business. And it’s a hugely valuable asset, and it’s an asset we’re going to really drive going forward.

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Lauren Danielle Silberman, Crédit Suisse AG, Research Division – Senior Analyst [38]

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Great. And just a follow-up to the digital sales growth. I think there’s a perception that the majority is coming from deliveries for customers going through the third-party platform. Are there opportunities to convert them to the Chipotle digital ecosystem?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [39]

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Yes. I would tell you that that’s a little bit of a misconception. The thing that’s great is, as we see people come into the digital system, we see really nice gains in our order ahead business. So in the early days, obviously, delivery was on a percent growth rate was one of the biggest parts of our digital business. But one of the things I’m really excited about is the progress we’re making on the order ahead business. And delivery is proving to be just a great experience for people that maybe didn’t have that occasion with Chipotle in the past. Now they believe it’s convenient so they can have those occasions with Chipotle, both order ahead as well as delivery. So it’s working nicely as a system between rewards, order ahead, delivery and now with Chipotlane.

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Operator [40]

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The next question is from Peter Saleh with BTIG.

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Peter Mokhlis Saleh, BTIG, LLC, Research Division – MD and Senior Restaurant Analyst [41]

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I wanted to ask about the second make line. The second make line, the digitized second make line is now in all the stores. Digital sales are now approaching 20%. So are you starting to see some leverage on that second make line? Is there anything noticeable? Any which way that you guys can break out the contribution that you’re seeing from that second make line now?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [42]

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Look, I think we’re going to be very smart about how we take advantage of that efficiency. Our most important thing right now is we want to give people a great digital experience. That’s why we’ve invested in those digital make lines. We’ve invested in the — we’re calling it now the digital portal pickup.

The thing that’s great is, we know the efficiency is there, and we’re going to be smart about how we implement that efficiency into the business so that we don’t affect our growth and/or the experience that the customer has.

So we’re delighted that we’re closing on 20%, but that’s not the end of this journey. That’s just one of the stops on our journey to, I think, a much bigger business than where we are today.

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Operator [43]

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The next question is from Jake Bartlett with SunTrust.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [44]

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Great. My first one is on throughput. You mentioned an improvement in the peak-hour throughput. I think you said 10% or maybe it was 10 seconds. Maybe I misheard. But if you could just remind us what that was and where you are in terms of throughput versus the kind of the low of your throughput, trying to see how much you’ve improved since that low and maybe when that low was.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [45]

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Yes. So it was 10% improvement is what I said. But yes, I think we talked about this as, at our peak, we were doing low 30s, mid-30s, and the max 15. And unfortunately, that dropped to kind of the low 20s, mid-20s. And what I’m happy to say is Scott and the team have really put a lot of focus on how do we get back to great throughput. And the more we have stability in the restaurants, the more we have consistency in our KPIs and what we’re going to hold our teams accountable for. I think we’ll continue to see this metric improve, which just provides a better experience for our customer.

But yes, the way to think about it is we had about a 10% improvement. And what I’m happy to say is, as we’ve moved into 2020, we continue to see the improvement. So this is one of those things that builds on top of itself. And if you were to talk to any of our team members, they would all know throughput is a key pillar as well as having great food, great teams and having those restaurants staffed correctly. So I’m really optimistic about where operations are going to take this metric going forward.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [46]

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Great. And I think of throughput as a key sales driver, but it also could be a cost savings. Is throughput part of what you talked about in your prepared script around just flow-through — better flow-through of profits in 2020? Is that going to contribute to kind of keep labor in check?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [47]

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Yes. I mean it’s part of it. The flow-through I’m referring to is kind of where Jack started this conversation in regard to, look, for every incremental dollar, we expect X percent to flow to the bottom line. And then that’s how we hold the model consistent so that when we do get to $2.5 million, we’ll have 25% margins or better.

So it’s not just one thing, but obviously, that’s a key indicator that we’re running the restaurants correctly. You’re not running the restaurants correctly if we’re not going fast. And so one thing we do know is a busy restaurant, a restaurant that’s running quick is a well-run restaurant. The team members prefer working in that environment and the customers prefer getting their food in that environment. So all really good stuff.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [48]

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Great. And then, Jack, last question on G&A. You mentioned this kind of on the underlying G&A and the guidance for the first quarter, I think you said $77 million to $80 million, if I got that right. But that, to me, is up — I mean, it looks versus the first quarter of last year, up about 9%, 10%. Is that the right run rate just in terms of the underlying G&A, that underlying G&A should grow that quickly? I was kind of more under the impression that you could kind of keep a mid-single-digit G&A growth longer term.

