Q4 2021 Chipotle Mexican Grill Inc Earnings Call

Good day, and welcome to the Chipotle Mexican Grill fourth quarter and full year 2021 results conference call.

Speaker 1: Good day and welcome to the Chipotle Mexican Grill fourth quarter and full year 2021 results conference call. All participants will be in listen only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by.

All participants will be any listen only mode.

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Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is...

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Please note this event is being recorded.

Speaker 1: I would now like to turn the conference over to Ashish Kohli, Head of Investor Relations. Please go ahead. Hello, everyone, and welcome to our fourth quarter of fiscal year-end 2021 earnings.

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

Hello, everyone and welcome to our fourth quarter and fiscal year end 2021 earnings call.

Speaker 2: 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.

By now you should have access to our earnings press release, if not it may be found on our Investor Relations website at IR Dot Chipotle Dot com.

Speaker 2: I'll begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements.

I'll begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward looking statements.

Speaker 2: 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 statement.

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.

Speaker 2: Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Q s for discussion of risk that may cause our actual results to vary from these forward-looking statements. Our discussion today will include...

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.

Speaker 2: A reconciliation to GAAP measures can be found via the link included on the presentation page within the investor relations section of our website.

A reconciliation to GAAP measures can be found via the link included on the presentation page within the Investor Relations section of our website.

Speaker 2: We will start today's call with prepared remarks from Brian Nickel, Chairman and Chief Executive Officer, and Jack Hartung, Chief Financial Officer.

We will start today's call with prepared remarks from Brian Nickel, Chairman and Chief Executive Officer.

And Jack Hartung, Chief Financial Officer.

After which we will take your questions.

Speaker 2: Our entire executive leadership team is available during the Q&A session. And with that, I'd like to...

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 .

Speaker 2: Thanks Ashish and good afternoon everyone. 2021 was an outstanding year for Chipotle, highlighting the organizational strength and resiliency of our brand. Despite an unprecedented environment, our employees remain passionate about their work, dedicated to delivering excellent guest experiences, and aligned with our purpose and values.

Thanks, Ashish and good afternoon, everyone 2021 was an outstanding year for Chipotle, highlighting the organizational strength and resiliency of our brand.

Aspire and unprecedented environment, our employees remain passionate about their work dedicated to delivering excellent guest experiences and aligned with our purpose and values.

Speaker 2: Our business is as much about people as it is about food, and I strongly believe that we have the best in the industry.

Our business is as much about people as it is about food and I strongly believe that we have the best in the industry I'm very grateful for our team members monumental efforts and together, we accomplished many incredible things and accelerated business momentum all of which was fueled by our multi pronged growth strategy.

Speaker 2: I'm very grateful for our team members, monumental efforts, and together we accomplished many incredible things and accelerated business momentum, all of which was fueled by our multi-pronged growth strategy.

Speaker 2: For the fiscal year, this resulted in sales growing 26% to reach $7.5 billion, driven by a 19.3% comp, digital sales of $3.4 billion, which grew 25% versus the prior year, restaurant level margin expanding 520 basis points year over year to reach 22.6%,

For the fiscal year. This resulted in sales growing 26% to reach seven $5 billion driven by a 19.3% comp digital sales of $3 4 billion, which grew 25% versus the prior year restaurant level margin, expanding 520 basis points year over year to reach 22, 6%.

Speaker 2: Adjusted the looted EPS of $25.42 representing 137% growth over last year. And we open 215 new restaurants.

Adjusted diluted EPS of $25.42, representing a 137% growth over last year, and we opened 215 new restaurants.

Speaker 2: I'm also delighted with our fourth quarter performance, even with the surge in Oma-Kron cases that began in December .

I'm also delighted with our fourth quarter performance, even with the surge in AUM a crime cases that began in December .

Speaker 2: For the quarter, we reported sales of $2 billion, representing 22% year-over-year growth, which was fueled by a 15.2% increase in comparable restaurant sales. Restaurant level margin of 20.2%, with 70 basis points higher than the 19.5% we reported last year.

For the quarter, we reported sales of $2 billion, representing 22% year over year growth, which was fueled by a 15, 2% increase in comparable restaurant sales.

Restaurant level margin of 22% was 70 basis points higher than the 19, 5% we reported last year.

Speaker 2: earnings per share adjusted for unusual items of $5.58 representing an increase of 60% year over year.

Earnings per share adjusted for unusual items of $5.58, representing an increase of 60% year over year.

Speaker 2: Digital sales growth of nearly 4% year over year, representing 42% of sales.

Digital sales growth of nearly 4% year over year, representing 42% of sales.

Speaker 2: and we opened 78 new restaurants, including 67 with the Chipotle.

And we opened 78, new restaurants, including 67 with the Chipotle.

Speaker 2: We're encouraged by the recent performance, but we're really excited that this is a longer term opportunity as we believe our powerful economic model will deliver best in class returns while achieving AUV's well beyond $3 million and significantly expanding the number of Chipotle restaurants in North America, which I'll elaborate on shortly.

We're encouraged by the recent performance, but what really excites us is the longer term opportunity as we believe our powerful economic model will deliver best in class returns, while achieving a UBS well beyond $3 million and significantly expanding the number of chipotle restaurants in North America, which I will elaborate on shortly.

Okay.

Speaker 2: There's no doubt in my mind that our five key strategies still have a long runway, and are positioning us to win today while we create the future. We revamped them slightly to reflect us transitioning from our turnaround phase to a sustainable growth phase. These now include...

There's no doubt in my mind that our five key strategies still have a long runway and are positioning us to win today, while we create the future we've revamped them slightly to reflect this transitioning from our turnaround phase to a sustainable growth base.

Now include.

Speaker 2: Number one, running successful restaurants with people, accountable culture that provides great food with integrity while delivering exceptional in restaurant and digital experiences. Number two, sustaining world-class people leadership by developing and retaining diverse talent at every level. Number three, making the brand visible, relevant and love to improve overall guest engagement. Number four, amplifying technology and innovation to drive digital growth and productivity at our restaurants and support centers.

Number one running successful restaurants with people accountable culture that provides great food with integrity, while delivering exceptional in restaurant and digital experiences number two sustaining world class people leadership by developing and retaining diverse talent at every level.

Number three making the brand visible relevant and loved to improve overall guest engagement number for amplifying technology and innovation to drive digital growth and productivity of our restaurants and support centers.

Speaker 2: And number five, expanding access to convenience by accelerating new restaurant.

And number five expanding access and convenience by accelerating new restaurant openings.

Speaker 2: Let me provide a brief update on each of these, starting with the rest of the operation.

Let me provide a brief update on each of these starting with our restaurant operations.

Speaker 2: The key to happy customers is a wonderful guest experience that provides consistently great tasting food prepared and served quick.

The key to happy customers, there's a wonderful guest experience that provides consistently great tasting food prepared and start quickly it hasn't been easy, especially if the number of Covid cases, spike and at times impacted our staffing capabilities, but we're fortunate to have amazing employees that are restaurants, who have stayed focused on safety reliability and excellent culinary while adapting seamless.

It leads to the dynamic environment.

Speaker 2: The execution, whether it be on new menu introductions or managing the balance between digital and in-restraintal orders, has been exemplary.

Their execution, whether it be on new menu introductions or managing the balance between digital and in restaurant orders has been exemplary.

Speaker 2: As always, throughput remains a key focal area and something that we're determined to improve, especially as more guests come back through the front line. The critical success factor is ensuring we have proper staffing, which is currently a challenge for many companies.

As always throughput remains a key focal area and something that we're determined to improve especially as more guests come back through the frontline are.

The critical success factors, ensuring we have proper staffing, which is currently a challenge for many companies. However, ongoing investments in our people, including competitive starting rates enhanced benefits debt free degrees development programs and transparent career progression opportunities are resulting in better employee recruitment and retention as well as allowing us to.

Speaker 2: However, ongoing investments in our people, including competitive starting rates, enhanced benefits, debt free degrees, development programs, and transparent career progression opportunities, are resulting in better employee recruitment and retention, as well as allowing us to make progress on labor challenges.

Make progress on labor challenges, but we know there's more work to do especially to support our future growth. As a result, we are focused on increasing our staffing stability through investing in human capital technology that will enhance our hourly team member experience.

Speaker 2: But we know there's more work to do, especially to support our future growth. As a result, we are focused on increasing our staffing, stability through investing in human capital technology, that will enhance our hourly team member experience.

Speaker 2: Specifically, we are in the process of implementing a new digital scheduling program, as well as upgrading our learning management portal.

Specifically, we are in the process of implementing a new digital scheduling program as well as upgrading our learning management portal.

Speaker 2: Also, I know we've mentioned this before, but it's worth highlighting again the importance of the GM role. Their leadership is crucial in executing the fundamentals of our business and setting the standard for how we run great restaurants every day. Additionally, our GM's helped grow the brand and the careers of countless team members, many of whom end up being top performing leaders in our organization. In fact, during 2021, 90% of our restaurant management roles were internal promotion.

Also I know we've mentioned this before but it's worth highlighting again the importance of the GM roll their leadership is crucial and executing the fundamentals of our business and setting the standard for how we run great restaurants everyday. Additionally, our gms help grow the brand in the careers of countless team members, many of whom end up being top performing leaders in our organization in fact during two.

2021, 90% of our restaurant management roles were internal promotions overall, we promoted almost 19000 team members in 2021, our goal is to develop and retain diverse talent at every level of the organization and be the employer of choice a message we want the size at our all manager conference in March.

Speaker 2: Overall, we promoted almost 19,000 team members in 2021. Our goal is to develop and retain diverse town at every level of the organization and be the employer of choice, a message we want to emphasize at our all-manager conference in March.

Speaker 2: After all, our employees need to be ready to support the consistent demand our talented marketing team creates by making Chipotle more visible, more relevant, and more loved. This is done using different advertising channels, including traditional media, to enhance brand awareness and stay relevant.

After all our employees need to be ready to support the consistent demand our talented marketing team creates by making chipotle more visible more relevant and more loved this is done using different advertising channels, including traditional media to enhance brand awareness and stay relevant.

Speaker 2: A wonderful example is our short animated film called The Future Begins, which is a sequel to our award-winning 2011 film Back to the Start. And shine the light on the modern-day challenges the next generation of farmers are faced.

Wonderful examples are short animated film called the future begins which is equal to our award winning 2011 film back to the start and Shine a light on the modern day challenges. The next generation of farmers are facing well, many young farmers value sustainability and ethics and farming like we do they are struggling with new problems like climate change technology cost and access to farm.

Speaker 2: While many young farmers value sustainability and ethics in farming like we do, they're struggling with new problems like climate change, technology costs, and access to farmland. Launching this film is one of the ways that we are raising awareness of our mission to influence the 2023 Farm Bill that would facilitate equitable access to up to one million acres of land for the next generation of farmers.

And watching this film is one of the ways that we are raising awareness of our mission to influence. The 2023 farm Bill that would facilitate equitable access to up to 1 million acres of land for the next generation of farmers.

We also utilized creative social media to successfully drive culture drive difference and ultimately drive a purchase we celebrated the 21 year anniversary of burrito by providing five dollar digital orders and serving up $1 million in free burritos through a virtual chipotle restaurants roadblocks.

Speaker 2: We also utilize creative social media to successfully drive culture, drive difference, and ultimately drive a purchase. We celebrated the 21-year anniversary of Burito by providing $5 digital orders and serving up $1 million in free burritos through a virtual Chipotle restaurant on Roblox.

Speaker 2: We're the first restaurant brand to create a virtual experience on the interactive Roblox platform, which resulted in Halloween 2021 having the most visual transactions of all time at Chipotle. This is a great illustration of us reaching consumers in a unique way to build sales today and the brand for tomorrow.

We're the first restaurant brand to create a virtual experience on the interactive roadblocks platform, which resulted in Halloween 2021, having the most digital transactions of all time at Chipotle is a great illustration of us reaching consumers in a unique way to build sales today and the brand for tomorrow enhanced.

Speaker 2: Enhancing our marketing efforts is a consistent cadence of two to three new menu items per year. Using a disciplined approach to innovation. Not only do these items help bring new guests in the Chipotle family, but they also dry frequency with existing users and give us another opportunity to highlight the brand.

Enhancing our marketing efforts as a consistent cadence of two to three new menu items per year, using a disciplined approach to innovation not only do these items helped bring new guests into chipotle family, but they also drive frequency with existing users and give us another opportunity to highlight the brands in.

Speaker 2: In 2021, we launched Color Flower Rice in January , followed that with case of ears in March, and finally debuted Smoke Risk It in September . All of these new items perform very well, driving an increase in both check size and transact.

In 2021, we launched cauliflower Rice in January followed that with case. It is in March and finally debuted smoked brisket in September all of these new items performed very well driving an increase in both check size and transactions.

Speaker 2: In 2022, we've already launched plant-based territzo for a limited time across our U.S. restaurants. This entree is made using all real fresh ingredients going on a farm, not in a lab, and proves that you don't have to sacrifice flavor to enjoy a vegan or vegetarian product.

In 2022, we've already launched plant based retail for a limited time across our U S. Restaurants. This entrees made using all real fresh ingredients grown on a farm not in the lab and crews that you don't have to sacrifice flavor to enjoy a vegan or vegetarian protein is off to a terrific start and is helping drive cultural buzz for its health and environmental benefits and theirs.

Speaker 2: is off to a terrific start and is helping drive cultural buzz for a health and environmental benefit.

Speaker 2: And there's more on deck. Pollo Esado, the first menu innovation with chicken in our 28-year history has been successfully validated as part of our stage gate process. And our culinary team is in the early stages of developing other exciting menu items. So stay tuned.

On deck patio is Sato, the first menu innovation with chicken in our 28 year history has been successfully validated as part of our stage gate process and our culinary team is in the early stages of developing other exciting menu items, so stay tuned.

Speaker 2: Another important growth driver that accelerated during the pandemic has been our technology transformation, which is helping Chipotle become a real food focused digital lifestyle brand. During the fourth quarter, digital sales grew 4% year over year to $811 million and represented 42% of sales.

Another important growth driver that accelerated during the pandemic has been our technology transformation, which is helping chipotle become a real food focused digital lifestyle brand during the fourth quarter digital sales grew 4% year over year to $811 million and represented 42% of sales. We're pleased to see our digital sales dollars continue to grow despite.

Speaker 2: We're pleased to see our digital sales dollars continue to grow despite lapping tough comparisons and our overall digital mix remains steady. It would seem like a new normal.

Lapping tough comparisons and our overall digital mix remained steady in what seems like a new normal.

Speaker 2: Incredibly, our full-year digital sales of $3.4 billion is nearly three and a half times what we did pre-COVID in 2009.

Incredibly our full year digital sales of $3 $4 billion is nearly three and a half times, what we did pre COVID-19 in 2019.

Speaker 2: Visual has proven to be sticky as it's a frictionless and convenient experience that has been aided by continuous investments and you will likely see us increasing technology enablement for our restaurants and support centers to amplify innovation, enhance the customer experience, and optimize efficiencies to improve operational excellence.

Digital has proven to be sticky as it's a frictionless and convenient experience that has been aided by continuous investments in you will likely see us increasing technology enablement for our restaurants and support centers to amplify innovation enhanced the customer experience and optimize efficiencies to improve operational execution.

Speaker 2: As a result of this pandemic, many new consumers were introduced to Chipotle via our digital channels and are now using us for alternative and at times incremental occasions. Having two large and growing businesses that are supported by separate make lines makes it easy for guest access to Chipotle through different channels and is a key point of differentiation.

As a result of this pandemic many new consumers were introduced to Chipotle via our digital channels and are now using us for alternative anytime's incremental occasions, having two large and growing businesses that are supported by separate make lines makes it easy for guest access chipotle through different channels and is a key point of differentiation.

Apparently about two thirds of our guests use in restaurant as their exclusive channel with the remainder using chipotle digital ecosystem to conveniently access our real food. This dynamic gives us several future opportunities, including adding more guests converting more of our in restaurant guests into higher frequency digital users and leveraging our expanding loyalty program.

Speaker 2: This dynamic gives us several future opportunities, including adding more guests, converting more of our in-restraint guests into higher frequency digital users, and leveraging our expanding loyalty program.

Speaker 2: We now have more than 26.5 million members in our rewards program, which is a key naveler of our digital flywheel. We're focusing a lot more on personalization by creating journeys, primarily for new and at-risk customers that can influence guest behaviors and ultimately drive more free.

We now have more than $26 5 million members in our rewards program, which is a key enabler of our digital flywheel, we're focusing a lot more on personalization by creating journeys primarily for new and at risk customers that can influence guest behavior and ultimately drive more frequency.

As the program grows and we gain more experience we are constantly learning evolving and optimizing for example, offering greater customization and flexibility to redeem rewards as well as game of finding the program with personalized challenges and badges that.

Helped drive engagement and deepen relationships with our guests.

Speaker 2: Not only have we seen strong positive responses from our most loyal fans, but even more exciting is that these program enhancements have increased engagement from our medium and low frequency guests.

Not only have we seen strong positive responses from our most loyal fans, but even more exciting is that these program enhancements have increased engagement from our medium and low frequency guests.

Speaker 2: We are delighted with our progress today and believe ongoing investments and further leveraging of data driven insights will make us even better.

We are delighted with our progress to date and believe ongoing investments and further leveraging of data driven insights will make us even better.

Speaker 2: Our last strategic drivers to expand access and convenience, which today is the number one request from consumers. And we're listening. I'm excited to share that over the long term, we now believe we can operate at least 7,000 Chipotle restaurants in North America, up from our prior goal of 6,000, based on the success of small town opportunities that are delivering unit economics at or better than our traditional location.

Our last strategic drivers to expand access and convenience, which today is the number one request from consumers and we're listening I'm excited to share that over the long term. We now believe we can operate at least 7000 Chipotle restaurants in North America up from our prior goal of 6000 based on the success of small town opportunities that are delivering unit economics at all.

Better than our traditional locations. We're also in the early stages of testing alternate formats, including seem locations, which if successful could further expand our addressable market.

Speaker 2: We're also in the early stages of testing alternate formats, including scene locations, which if successful could further expand our addressable mark.

Speaker 2: Additionally, given healthy and improving cash and cash returns, we are building a real estate pipeline that will allow us to accelerate new unit growth to be in the range of 8 to 10 percent.

Additionally, given the healthy and improving cash on cash returns we were building our real estate pipeline that will allow us to accelerate new unit growth to be in the range of 8% to 10% per year with greater than 80% of new restaurants, having a chipotle and of course, we continue to look for ways to enhance convenience with triple lanes alternative formats delivery and catering to bright in many ways for our guests.

Speaker 2: with greater than 80% of new restaurants having a triple ring. And of course, we continue to look for ways to enhance convenience with triple rings, alternative formats, delivery, and catering to brighten many ways for our guest, triple.

To chipotle.

Speaker 2: In closing, I can't thank our employees enough for everything they've done to elevate the brand and cultivate a better world for each other, our guests and our communities, no matter what external restrictions came our way in 2020.

In closing I can't thank our employees enough for everything they've done to elevate the brand and cultivate a better world for each other our guests and our communities no matter what external restrictions came our way in 2021.

Speaker 2: As I've said before, challenges create opportunities and we are now in a much stronger competitive position than we were two years ago. While we're still navigating through what we all hope is the last phase of this pandemic, I look forward to the future with optimism and can't wait to see what 2022 holds for Chipotle. Okay, with that, here's Jack to walk you through the finance.

As I've said before challenges create opportunities and we are now in a much stronger competitive position than we were two years ago, while we're still navigating through what we all hope is the last phase of this pandemic I look forward to the future with optimism and can't wait to see what 2022 holds for Chipotle.

Okay with that here's Jack to walk you through the financials.

Thanks, Brian and good afternoon, everyone. We ended the year on a positive note with sales in the fourth quarter growing 22% year over year to reach $2 billion as comp sales grew 15, 2%.

Speaker 3: We end of the year on a positive note with sales in the fourth quarter growing 22% year over year to reach $2 billion as Comp Sales Group 15.2%.

Speaker 3: Restaurant level margin of 20.2% expanded 70 base points over last year. And earnings per share adjusted for unusual items was $5.58 representing 60.3% year-over-year growth. The fourth quarter had unusual expenses related to legal expenses. Our previously disclosed 2018 performance share modification, transformation costs, as well as restaurant asset impairment and closure costs.

Restaurant level margin of 22% expanded 70 basis points over last year and earnings per share adjusted for unusual items was $5 58, and representing 63% year over year growth fourth quarter had unusual expenses related to legal expenses. Our previously disclosed 2018 performance share modification transforms.

<unk> cost as well as restaurant asset impairment and closure costs, which negatively impacted our earnings per share by 89 cents, leading to GAAP earnings per share of $4 69.

Speaker 3: negatively impacted our earnings per share by 89 cents. We need to gap earnings per share of $4.69.