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [49]

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No. I think that’s right. Over the long term, I think that’s about right. We started the transformation and this move about 1.5 years ago, and so there’s a few gaps that we need to fill. And so that’s why we want to make sure you guys saw what we were doing into the first quarter. But I think more of a mid-single-digit-ish in terms of underlying G&A. So we will grow our G&A at a less than the sales rate so we can leverage it. I think that’s correct to think about it long term.

But keep in mind, as Brian mentioned, we’re in the early days of digital so some of these resources, a lot of these resources, in fact, are making sure that we’ve got the right skill gaps whether it comes to digital, whether it comes to some of the CRM, things like that. And so we want to make sure we get ahead of those. But I think over a longer period of time, I think something more in that kind of mid-single digit as opposed to a high single digit is probably a good way to think about it.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [50]

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Great. And just to be clear, the first quarter should be higher than — rest of the year should be more in line with the long term or the whole year is going to be a year of investment?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [51]

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The whole year is going to be up because we’re going to hire people, and then they’re going to be into the base.

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Operator [52]

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The next question is from Dennis Geiger with UBS.

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Dennis Geiger, UBS Investment Bank, Research Division – Director and Equity Research Analyst of Restaurants [53]

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Brian, you talked about employee benefits and initiatives, kind of how that’s been translating into operational excellence. Just kind of wondering if you could talk a bit more about building the talent pool, what that’s meant for the quality of restaurants looking ahead, in particular. I don’t know if you still frame it as far as a restaurant, et cetera. Just the progress that you’ve made there on the restaurant pool.

And then just going one step further, thinking a little longer term around restaurant development, it feels like that this has always kind of been what the limiting factor from an employee talent perspective. Just how you’re thinking about those benchmarks from a talent perspective to where you can kind of see a step change looking ahead from a store growth perspective.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [54]

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Sure. Sure. So look, I’ll give you a little bit of an example to bring to life the progress that I think we’re making on restaurants. I was actually in Denver just a couple of weeks ago. And Denver is one of our older markets. And I was visiting with our team director there, Alfredo Ponce. And he has got just terrific restaurant general managers. And this one young lady, who is running one of our restaurants, she’s had 3 consecutive quarters where she’s hit all the KPIs, and her and her entire crew have all gotten bonuses. And she is on her way in the fourth, so the first quarter. I mean, as soon as I walked in there, she wanted to show me her AB scorecard. It was all green. It was As everywhere. And the first thing she told me is like, we’re going to get our fourth quarter in a row of a crew bonus.

And every one of those employees had a smile on their face. They were truly energized, truly engaged. And I give that just as one example of what I see as I now travel more and more across the country. Whether you’re in Arizona, Boston, New York, we’re seeing our team members, I think, just be more energized, more engaged and just super proud of making a difference. And it’s hard to put a value on that.

As part of this process though we ask them, what does more support look like for you to be successful at Chipotle? And what they came back with is, look, tuition reimbursement is great, but I actually need a debt-free program like I need a program where I don’t put myself in a place where I’m behind the 8 ball. And that’s why we came up with a debt-free degree program. We also heard loud and clear from a lot of young people, mental health is top of mind for not only them but their family. And so we brought forward those benefits.

So English as a second language is something also too where people are like, hey, it’s great to have a benefit for me, but it would be great if I could have it for my whole family. And the reason why this is important is, we want the employee to feel great about working there, but we want those around them to feel great about them working at Chipotle as well. And I think we’re seeing the impact of that.

And we’re going to continue to fine-tune the benefits. We’re going to continue fine-tuning the employee value proposition. But my goal and our team’s goal is, we want people to believe and experience that when they work at Chipotle, they get to be themselves, they will get to grow professionally, and they will get to grow personally. And I think if we do that, we’ll continue to attract the right people, and we’ll get much better outcomes than if we didn’t have all these things in place to attract these types of people. So it’s one of the places that I’m hugely passionate about, and it makes you get really excited when you see it happening in our restaurants.

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Operator [55]

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The next question comes from John Glass with Morgan Stanley.

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John Stephenson Glass, Morgan Stanley, Research Division – MD [56]

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First, just on the loyalty and program enhancements, Brian, that you’re planning. How much work has been done? Are you ready to do sort of Phase 2 and do more bespoke offers or is there more work behind the scenes that you need to do before you can do that? I know it’s easier said than done. And when should we expect those more bespoke or personalized offers to start appearing?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [57]

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Yes. John, great question. The bespoke or more personalized offers have begun. We’re kind of rolling right now with it. So it’s going to be happening all year long. And I think as every week goes by, we’re only going to get better at it. It’s nice to see the work that’s been done over the last year start to come to fruition in 2020.