Speaker 3: As we look ahead to 2022, there remains uncertainty on several floods, including COVID with impacts, as well as staffing and inflationary pressures, that limit our visibility there for making it difficult to provide full-year concides.

As we look ahead to 2022, there remains uncertainty on several fronts, including COVID-19 impacts as well as staffing and inflationary pressures that limit our visibility and therefore make it difficult to provide full year comp guidance.

Speaker 3: These had went for a significant in January , which also included some challenging weather, which led to a January cop around 5%.

These headwinds were significant in January which also included some challenging weather, which led to a January comp around 5%.

Speaker 3: We remain optimistic that as these challenges ease, that are comfortable to accelerate from the January level.

We remain optimistic that as these challenges these better console accelerate from the January level.

Speaker 3: It's difficult to predict the comp for Q1 with precision. We expect the land somewhere in the mid to high single digit range, assuming the effect of COVID continue to supply.

Difficult to predict the comp for Q1 with precision we expected to land somewhere in the mid to high single digits range, assuming the effects of Covid continue to subside.

Speaker 3: There's no doubt our restaurant level margin is messy in the near term. So let me provide some respect to my Q4 and what we expect moving forward.

Theres no doubt our restaurant level margin is messy in the near term. So let me provide some perspective on Q4 and what we expect moving forward.

Speaker 3: If I don't go in labor pressures, our Q4 margin will impact by a higher level of commodity inflation than we originally expected for a merely due to elevated beef and freight costs.

Besides ongoing labor pressures, our Q4 margin was impacted by a higher level of commodity inflation than we originally expected primarily due to elevated beef and freight costs.

Speaker 3: As a result, we took a 4% manufacturing increase in the middle of December to help out the southeast sideway.

As a result, we took a 4% menu price increase in the middle of December to help offset these headwinds.

Speaker 3: Given the timing of this pricing action, it had little impact in the quarter, resulting in our Q4 margin being at the lower end of our 20 to 21% guidance range.

Given the timing of this pricing action it had little impact in the quarter, resulting in our Q4 margin being at the lower end of our 20% to 21% guidance range.

Speaker 3: However, if you look ahead to Q1 where we will see the pricing benefit for the bull quarter, a restaurant-level margin is expected to be nearly 22%.

However, if you look ahead to Q1, where we will see the pricing benefit for the full quarter. Our restaurant level margin is expected to be nearly 22%.

Speaker 3: And normalizing for the elevated marketing spend expected this quarter, as well as transitory COVID related cost pressures, the underlying Q1 margin would be in the low to mid 23% rate.

And normalizing for the elevated marketing spend expected this quarter as well as transitory COVID-19 related cost pressures the underlying Q1 margin would be in the low to mid 23% range.

Speaker 3: The bottom line is that our underlying margin remains healthy, and we believe we still have pricing power to use as needed if inflation continues to rise going forward. Of course, we'll be thoughtful and patient as we consider these actions to make sure we continue to deliver an excellent value and dining experience to our guests.

Bottom line is that our underlying market remains healthy and we believe we still have pricing power to use as needed if inflation continues to rise going forward.

We'll be thoughtful and patient as we consider these action to make sure we continued to deliver an excellent value and dining experience to our guests.

Speaker 3: Now let me go through the key panel line items beginning with cost of sales.

Now let me go through the key P&L line items, beginning with cost of sales.

Speaker 3: While our supply chain team continues to do an admirable job peeping our restaurants and supply of peeing gradient and managing the cost of doing so, external challenges were quite extreme in Q4, which led to food cost being 31.6% and increase at 60 basis points for last year. As I just mentioned, inflation on beef and freight, and to a lesser extent, Avocado costs more than offset the leverage from our menu price increase.

While our supply chain team continues to do an admirable job keeping our restaurants in supply of key ingredient and managing the costs of doing so external challenges were quite extreme in Q4, which led to food costs being 31, 6% an increase of 60 basis points from last year.

As mentioned inflation on beef and freight and to a lesser extent avocado costs more than offset the leverage from our menu price increases.

Speaker 3: As we think about Q1, the successful premium brisket LTO is done this, and we get the full benefit of our December price.

As we think about Q1, the successful premium brisket LTI was grounded and we get the full benefit of our December pricing.

Speaker 3: These tailwinds will be partially offset by a full quarter of elevated beef prices, as well as seasonally higher avocado pricing. As a result, we expect our Q1 food cost to be in the 30 to 30.5% rate.

These tail winds will be partially offset by a full quarter of elevated beef prices as well as seasonally higher avocado pricing as a result, we expect our Q1 food costs mean that 30% to 35% range.

Speaker 3: Labor costs for the fourth quarter with 26.4%, an increase of about 100 based coins from last year. This increase was driven by a strategic decision to increase average nationwide wages to $15 per hour in May of last year, which was partially offset by menu price increases and sales leverage.

Labor costs for the fourth quarter was 26, 4% an increase of about 100 basis points from last year. This increase was driven by our strategic decision to increase average nationwide wage to $15 per hour in may of last year, which was partially offset by menu price increases and sales leverage.

Speaker 3: While expecting elevated wage inflation to continue, especially given higher exclusion and overtime pay, because of the Amapron variant, our December menu price increase should provide some offset resulting in labor costs being in the low 26% range for Q1.

Acting elevated wage inflation to continue, especially given higher exclusion and overtime pay because it would be omicron variant or December menu price increase should provide some offset resulting in labor cost being in the low 26% range for Q1.

Speaker 3: Other operating costs for the quarter were 16.3% at decrease of about 160 base points from last year. Give it primarily to price and sales.

Other operating cost for the quarter was 16, 3% a decrease of about 160 basis points from last year, due primarily to price and sales leverage.

Speaker 3: Marking a promo cost to the quarter were 3.6 percent, about 30 base points lower than we spent last year. But as expected, 120 base points sequentially increased from Q3 to support smoke risk it and the latest brand investing under our behind the foil campaign.

Marketing and promo costs for the quarter were three 6% about 30 basis points lower than we spent last year, but as expected 120 basis point sequential increase from Q3 to support smoked brisket and the latest brand messaging under our behind the foil campaign.

Speaker 3: Like Q4, Q1 tends to be at a marketing quarter to support new menu items like plant-based Theresa. Therefore, we expect marketing to be in the high 3% range of Q1, but to remain around 3...

Q4, Q1 tends to be a higher marketing quarter to support new menu item like plant based chorizo. Therefore, we expect marketing to be in the high 3% range of Q1.

But to remain around 3% for the full year.

Speaker 3: Overall, other operating costs are expected to be in mid-16% range for the first quarter.

Overall other operating costs are expected to be in mid 16% range for the first quarter.

Speaker 3: GNA for the quarter was $1,160 million on a gap basis or $133 million on a non-gap basis, excluding $18 million related to the proposed settlement of legal matters. $7.6 million for the previously disclosed modification to our 2018 performance share and $1.3 million related to transformation expenses. GNA also includes about $100 million.

G&A for the quarter was $160 million on a GAAP basis or $133 million on a non-GAAP basis, excluding $18 million related to the proposed settlement of legal matter $7 $6 million for the previously disclosed modification to our 2018 performance shares and $1 3 million related to transformation expenses.

G&A also includes about $100 million of underlying G&A.

Speaker 3: $30 million related to non-cash stock compensation, $1.8 million related to higher performance-based bonus of cruells and payroll taxes, and equity besting, and stock coction exercises, and roughly $1.4 million related to our upcoming All-Manager conference.

$30 million related to noncash stock compensation.

One 8 million related to higher performance based bonus accruals and payroll taxes, and equity vesting and stock option exercises and roughly $1 $4 million related to our upcoming all manager conference.

Speaker 3: We expect our underlying GNA to be around $1 million in Q1 and grow slightly every quarter of their after as we continue to make investment, primarily in technology and people to support ongoing growth.

We expect our underlying G&A to be around $101 million in Q1 and grow slightly every quarter thereafter, as we continue to make investments primarily in technology and people to support ongoing growth.

Speaker 3: Despite the elevated spend, our goal remains to deliver leverage on this line item relative to our sales growth, just like we did in 2021.

The elevated spend our goal remains to deliver leverage on this line item relative to relative to our sales growth just like we did in 2021.

Speaker 3: The interest-based stock comp will be likely around $30 million in Q1, although this amount could move up or down based on our performance and subject to the 2022 grants which are issued in Q1. We also expect to recognize around $4 million related to employer taxes, associated with shares that best turn the quarter, as well as about $17 million related to our all-admitted.

We anticipate stock comp will be likely around $30 million in Q1, although this amount could move up or down based on our performance and subject to the 22 2022 grants which are issued in Q1.

We also expect to recognize around $4 million related to employer taxes associated with shares that best during the quarter as well as about $17 million related to our all manager conference.

Our effective tax rate for Q4 was 23% on a GAAP basis, and 18, 7% on a non-GAAP basis.

Speaker 3: Our expected tax rate for Q4 was 20.3% on a gap basis, an 18.7% on a non-gap basis. Both rates benefited from option exercises and share investing at elevated stock prices. In addition, our gap tax rate included a benefit for the write-off of uncertain tax position reserves in the fourth quarter of 2021.

Both rate benefited from option exercises and share vesting at elevated stock prices. In addition, our GAAP tax rate included a benefit for the write off of uncertain tax position reserves in the fourth quarter of 2021.

Speaker 3: For fiscal 2022, we estimate our underlying effective tax rate will be in the 25% to 27% range. That what it may vary based on discrete item.

For fiscal 2022, we estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary based on discrete items.

Speaker 3: Our balance sheet remains healthy as we end the year with $1.4 billion in cash, restricted cash and investments, with no debt along with a $500 million untapped revival.

Our balance sheet remains healthy as we ended the year with $1 $4 billion of cash restricted cash and investments with no debt along with a $500 million untapped revolver.

Speaker 3: During the fourth quarter, we repurchased $169 million of our stock, an average price of $1,750. And we expect to continue using excess free cash flow to opportunistically repurchase our stock.

In the fourth quarter, we repurchased $169 million of our stock at an average price of $1750 and we continue we expect to continue using excess free cash flow to opportunistically repurchase our stock.

Speaker 3: We're privileged to have the financial strength with which to make ongoing strategic investment, including restaurant design and real estate development growth. I'm really impressed by the hard work of our development and operations team as they open 78 new restaurants in the fourth quarter with 67, including a Chipotle. This is despite all the construction inflationary pressures, subcontractor labor issues, critical equipment shortages and landlord delivery delays.

We're privileged to have the financial strength with which to make ongoing strategic investment, including restaurant design and real estate development growth I'm really impressed by the hard work of our development and operations team.

We opened 78, new restaurants in the fourth quarter with 67, including a chipotle. This is despite all the construction inflationary pressures subcontractor labor issues critical equipment shortages and landlord delivery delays.

Speaker 3: But the full year exceeded our guidance and opened 250 new restaurants with 81%, or 174, including H-boat line.

Full year exceeded exceeded our guidance and open 250, new restaurants, with 81% or 100, and said before including a chipotle.

Speaker 3: We ended 2021 with 355 Chipotle, including 16 conversions and 11 relocations. And overall, these formats continue to demonstrate stellar performance. Furthermore, we're gaining more confidence in our conversion or relocation strategy, which will allow us to enhance the Chipotle and opportunity and provide more access and convenience for our guests.

We ended 2021 with 355, Chipotle, including 16 conversion and 11 relocation and overall these formats continued to demonstrate its stellar performance. Furthermore, we're gaining more confidence in our conversion our relocation strategy, which will allow us to enhance the chipotle and opportunity and provide more access and convenience for our guests as.

Speaker 3: As a result, we expect to open between 235 and 250 restaurants in 2022, with more than 80%, including a Chipotle. This guidance includes 5-10 relocations to add a Chipotle.

As a result, we expect to open between 235, and 250 restaurants in 2022 with more than 80%, including a chipotle in.

This guidance includes five to 10 relocations to add at Chipotle.

Speaker 3: Looking past the pandemic, we expect to be able to accelerate openings in 2023 and beyond and move towards the high end of the 8% to 10% openings range that Brian .

Looking past the pandemic, we expect to be able to accelerate openings in 2023 and beyond and move towards the high end up 8% to 10% openings range that Brian mentioned.

Speaker 3: Let me end by expressing my gratitude to our nearly 100,000 team members in the restaurant and in the support centers for overcoming countless issues in the past year to safely serve and delight our guests.

Let me end by expressing my gratitude to our nearly 100000 team members in the restaurants and in the support center for overcoming countless issues in the past year to safely serve and delight our guests.

Speaker 3: Their focus and strong execution have brought us to where we are today, and I believe will be critical to sustaining our industry leadership in the future. With that, we're happy to take your questions.

Their focus and strong execution have brought us to where we are today and I believe will be critical to sustaining our industry leadership in the future with that we're happy to take your questions.

Speaker 1: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key.

Thank you we will now begin the question and answer session to ask a question.

<unk> you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Speaker 1: To withdraw your question, please press star then 2.

To withdraw your question. Please press Star then two.

Speaker 1: At this time, we will pause momentarily to assemble our...

At this time, we will pause momentarily to assemble our roster.

And the first question will come from Dennis Geiger with UBS. Please go ahead.

Speaker 1: And the first question will come from Dennis Geiger with UBS. Please go ahead.

Speaker 4: Great, thanks for the question. Wanted to focus a little bit more on the margin. I guess both for kind of the one, two. I think Jack and Brian , you talked to a

Great. Thanks for the question I wanted to focus a little bit more on the margin.

I guess, both for kind of the <unk> I think Jack and Bryan you talked to.

Speaker 4: a low to mid 23 sort of underlying wondering if you could just talk a little bit more about what goes into that and just kind of the go forward if you could kind of give any kind of color as we go through the year what that margin trajectory looks like and related as it relates to that long term algorithm you provided if there's any change there or if it's kind of consistent with what you've messaged prior.

Low to mid 20 threes sort of underlying wondering if you could just talk a little bit more about what goes into that and and just kind of the go forward. If you could kind of give any kind of color as we as we go through the year, what what that margin trajectory looks like and related as it relates to that long term algorithm you provided if theres any change there or if it fits.

Kind of consistent with what you've messaged prior thank you.

Speaker 2: Yeah, so I'll start, Jack. To answer your question, the long-term algorithm, you know, we still believe we will achieve that. And, you know, it's a combination of the sales growth and obviously, you know, pricing where we need to, when we need to, and then we've got a lot of initiatives going on making sure that we're as efficient as possible. So, long-term, we've got 100% confidence in what we can achieve.

Yes, so I'll start Jack.

To answer your question the long term algorithm, we still believe.

We will achieve that and.

Combination of the sales growth and obviously.

Pricing, where we need to win we need to and then we've got a lot of initiatives going on making sure that we're as efficient as possible. So long term.

We've got a 100% confidence in what we can achieve.

Speaker 2: to your specific question about some of the stuff happening in the short term, I'll turn that over to Jack.

To your specific question about some of the stuff happening in the short term I'll turn that over to Jack.

Speaker 3: Yeah, the key things that are happening as you move from Q4 to Q1 are the menu price increase we took. We only got like less than 100...

Yeah Yeah.

Key things that are happening as you move from Q4 to Q1 or are the menu price increase we took we only we got like less than 100 basis points of impact in the fourth quarter. So we took that in December we will get the full bang up the benefit of that in Q1.

Speaker 3: impact in the fourth quarter. We took that in December . We'll get the full benefit of that in Q1. That's going to be offset somewhat by the fact that beef inflation has continued. We keep thinking that beef is going to level off and then go down. It just hasn't happened yet. And so while we got a partial quarter of beef inflation during the fourth quarter, we'll get a full quarter.

That's gonna be offset somewhat by the fact that beef inflation has continued we keep thinking that beef is going to level off and then go down it just hasn't happened yet and so while we got a partial quarter of beef inflation during the fourth quarter, we'll get a full quarter.

Speaker 3: you know, up inflation, you know, throughout that month. So we just, you know, mainly those two things alone and then Briskit, actually Briskit does...

I've inflation.

That month. So we're just mainly those two things alone brisket actually brisket does.

Speaker 3: It's a premium priced item, also the premium cost item, so that has a...

It is a premium priced item, but it also has a premium cost items. So that has a drag on the margin as well and so that added during the fourth quarter. So when you look at what our margin is expected to be in Q1 without considering timing adjustments. It's in that kind of high 22% range, but we're going to spend more than average.

Speaker 3: drag on the margin as well. And so that ended during the fourth quarter. So when you look at what our margin is expected to be in Q1, without considering timing adjustments, it's in that kind of high 22% range. But we're gonna spend more than average.

Speaker 3: on marketing because we're going to support, you know, we already have supported.

On marketing because we're going to support you know we already have supported.

Speaker 3: new venue items were going to support our next campaign and so when you adjust for the timing of that and some other timing differences that's where our normalized underlying margin should be in that kind of 23 percent range and then the only thing I would just add is typically our winter months are not our high margin months.

Menu items to support our next campaign and so.

When you adjust for the timing of that and some other timing differences, that's where our normalized underlying margin should be in that kind of 23% range and then the other thing I would just add is typically our winter months are not a high margin months. So it of course depends on what happens with inflation throughout the year, but if inflation doesn't get too much worse, we were.

Speaker 3: So it, of course, depends on what happens with inflation throughout the year, but if inflation doesn't get too much worse, we would hope that we would see margins at or about that 23% range going forward.

Hope that we would see margins at or above that 23% range going forward.

Great Thanks, and congrats on the results.

Thank you.

The next question will be from Jared Garber from Goldman Sachs. Please go ahead.

Speaker 1: The next question will be from Jared Garber from GoldenSax. Please go ahead.

Speaker 5: Hi, thanks for the question. I wanted to ask about menu innovation. And 2021 was a year in which you had several really successful innovations come through the menu. And why don't you just get a sense of how you're thinking about that as we approach 22 or head further into 22, and how you think about lapping in and maybe where you're focused on that.

Alright. Thanks for the question I wanted to ask about menu innovation in 2021 was a year in which you had several really successful innovation coming through that the menu and wanted to just get a sense of how youre thinking about that as we approached 22 or head into further into 'twenty, two and how you think about lapping in may.

What those were.

What are your focus on the menu.

Speaker 2: Yeah, sure. Yeah, well, you touched on the first part. We're really happy with how all of our nation has performed. You know, I think it's a testament to our discipline around ensuring what we launch has, you know,

Yes sure.

Yeah, well you touched on the first part we were really happy with how all of our initiatives performed I think it's a testament to our discipline around ensuring what we launch.

It has.

Speaker 2: high probability of success and that we're able to execute, supply it, and then deliver a great experience. So, we're really delighted with what we did in 2021. I mentioned this in my earlier remarks, the plant-based chorizo is off to a great start.

A high probability of success and that we're able to execute supply and then deliver a great experience. So.

We're really delighted with what we did in 'twenty one.

As I mentioned this in my earlier remarks, the plant based retail is off to a great start.

Speaker 2: If you haven't had a chance to try it, I highly recommend to give it a try.

If you haven't had a chance to try it I highly recommend it to give it a try.

Speaker 2: It's really terrific, but you know the way we think about it is we obviously want to listen to what our customers say they would like to see on the menu. That's why we've done things like tasty Diaz, improved the case so we want to listen to what you know habits and trends are happening. So that's why you see us do things like leading with cauliflower rice, plant-based chorizo.

It's really terrific, but the way we think about it is we obviously want to listen to what our customers say they would like to see on the menu. That's why we've done things like <unk> improved the queso.

We want to listen to what.

Habits and trends are happening. So that's why you see us do things like leading with cauliflower Rice plant phase III. So and then we're going to lead consumer palates and that's why we're really excited about this polo is Sato program that we just tested obviously carnitas solder was something that we're really excited about.

Speaker 2: And then, you know, we're going to lead consumer pilots. And that's why, you know, we're really excited about this Pollo Asado program that we just tested. Obviously, Carnia Asado was something that we're really excited about. And, you know, hope to be able to try the brisket. That was just, I thought, outstanding.

We had a chance to try the brisket that was just.

Outstanding and so we're going to continue to probably do two to three innovations a year, we're going to use kind of those guard rails as were our culinary team is looking and then we're going to continue to use our disciplined approach. So that we have a pretty good idea of how it's going to perform when we do roll it out nationally.

Speaker 2: You know, we're going to continue to probably do two to three innovations a year. We're going to use kind of those guard rails as where our culinary team is looking. And then we're going to continue to use our discipline approach so that we have a pretty good idea of how it's going to perform when we do roll it out nationally.

Thanks, I appreciate the color there.

Sure.

Speaker 1: The next question will be from David Palmer from Evercore ISI. Please go ahead.

The next question will be from David Palmer from Evercore ISI. Please go ahead.

Thanks, a question on pricing is is the current year over year run rate, 12% after that latest increment and what what's going to dictate your pricing strategy through the year and in particular.

Speaker 1: Thanks. Question on pricing. Is the current year-over-year run rate 12% after that latest increment?