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John Stephenson Glass, Morgan Stanley, Research Division – MD [58]

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And then, Jack, just 2 margin questions. One is, you didn’t mention in the labor commentary the cost of the bonus program. Can you just quantify what that may have been? And I assume that’s entirely variable, right? So if comps were to moderate, some of the bonus goes away, so we shouldn’t worry about labor dollars per store growth. It’s going to be relative to comp growth. Is that fair as it relates to the bonus?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [59]

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Yes. Well, first, we’re not breaking out the dollar amount, John. I would put that into the category of the 4% to 5% inflation. That’s the piece where I mentioned we have about 140 basis points of headwind in labor. So that includes normal wage inflation, includes debt-less degrees and includes the bonus program. All these things that Brian mentioned, those are all in that. And I know that doesn’t technically qualify as wage inflation the way you might think about it, but these are all things we’re doing to make sure that we have the best workforce we can and that we engage them and that we keep them. So that’s all included in that number.

And I wouldn’t think of it as 100% variable, John, because there’s qualitative figures in there as well. Sure, when sales are good, that means their margin is going to be good. And so they’ll be hitting those metrics. There’s other metrics as well that aren’t as direct. So I would call it semi-variable. So generally, yes, it’s going to be tougher to earn the bonus if we don’t have very strong sales and very strong margins, but it’s not 100% variable to sales.

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John Stephenson Glass, Morgan Stanley, Research Division – MD [60]

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Okay. And then just finally, you mentioned there may be a modest impact to comp on the loyalty program or deferred benefits. What does modest mean? How big could that drag be?

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John R. Hartung, Chipotle Mexican Grill, Inc. – CFO [61]

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We had seen 30 and 40 basis points early last year, John. And as we’ve seen the program mature a little bit and people have earned their reward, they’re redeeming them and the redemptions are now offsetting the deferrals. And so it will be, we think, in most quarters, it’s going to be less than it was early last year when it was in the 30, 40 basis points. So like this past quarter, because we also made a little adjustment on our breakage rate on chips and guac, there was no net impact. And so I think in the future it’s either going to be very little to no net impact.

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Operator [62]

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And the next question will come from Chris Carril with RBC.

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Christopher Emilio Carril, RBC Capital Markets, Research Division – Analyst [63]

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So you noted the very strong productivity of recent openings, and I think they were described as the highest in company history. I know you mentioned earlier in the context of investment that we shouldn’t expect large accelerations in openings. But given these really strong productivity results, does this potentially shift your thinking incrementally at all on development in the near to medium term?

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [64]

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Yes. So I think the way we’ve been sharing this with you guys is, the economic model and the availability of sites for Chipotle continues to be a huge opportunity. And we increased, obviously, what we’re going to build in 2020. And I think you’re going to continue to see us, I think, accelerate that into the future years for 2 reasons. One, the economics support it. The customers want it. And then the second key piece is, I think we now have our operations at a place where we’re developing leaders to be ready to take over those restaurants.

So we want to be smart about how we continue to move forward on adding new units. The good news is, the returns continue to be great. Our operations are running better. Our people development is in a much better place. And I think it sets the stage for us nicely to continue to grow from where we are right now. So I see a future where we could get back to the 200-plus restaurants. It’s just not going to happen this year.

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Operator [65]

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Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Brian Niccol for any closing remarks.

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Brian R. Niccol, Chipotle Mexican Grill, Inc. – CEO & Director [66]

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All right. Thanks. And thanks, everybody, for taking the time.

Obviously, very proud of Chipotle for delivering what was a great 2019. I think we touched on each of our key strategies. The thing I just want to emphasize to everybody is, I believe you don’t get these results without developing the right culture and the right people. And I think that’s happening in all facets of our business, whether it’s operations, marketing, digital, HR, public affairs. I do believe we are building out a team that has world-class leaders in all aspects of this company, and those leaders are building a strong culture that’s focused on cultivating a better world and developing future leaders so that these strategies that I believe have a tremendous runway of growth can be executed flawlessly.

So I do want to say thank you to everybody for a terrific 2019. But as we mentioned earlier, these strategies are not just about 2019, they’re about 2020 and well beyond. And we’re confident Chipotle is going to continue to be a unique brand that provides a unique experience that will continue to drive and attract great people and a great culture.

So thanks for listening, and we’ll talk to you in a quarter. Thanks.

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Operator [67]

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The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.