Speaker 6: what what's going to dictate your pricing strategy through the year and in particular and and no people are curious about how you view your pricing power in what what would you when informs your view about your portless pricing power and you know basically how does that dovetail with your pricing strategy

I know people are curious about how you view your pricing power you know what what informs your view about Chipotle is pricing power in you know basically how does that dovetail with your pricing strategy. Thanks.

Speaker 2: Yeah, so David, I think we're more in the 10% range right now, as you look at Q1. And if we want to take any more pricing for the bounce of the year, you know, that ultimately ends up being about a 6% or more, plenty of little bit more than 6% for the year. To answer your question on...

Yeah, So David I think we're more in the 10% range right now.

As you look at Q1, and if we want to take any more pricing for the balance of the year that ultimately ends up being about a 6% or more probably a little bit more than 6% for the year.

To answer your question on win.

Speaker 2: and why we would take pricing. You know, Jack and touch on this. Like we continue to see pressure on wages. We want to make sure that we continue to be competitive on that front.

And why we would take pricing Jacqueline and touch on the suite like we continue to see.

Pressure on wages, we want to make sure that we continue to be competitive on that front.

Speaker 2: We feel like we're in a really good position right now as result. Our restaurants are staff.

We feel like we're in a really good position right now as a result, our restaurants are staffed.

Speaker 2: better than they were pre-COVID. And frankly, better than they had been for the last two years through this whole COVID period. So we don't...

Better than they were pre COVID-19 and frankly better than they had been for the last two years through this whole COVID-19 period. So we don't want to slip on our wages. So we're going to keep a close eye on that and then obviously, we will look for any inefficiencies to help mitigate that but we do have the pricing lever there and then so as Jack mentioned.

Speaker 2: slip on our wages, so we're going to keep a close eye on that. And then obviously...

Speaker 2: We'll look for any inefficiencies to help mitigate that, but we do have the pricing lever there. And then, as Jack mentioned, be afraid in some of these other things that continue to stay elevated.

You can trade in some of these other things that continue to stay elevated and we don't see it abate, we will have to take some additional pricing there. So.

Speaker 2: If we don't see it obeyed, we'll have to take some additional pricing there. So it's really the last thing we want to do, but we're fortunate that we can pull it. And we've seen no resistance today with the levels that we're currently at. And I think I mentioned this.

It's really the last thing we want to do but we're fortunate that we can pull it and.

We've seen no resistance to date with the levels that we're currently at and I think I mentioned this in my earlier remarks or maybe this was an interview with you earlier I mean keep in mind. When we talk about these percentages I'd like to remind people the absolute dollar of chicken burrito for most parts of the country is still less than $8 chicken bowls still less than $8 and that's the.

Speaker 2: earlier remarks or maybe this was an interview earlier. I mean, keep in mind, when we talk about these percentages, I like to run people to the absolute dollar. A chicken burrito, for most parts of the country, is still less than eight dollars.

Speaker 2: She can go still less than $8. And that's phenomenal value, especially when I see where...

Nominal value, especially when I see where frankly food that I would question the caliber not being what our caliber is nor with the customization.

Speaker 2: Frankly, food that I would question the caliber, not being what our caliber is, nor what the customization is, you know, right in that price point, if not higher. So.

As you know right in that price point, if not higher so.

Speaker 2: We've got a lot of pricing power. Our customers appreciate the brand, appreciate the culinary, and we're fortunate to be in that position.

We've got a lot of pricing power our customers appreciate the brand appreciate the culinary and.

We're fortunate to be in that position.

Thank you.

And the next question will be from Peter <unk> with <unk>. Please go ahead.

Speaker 1: And the next question will be from Peter Sala with BTIG. Please go ahead.

Speaker 7: Great, thanks Brian . I think you just touched on this a little bit by hoping you can elaborate a little bit. You guys just took another price increase and you're running with about 10%. But what about the value proposition and how do you ensure you just don't out price some of your consumers? Is there a benchmark that you're looking at the price against or is there something else we can look at to get a sense on how much inflation you guys are willing to take on?

Great. Thanks, Brian I think you just touched on this a little bit, but hoping you can elaborate a little bit.

You guys just took another price increase and you run it was about 10%, but what about the value proposition and how do you ensure you just don't know price. Some of your consumers is there a benchmark that youre looking at the price against them or is there something else. We can look at to get a sense on how much inflation you guys are willing to take on.

Speaker 2: Yeah, so look, we do a couple things. One, we have internal work where we're constantly evaluating the value strength of our brand through, you know, cultural traditional market research.

Yes, So look we do a couple of things one we have internal work, where we're constantly evaluating the value strength of our brand through call. It traditional market Research. Then we also do the analytical side of things where after we take pricing, we really do analyze what happens to transactions in the <unk>.

Speaker 2: Then we also do the analytical side of things where after we take pricing, we really do analyze what happens to transactions and the good news is, we have so much data now with our loyalty database that we're able to understand are there any behavioral impacts from what we're seeing?

News is we have so much data now with our loyalty database that we're able to understand are there any behavioral impacts from what we're seeing and we see very little resistance. There and then obviously, we look out into the marketplace. You know you look at it and.

Speaker 2: and we see very little resistance there. And then, obviously, we look out into the marketplace. You look at, and in all this stuff, right? Pricing usually has something to do with your relative options. And when you look at the options, again, this is why I think we get such strong value scores to get our food, with our customization, with our access.

All of this stuff right pricing, usually has something to do with your relative options and when you look at the options.

Again. This is why I think we get such strong value scores to get our food with our customization with our access.

Speaker 2: and, you know, frankly, the quantity that you're also able to get.

And.

Frankly, the quantity that you are also able to get.

Speaker 2: You know, we're kind of in our own space and we're very fortunate to be in that space. And, you know, there's a lot of headroom from what we can tell. And I really hope we never have to use all of it, but we'll be judicious in when we need to, we will.

We're kind of in our own space and we're very fortunate to be in that space.

You know theres a lot of headroom from what we can tell and I really hope we never have to use all of it but we'll be judicious and when we need to we will.

Yeah.

Thank you very much.

Yes.

Speaker 1: And the next question is from David Tarantino from Baird. Please go ahead.

And the next question is from David Tarantino from Baird. Please go ahead.

Speaker 8: Hi, good afternoon. My question is about the unit growth outlook accelerating. I guess first.

Hi, Good afternoon, my question's about the unit growth outlook.

Celebrating I guess.

First question is just wanted to gauge your confidence level in being able to ramp up.

Speaker 8: Wanted to gauge your confidence level and being able to ramp up.

Speaker 8: to those types of numbers in the current.

Those types of numbers and the current labor environment, where in given how tight the labor market has it become I guess is there are certain things you are doing.

Speaker 8: labor environment we're in given how tight the labor market has become I guess is there certain things you're doing on the staffing side ahead of that acceleration that are worth talking about and then the second question related to this is Jack I was wondering if you could give us an update on what the return profile looks like for the Chipotle lanes that you're developing

On the staffing side ahead of that acceleration that are worth talking about and then the second question related to this is Jack I was wondering if you could give us an update on what the return profile looks like for the Chipotle ins that you're developing.

So yes, so David your first question.

Speaker 2: So yeah, so David, your first question, you know, we continue to feel really good about one, the performance of a restaurant.

We continue to feel really good about one the performance of our restaurant openings right. So we opened 215 and.

Speaker 2: Right, so we opened 215 and the performance was excellent. I had to test them into our real estate development team, our operators to ensure those restaurants for staff for the opening. And when things, I think I mentioned this in the script, we promoted something like 19,000 people to the manager level. And when things that's great about our company is as we close in on having 3,000 restaurants, then 4,000 restaurants.

The performance was excellent and that's a testament to our real estate development team our operators to ensure those restaurants for <unk> for the opening.

I think I mentioned this in the script we.

We promoted something like 19000 people to the manager level and one of the things that's great about our company is as we close in on having 3000 restaurants and 4000 restaurants. Our goal is to internally develop our future leaders and the reason why that's important is it's a lot easier to prepare for 300 openings when youre working off of a base.

Speaker 2: Our goal is to internally develop our future of leaders. And the reason why that's important is, it's a lot easier to prepare for 300 openings when you're working off of a base.

Speaker 2: of 3000 or 4000 or you know whatever number of openings we want to achieve. The bigger our basis, the more talent we can develop and I think we're demonstrating we can develop that talent with the fact that we just promoted 19,000 employees. So they'll stay with us, they'll grow with us.

<unk> 3000, or 4000 or whatever number of openings, we want to achieve the bigger basis. The more talent, we can develop and I think we're demonstrating we can develop that talent with the fact that we just promoted 19000 employees. So they will stay with us they will grow with us. They are excited about the growth opportunity.

Speaker 2: They're excited about the growth opportunity. You know, I will tell you obviously COVID made it very hard to open 2115 restaurants. You know, that wasn't...

I will tell you obviously COVID-19 made it very hard to open 215 restaurants.

Speaker 2: an easy thing. And again, I give it a real pass-off to our team for being able to execute that type of new restaurant opening quantity as well as quality. And the last thing I'll say before I enter with a jack is the pipeline is very strong.

In an easy thing and again I give it a real hats off to our team for being able to execute that type of new restaurant opening in quantity as well as quality and the last thing I'll say before I hand over to Jack is the pipeline is very strong.

Speaker 2: And, you know, we're fortunate. People want Chipotle in their towns.

<unk>.

We're fortunate people want chipotle in their towns.

Speaker 2: The landlords want Chipotle in their centers and you know we just demonstrated now we also have the small town opportunity to add to the Chipotle opportunity. So we're in a really good position obviously I'm hoping we-

The landlords want chipotle in their centers.

And we just demonstrated now we also have the small town opportunity to add to the chipotle opportunity. So we're in a really good position obviously.

I'm, hoping we're in the last phase of Covid and.

Speaker 2: phase of COVID and some things get a little bit easier versus harder, going forward. But it's a real testament to the strength of our operations, the strength of our development team, that we're able to open 215 high quality new units. So Jack, I'll let you talk to David's question.

Some things get a little bit easier versus harder.

Going forward, but it's a real testament to the strength of our operations the strength of our development team that we were able to open 215 high quality new units. So Jack I'll, let you talk to David's question on <unk>.

Speaker 3: Yeah, David, your coat lengths continue to outperform, you know, our notch, coat laying restaurant.

Yes, David Chipotle and continue to outperform.

Chipotle restaurants, that's why you've seen us quickly get up to now 80% of our new restaurants have at Chipotle, They have higher volume they skew more towards digital and that skew comes from order ahead, which is a higher margin transaction and the abouts mandates only modestly higher call. It in that $75000 range. So if a non chipotle opening.

Speaker 3: That's why you've seen this quickly get up to now 80% of our new restaurants. Have a Chipotle. They have higher volume. They skew more towards digital and that skew comes from order ahead, which is a higher margin.

Speaker 3: transaction and the investment is only modestly higher call it and at $75,000 range. So if a non-dubult lane opening get a cash on cash return within a couple years as the sales grow.

You can get a cash on cash return within a couple of years at the sales growth.

Speaker 3: in the 55 to call it 60% return. A to Portland is gonna generate cash and cash returns in the 65 to 70% return. So clearly exceptional returns. And then what Chipotle and Balsow allowing us to do is go into the small town where we have another convenient access point. And then also we're starting to get into these seam locations. We only have a few open. But with the extra convenience channel of Chipotle, it just makes it more

In that 55 to call it 60% return a chipotle is going to generate cash and cash returns and 65% to 70% returns. So clearly exceptional returns I know, what chipotle and also allowing US to do is go into these small towns where we have another convenient access point and then also we're starting to get into these.

Seem locations, we only have a few open.

But with the extra convenience channel at Chipotle It just makes it.

Speaker 3: doable from a financial standpoint and a convenience standpoint to go into these small towns and seem location and it generates a barrier return. So yeah, Chipotle continues to form at exceptional levels.

More doable from a financial standpoint, and a convenience standpoint, they're going to these small towns. It seemed location did generate superior returns. So yeah Chipotle continues to perform at exceptional levels.

Great. Thank you very much.

Okay.

Speaker 1: The next question will be from Brian Bittner with Oppenheimer Company. Please go ahead. Thank you.

And the next question will be from Brian Bittner with Oppenheimer <unk> Company. Please go ahead.

Thank you.

Speaker 6: Can you just update us again on the pace of the loyalty membership trajectory as we enter 2022? Is it still showing a healthy pace of growth? And with this now very large base of members in this immense digital ecosystem, Brian , what do you believe is the biggest strategic or operational unlock that still sits in front of you as it relates to loyalty that you believe can be incremental to the business moving forward?

Can you just update us again on the pace of the loyalty membership trajectory as we enter 2022 is it still showing a healthy pace of growth in and with this now very large base of members and this immense.

Immense digital ecosystem, Brian what do you believe is the biggest strategic or operational unlock that still sits in front of you as it relates to loyalty that you believe can be incremental to the business moving forward.

Speaker 2: Yeah, sure. So, yeah, look, we are very fortunate that we can continue to grow the loyalty.

Yeah sure. So look we are very fortunate that we continue to grow the loyalty.

Uh huh.

Speaker 2: population in a meaningful clip. Obviously it started the same speed it was.

Population and a meaningful clip obviously, it's not at the same speed it was a year or two ago, but.

Speaker 2: you know a year or two ago, but you know, it's one of the things that's kind of interesting is we add more restaurants and we give people more access.

It's one of the things that's kind of interesting as we add more restaurants, and we give people more access.

Speaker 2: The Loyalty Sledge Rewards program becomes even that much more of an appealing program that they wanna be a part of. So we continue to see people join. One of the big unlocks for us, frankly, is we still have a lot of people that are only dining room people and then we have a lot of people that are only digital people. And there's a small group that's doing both. And, you know, call it the 50%, 60% that are dining room only people.

The loyalty rewards program becomes even that much more of an appealing program that they want to be a part of it. So we continue to see people join one of the big unlocks for US frankly is we still have a lot of people that are only dining room people and then we have a lot of people that are only digital people and there is a.

Small group Thats doing both and you know.

Call it 50%, 60% that are dining room only people I think if we get those people to have a really positive experience using the rewards program.

Speaker 2: I think if we get those people to have a really positive experience using the rewards program, it's just a tremendous unlock.

Just a tremendous unlock for.

Speaker 2: what that rewards program can grow to be. As you mentioned, there's a lot of incremental opportunity in that. And just within the universe of people that we have, you know, the guys that really, I think, learned quite a bit about

What that rewards program can grow to be.

As you mentioned, there's a lot of incremental opportunity in that and just within the universe of people that we have the guys are really I think learned quite a bit about how to do these journeys so that they communicate and engage the right way so that we get the behavior more frequency or if we see somebody lapsing we.

Speaker 2: how to do these journeys so that they communicate and engage the right way, so that we get the behavior of more frequency, or if we see somebody lapsing, we get them to come back into the business. So, there's incremental opportunities on just getting all those people that are exclusive dining room people to become at least.

Get them to come back into the business. So.

There is incremental opportunities on just getting all those people that are exclusive dining room people to become.

At least comfortable with using our digital platform, even if they don't want to order through it.

Speaker 2: comfortable with using our visual platform, even if they don't want to order to throw it. They can at least take the benefits of it. And then you look at that database grows, we get smarter in the journeys. We definitely have demonstrated.

Can you at least take the benefits of it and then you look at that database grows we get smarter and the journey, we definitely have demonstrated.

Speaker 2: Inside here that we can use this tool to implement the behavior both in frequency as well as staying with the business.

Inside here that we can use this tool to influence behavior, both in frequency as well as staying with the business.

Thanks.

You bet.

Okay.

And the next question is from Andrew Charles with Cowen. Please go ahead.

Speaker 1: And the next question is from Andrew Charles with Cowan. Please go ahead.

Speaker 9: Great, thanks. Brian , you're very proactive getting the average wage to $15 an hour back in May of last year, but we're curious about your multi-year view for where wages could go as more national retailers and act formalized programs to get to $17 an hour as you strive to keep Chipotle as an employer of choice.

Great. Thanks.

Ryan you were very proactive getting the average wage to $15 an hour back in may of last year, but I was curious about your multi your view for where wages could go as more national retailers connect formalized programs to get to $17 an hour and just tried to keep chipotle as an employer of choice.

Speaker 2: Yeah, look, I think wages are going to continue to go up. And, you know, I think the combination of having the right wage and the right development or growth opportunity is what get people excited to be a part of it.

Yes look I think we use are going to continue to go up.

And I think the combination of having the right wage and the right development or growth opportunity is what gets people excited to be a part of the company.

Speaker 2: And that's why I think it's really important. That's why I chose to share, you know, look, even in a tough environment, we still promoted 19,000.

And that's why I think it's really important and that's why I chose to share look even in a tough environment, we still promoted 19000 people.

Speaker 2: which tells you two things. One, they grew with us and they spayed with us. We're going to always make sure that we've got the right wage to give people into our company. And then we also want to make sure that we're growing them so that they're excited to stay with our company.

Which tells you two things one they grew with us and they stayed with us.

No.

We're going to always make sure that we've got the right ways to get people into our company.

And then we also want to make sure that we're growing them. So that they are excited to stay with our company and.

Speaker 2: I think you're point to good one. I don't want to fall behind. I like being in the position of people viewing Chipotle as a leader in this space. I think our jobs are great. I think our company's special. And if we can get people to experience that, they have a real opportunity to grow with us. And ultimately change their lives and potentially their family. So that's one of the luxuries I think we get to have at Chipotle is you can really change people's lives with a career. And I think we can get people to experience that.

I think your point's a good one I don't want to fall behind.

I like being in the position of people viewing chipotle as a leader in this space I think our jobs are great I think our company special and if we can get people to experience that they have a real opportunity to grow with us and ultimately change their lives and potentially their family. So.

That's one of the luxuries I think we'd get to have that Chipotle is you can really change people's lives with a career here.

Very helpful. Thanks.

Speaker 1: The next question is from John Glass with Morgan Stanley . Please go ahead.

The next question is from John Glass with Morgan Stanley . Please go ahead. Thanks, very much I wanted to circle back on the small town opportunity.

Speaker 10: Thanks very much. I wanted to circle back on the small town opportunity. One, how many are there today? Like what's the evidence that you have for this incremental opportunity? Years ago, there was something called an A model. So it was like a lower cap-backs, good return, but lower volume unit. Are these lower volume but better returns because they're lower cap-backs? Or how should we think about both the returns and the volume calculus as we think about the small market opportunity and just tell many there are so far so we can gauge where you are.

One how many are there today like whats the evidence that you have for this this incremental opportunity years ago. There was something called in a model. So it was a lower capex. Good return, but lower volume units are these lower volume, but better returns because they're lower capex or how should we think about both the returns and the volume calculus as we think about the small market Arbor.

Attunity and just just how many there are so far so we can gauge where you are on that.

Speaker 2: Yeah, I mean, the one thing that is nice is it's definitely a little bit higher margin because the cost of, you know, the lease is a little bit lower. And what we're seeing though is no tradeoff in volume. Actually, it's probably outsized.

Yes, I mean, the one thing that is nice it's definitely a little bit higher margin because the cost of the lease is a little bit lower.

And what we're seeing though is no trade off in volume.

Actually it's probably outsized.

Speaker 2: call it revenue or sales. So it kind of, you know.

Call it revenue or sales.

So it's kind of.

Speaker 2: a really great proposition because we're a little bit cheaper to put in some of the fixed cost and then people view us as an employer that they want to be a part of. So we have a-

A really great proposition because little bit cheaper to putting some of the fixed cost and then people view us as an employer that they want to be a part of so we haven't.

Speaker 2: a really good success rate in staffing them. And then the towns are really excited to have a Chipotle. So we see great, you know, sales opening sales and then sales that stay with us. You know, so look, we feel really good about it. I think there's, you know, hundreds of these that we can easily find and build. And, you know, Jack, you'll have to...

Really good success rate in staffing them and then the towns are really excited to have at Chipotle.

So we see great.

Sales opening sales and then sales that stay with us.

So look we feel really good about it I think there is hundreds of these.

That we can easily find and build in.

Jack you'll have to.

Speaker 2: Correct me here, but I think, you know, when we're talking about small town, we're not talking about, you know, five, 10, that we're talking about like four

Correct me here, but I think what we're talking about small town, we're not talking about.

<unk> tenant that we're talking about like 40000, plus so its still pretty good size its small for chipotle, but.

Speaker 2: Plus so it's still pretty good size it's small for Chipotle, but You know I want to make sure we qualify that for you so you realize

I want to make sure we qualify that for you. So you realize what we're talking about when we say small town, but Jack I don't if you want to add anything to that yeah. Yeah, and you know there are some that will be smaller than that but it might be like kind of an expressway or something but I think the key is that these are restaurants that are not in a metropolis.

Speaker 2: What we're talking about when we say small town, but Jack, I don't know if you want anything to do that.

Speaker 3: Yeah, and you know, there's some that will be smaller than that, but you know, it might be like kind of an expression or something, but I think the key is that these are restaurants that are not in a, you know, I'm a tropicalist, you know, so it's not in an area with a lot of Chipotle, or Chipotle. So they tend to have zero impact. The margins are higher, the volumes are about the same, so the returns are higher as well, typically the construction process higher as well.

Not in the area with a lot of Chipotle Chipotle.

So they tend to have zero impact the margins are higher the volumes are about the same sort of returns are higher as well typically the construction cost is higher as well.

Speaker 3: The challenge really is to make sure that we have a strategic process, strategic approach.

The challenge really is just to make sure that we have a strategic process. Our strategic approach. So that we can keep an eye on me. So appealed later for example, because they have to travel 300 miles to get to a remote.

Speaker 3: so that we can keep keep on eyeing these. So a few later, for example, they have to travel 300 miles to get to a remote.

Speaker 3: you know, small town located that very hard to do. But if you string a bunch of small towns together, where there's one that's 50 miles away, another that's 50 miles away, you string these, you know, along so that a field leader can, over a number of days, make sure that he gets touches with those restaurants, develops the leadership in those restaurants. From a financial standpoint, and from bringing a special dining experience to these small towns, it's a home run.

Small town location that very hard to do but if you string a bunch of small towns together, where there's one that's 50 miles away in another that's 50 miles away extremely.

Along so that a field leader can over a number of days make sure that he gets touches what those restaurants develops the leadership in those restaurants from a financial standpoint, and from a bringing a special dining experience to the small town. It's a it's a home run.

Thank you.

Yeah.

Speaker 1: The next question is from Joshua Long with Piper Sandler. Please go ahead.

The next question is from Joshua long with Piper Sandler. Please go ahead.

Speaker 3: Great, thank you for taking my question. Want to see if we could circle back into loyalty and the growing digital-based of users that you have. And curious how that's informing your lifetime value considerations for your customers. I think maybe that's dove tails into the journey that you talked about. But curious if you're able to act on any of that now or how you think about that working into your pipeline going forward.

Great. Thank you for taking my question I wanted to see if we could circle back into loyalty in the growing digital base of users that you have and I'm curious how that's informing your lifetime lifetime value considerations for your customers I think maybe that dovetails into the some of the journey that you talked about but curious if you're able to act on any of that now or how you think about that.

Looking into your pipeline going forward.

Speaker 2: Yeah, look, it's high high priority. You know, we were really excited.

Yes look it's high high priority.

We were really excited about the size of the database and then we're really excited about how much learning we've had over the last couple of years. So that we can do exactly what you just talked about we know when we get people into the rewards.

Speaker 2: the size of the database, and then we're really excited about how much learning we've had over the last couple of years so that

Speaker 2: We can do exactly what you just talked about. We know when we get people into the rewards.

Speaker 2: you know, call it system. You know, the average ticket goes up and the frequency at which they shop which your polly goes up. So, you know, we're winning share of occasions and, you know, that's ultimately what we're after. You know, and I think making access easier, making people aware of that access, really engaging with people in a personalized way.

Call it system.

The average ticket goes up and the frequency at which they shop with Chipotle goes up so we're winning share of occasions and.

That's ultimately what we're after.

And I think making access easier, making people aware of that access really engaging with people in a personalized way.

Speaker 2: you know, we're able to gain more occasions and, you know, that's really what we use the data to understand. And then, you know, the thing is powerful too. And the data as we can see where we maybe aren't.

We're able to gain more occasions and.

That's really what we use the data to understand and then the other thing is powerful too in the data as we can see where we may be art.

Speaker 2: you know, executing the experience we'd want to. And it gives us the opportunity to save, you know, what was a less than ideal experience to turn that person from being a lapsed user into, you know, coming back to the business and staying with us. So, you know.

Executing the experienced we'd want to and it gives us the opportunity to save.

What was a less than ideal experience.

Turning that person from being a lapsed user into.

Coming back to the business and staying with us so.

Speaker 2: That's really the mission and we're very fortunate that we've got such a robust data set now and we've got a really talented team that's eager to learn every day and filled on what we've done today. We're not gonna be complacent, right? We have a real opportunity to fill on the momentum that we have.

Sure.

That's really the mission.

We're very fortunate that we've got such a robust data set now and we've got a really talented team that's.

Eager to learn everyday and build on what we've done to date, we're not.

We're not going to be complacent right, we have a real opportunity to build on the momentum that we have.

Thank you.

The next question is from Brian Vaccaro with Raymond James. Please go ahead.

Speaker 1: The next question is from Brian Vicaro with Raymond James. Please go ahead.

Hi, Thanks, and good afternoon, I wanted to circle back on labor, if I could with seven to eight months under your belt since increasing wages and making the other labor investment. So I guess I'm just curious to get your assessment of how effective those changes have been and obviously understanding all the crown has had an impact but how much of an underlying improvement have you seen in retention apt.

Speaker 3: Thanks and good afternoon. I wanted to circle back on labor if I could. And you know, with seven to eight months under your belt since increasing wages and making the other labor investment. So you have to just curious to get your assessment of how effective those changes have been and obviously understanding all the crowns had an impact. But how much of an underlying improvement have you seen in retention, application flow, or say the percentage of stores that are still significantly understaffed?

Location flow or let's say the percentage of stores that are still significantly understaffed and then if you think needs more needs to be done.

Speaker 3: And then if you think needs to be done, what form would that likely take? Is it more wage increases or is it more than just the money issue in the stores that remain meaningfully understaffed?

What form would that likely take is it more wage increases or is it more than just the money issue in the stores that remain meaningfully understaffed.

Speaker 2: Yeah, I mean, look, the actual thing is, you know, we, we've made tremendous progress, you know, and even with the Omicron surge.

Yeah, I mean look I'll tell you is.

We've made tremendous progress and even with the omicron Serge.

Speaker 2: I would tell you we've learned a lot over the last two years so that

I would tell you we've learned a lot right over the last two years so that we.

Speaker 2: We knew how to go into the markets where we were having a problem. We put a very focused effort on making sure people knew those employees that go out on exclusion, they're coming back. You know, so you're not. Your team is not.

We knew how to go into the markets, where we were having a problem. We put a very focused effort on making sure people knew those employees that go out on exclusion there coming back so youre not your team is not.

Speaker 2: all of a sudden lost the folks that went out on exclusion. They're coming back. And oh, by the way, as your business grows, you know, what we call being at model, we are actively recruiting so that you're going to have staff so that you can perform as this business grows. So I think we just got a lot better at one seeing, okay, this restaurant is about to have a real chat.

All of a sudden loss.

Folks that went out on exclusion theyre coming back and Oh by the way as your business grows what we call being at model. We are out actively recruiting so that youre going to have staff. So that you can perform as this business grows.

So I think we've just gotten a lot better at one seeing okay. This restaurant is about to have a real challenge we put a very focused effort on that restaurant, we ensure we've got the right wage.

Speaker 2: We put a very focused effort on that restaurant. We ensure we catch the right wage, the right communication of what this job is all about. And I'll tell you what, the one thing that we were probably surprised by and we weren't leveraging enough initially, is telling people the growth story.

Right communication of what this job is all about and I'll tell you what the one thing that we were probably surprised by and we weren't leveraging enough. Initially is telling people the growth story like.

Speaker 2: Like the number of people that I've met that have joined Chipotle

Like the number of people that I admit that have joined Chipotle.

Speaker 2: that might have been a multi-unit operator at another organization, but they're willing to join our organization as a team member, ultimately maybe a service manager, because they want the opportunity to grow with us, because they felt like they were capped out where they were.

That might have been a multi unit operator at another organization, but they are willing to join our organization as a team member ultimately maybe.

Service manager because they want the opportunity to grow with us because they felt like they were capped out where they were and so we've really ramped up that communication and youll see that in our marketing materials on what it means to get a job at Chipotle, it's not just the job youre getting now, but potentially if you want to stay with us when you can grow into so look we've made tremendous progress.

Speaker 2: And so we've really ramped up back to communication. You'll see that in our marketing materials on what it means to get a job at Chipotle. It's not just the job you're getting now, but you're potentially, if you want to stay with us, what you can grow into. So...

Speaker 2: Well, we've made tremendous progress. I think we made the right choice with using the DML as the tool to throttle up and down based on the challenges we were having with staffing. I'm happy to say that's now happening in less than 2% of our restaurants.

I think we made the right choice with using the <unk> as a tool to throttle up and down based on the challenges we were having with staffing I'm happy to say thats now happening in less than 2% of our restaurants.

Speaker 2: which is great. And the reason why it's so low is because our staffing is so much better across the enterprise. So, but with that said, we're about to move into the season where we sell even more of Rios and it's gonna require even more employees. So we're saying after it, we think we've learned a lot and we're seeing pretty good yield as a result of our efforts to date.

Which is great and the reason why it's so low is because our staffing is so much better across the enterprise. So.

But with that said, we're about to move into the season, where we sell even more of a windows and it's going to require even more employees. So.

We're staying after it we think we've learned a lot and.

We're seeing pretty good yield as a result of our efforts to date so.

Speaker 2: We love the position we're in. I really hope we don't have another search, but putting that aside, I love what Scott and Marisa have gone to ensure that our restaurants are.

We love the position we're in I really hope we don't have another surge.

But putting that aside.

I Love, what Scott and reset done to ensure that our restaurants are staffed.

Alright, that's great and I guess I'll circle back on the on the food cost situation. If I said, Jack I think you said you sort of a decent trade in a little bit of avocado pressure, but I'm curious to what degree you're seeing inflation on the chicken side, which I believe is your number one protein and I know visibility is low and a lot of things can change on a dime.

Speaker 2: All right, that's great. And I guess I'll circle back on the food cost situation if I could. And, Jack, I think you said you saw beef and freight and a little bit of avocado pressure. But I'm curious to what degree you're seeing in inflation on the chicken side, which I believe is your number one protein. And I know visibility is low, and a lot of things can change on a dime during this environment, it seems. But your best guess or view of the outlook here is it reasonable to expect

During this environment it seems but.

And your best guess or view of the outlook here is it reasonable to expect high single digit inflation for a couple more quarters, perhaps and then you start to lap some of the increases moving through the second half of 'twenty, one or just curious to get your broad perspective there.

Speaker 2: high single digit inflation for a couple more quarters perhaps. And then you start to lap some of the increases moving through the second half of 21 or just to get your broad perspective there if it differs from that materially.

Differs from that materially yeah listen I'm glad you said, it's really hard to predict the future because this is Dan.

Speaker 3: Yeah, listen, I'm glad you said it's really hard to predict the future because this has been the top that I've seen in terms of predicting the future about availability and about pricing really in my whole career. Having said that, I would say it's going to take at least

As I've seen in terms of predicting the future about availability and about pricing.

And my whole career, having said that.

I would say, it's going to take at least a few quarters like I wouldn't expect to see.

Speaker 3: a few quarters. Like I wouldn't expect to see, you know, much relief. Hopefully things won't get too much worse over the next few quarters, but we're not expecting to see much of a relief.

Relief, hopefully things won't get too much worse over the next few quarters, but we're not expecting to see much of a relief.

Speaker 3: until later in the year. Having said that, you asked about chicken in particular. Chicken knock on wood has not been that bad. We've had some near misses during the year. It was more driven by availability of labor and people who had to be excluded because they were either they came down with COVID or with somebody that COVID.

Until later in the year.

Having said that that's about chicken in particular.

And knock on wood has not been that bad we'd had some near misses during the year. It was more driven by availability of labor and <unk>.

People that had to be excluded because they were either they came down with COVID-19 or or.

With somebody who had COVID-19 .

Speaker 3: And so there were some near misses in terms of our suppliers, maybe being unable to meet our demand. Our supply chain team with Carlos has done a great job of working with suppliers and moving capacity around as needed. And what we've seen, oh,

And so there were some near misses in terms of our suppliers, maybe being unable to meet.

Our demand our supply chain team with Carlos has done a great job of working with suppliers and moving capacity around as needed.

What we've seen over the last several months and what we expect we will see more of in the future.

Speaker 3: several months and what we expect will see more of in the future. More pressure on the more pressure on

More pressure on beef more pressure on freight avocados, we think that's more of a seasonal thing that's more of a cyclical thing that doesn't feel like a <unk> a classic kind of supply chain issues.

Speaker 3: Avocados we think is, you know, that's more of a seasonal thing, that's more of a cyclical thing that doesn't feel like a a, you know, a classic kind of supply chain.

Speaker 3: issue that we're seeing in this environment. But I wouldn't be surprised if there's gonna be another ingredients or two. There just been so many disruptions. So hopefully things will be reasonably normal. We think we take an uprising action. We need to for what we've seen so far. And I will wait and see what happens in the next quarter or two. All right, very.

Issue that we're seeing in this in this environment.

But I wouldn't be surprised if theres going to be another ingredient or two there's just been so many disruption so.

Hopefully things will be reasonably normal we think we've taken the pricing action, we need to for what we've seen so far.

And it will wait and see what happens in the next quarter or two.

Alright, very helpful. I'll pass it along thank you.

Speaker 9: And the next question will be from John Ivanko with JP Morgan. Please go ahead. Hi, thank you. I wanted to get back to the conversation on store level mapping, but focusing on the GM. Has there been any change in turnover?

And the next question will be from John <unk> with J P. Morgan. Please go ahead hi, Thank you I wanted to get back to the conversation on store level staffing, but focusing on the GM has there been any change in turnover.

Speaker 9: you know throughout 21 has there been any unusual maybe blips you know in the quip rate that you've noticed and you know as you you know think obviously about a growing business you know going forward is there anything about training or compensation or the type of person you know that you're looking for perhaps looking to promote up you know that may change with your poll is to politely grows as you think about the next era

We know throughout 'twenty, one has there been any unusual maybe blips and quit rate that you've noticed then you know as you think obviously about a growing business going forward is there anything about training or compensation or the type of person that you're looking for perhaps looking to promote that may change what chipotle Chipotle grows as you think about the nextera.

Speaker 2: Yeah, no, you know, look, I got to tell you that we're very fortunate with the general managers we have in our company because, you know, those guys through all this showed up to the restaurants every single day.

Yeah, No look I can tell you.

We're very fortunate with the general managers, we have in our company.

Those guys through all of this showed up to the restaurants every single day.

Speaker 2: and figured out how to flex with whatever new thing came their way.

And figured out how to flex with whatever new thing came their way whether they were.

Speaker 2: whether they were, you know, people calling off, whether it was people unfortunately coming down with COVID. There was a time period where people didn't really know what COVID was and these guys and women showed up every day to lead their teams. And, you know, we're very fortunate to have that caliber of leader running our restaurants. And, you know, we're very fortunate to have that caliber of leader running our restaurants.

People, calling off whether it was people unfortunately coming down with Covid.

There was a time period, where people didn't even really know what COVID-19 was in these guys and women showed up every day to lead their teams and.

We're very fortunate to have that caliber of leader running our restaurants.

Speaker 2: You know, and we're also very fortunate that because we're a growing company, those leaders are the leaders that then become our field leaders and our team directors and then ultimately our VPs and, you know, they see it and, you know, one of my favorite things to do in my company is have the opportunity to go visit them in their restaurants.

And we're also very fortunate that because we're a growing company. Those leaders are the leaders that then become our field leaders and our team directors and then ultimately our RVP season.

You see it and.

One of my favorite things to do in my company has had the opportunity to go visit them in their restaurants and I'll tell you what.

Speaker 2: And I'll tell you what, they are so proud of their team, they're so proud of their results, and they're so proud of where we are. So, you know, we're working on being better with our learning and training tools. I think that we mentioned this in the call. We're rolling that out for them. We're rolling out for them a new labor scheduling tool. And then obviously we're looking for ways to make the job more efficient, more consistent, so that they can continue the great work that they do on the culture and the people in the culinary.

They are so proud of their team. They are so proud of their results and they are so proud of where we are so.

We're working on being better with our learning and training tools.

I think we mentioned this in the call we're rolling that out for them.

Rolling out for them, a new labor scheduling tool and then obviously, we're looking for ways to make the job more efficient more consistent.

So that.

They can continue the great work that they do on the culture and the people in the culinary so we're very fortunate.

Speaker 2: So we're very fortunate, you know, we've not seen...

We've not seen.

Speaker 2: You know, the great resignation that you read about and are here about at our company and definitely not at our general manager level. So, you know, hopefully some of them are listening right now because I would brag about them for this whole call if I could. So, you know, thanks for asking the question. Thank you.

The great resignation that you read about.

Or hear about at our company.

Definitely not in our general manager level so.

Hopefully some of them are listening right now because I would brag about them for this whole call if I could.

So thanks.

Thanks for asking the question.

Thanks, so much.

And the next question is from Brian Mullan with Deutsche Bank. Please go ahead.

Speaker 1: And the next question is from Brian Mullen with Deutsche Bank. Please go ahead.

Speaker 2: Hey, thank you. Just a question on the international development opportunity outside of North America. Can you share what the focus is right now? It's no, the existing markets, France, Germany, the UK. And are you also exploring new markets in West New York or even elsewhere at this point in time or just really focused on those?

Hey, Thank you just a question on the international development opportunity outside of North America can you share with the focus is right now as you know in the existing markets, France, Germany The U K.

Are you also exploring new markets in western Europe , or even elsewhere at this point in time or just really focused on those existing markets right now.

Speaker 2: Yeah, so for right now we are just focused on those existing markets and really just France and the UK. As you probably have read or know, Germany has been very slow.

Yes, so for right now, we're just focused on those existing markets and really just France and the UK.

Probably a red or know, Germany has been very slow to kind of get out of the COVID-19 challenges.

Speaker 2: to kind of get out of the COVID challenges. But look, I'm optimistic on what all Western Europe can be. And fortunately, we've had some really good recent openings in both France and the UK. And I'm optimistic about how we can grow in those countries. And once we feel like we're in a really good spot there, we'll definitely think about how we expand beyond it.

But look I'm optimistic on what all of Western Europe can be.

Fortunately, we've had some really good recent openings.

In both France, and the U K and I'm optimistic about how we can grow in those countries.

Once we feel like we're in a really good spot there we will definitely think about how we expand beyond.

Speaker 2: So, you know, one thing I know for sure is when you...

So.

One thing I know for sure is when you look at consumers in other countries they like our proposition.

Speaker 2: look at consumers in other countries, they like our proposition. Clean food, food with integrity, high levels of customization, culinary happening right in front of you, flavors that resonate, chicken, rice, and beans, those are pretty globally accepted ingredients. So, you know.

<unk> food food with integrity high levels of customization culinary happening right in front of you flavors.

That resonate chicken rice and beans, those are pretty global we accepted ingredients. So.

Speaker 2: I'm not too mystic about the future, but right now, we're focused on making sure we've got a winning proposition in the markets that we're currently in, and then we'll expand from there accordingly.

I am optimistic about the future, but right now we're focused on making sure.

We've got a winning proposition in the markets that we're currently in and then we'll expand from there accordingly.

Thank you.

Speaker 1: The next question is from Chris Carroll with RBC Capital Markets. Please go ahead.

The next question is from Chris Carroll with RBC capital markets. Please go ahead.

Hi, Thanks for taking the question. So can you expand on delivery mix today, and how the margins for those orders compare to other channels with the incremental delivery menu pricing you've taken over the past year, plus and how are you thinking about delivery mix and impact to margins from delivery as we move further into 'twenty two.

Speaker 6: Hi, thanks for taking the question. So can you expand on delivery mix today and how the margins for those orders compare to other channels with the incremental delivery menu pricing you've taken over the past year plus? And how are you thinking about delivery mix and impact margins from delivery as we move further into 22? Thanks.

Thanks.

Speaker 2: Yes, sure. So, you know, obviously delivery would get two kind of businesses there, right? We've got our in-app delivery business or what we call white label and then obviously in the third party partnerships we have with like UberVeats and...

Yeah sure. So obviously delivery, we've got to kind of businesses, there and we've got our in App delivery business or what we call White label and then obviously the third party.

Partnerships, we have with like Uber eats and door dash.

Speaker 2: in marketplace. And you know, you mentioned this, we took some pricing so that, you know, the margin issue became less of an issue.

In marketplace and.

You mentioned this we took some pricing so that.

The margin issue became less of an issue.

Speaker 2: and, you know, unfortunately, or I guess the reality is that channel comes with additional cost. If you want that convenience.

And unfortunately.

Or I guess the reality is that channel comes with additional cost. If you want that convenience that comes with some additional cost and what we've seen is people recognize that and are willing to accept that for those occasions.

Speaker 2: It comes with some additional cost and what we've seen is people recognize that and are willing to accept that for those occasions. So, you know, our digital business is roughly 42% of the business.

So our digital business is roughly 42% of the business.

Speaker 2: You know, today's delivery is about caught a little less than 20%, roughly 20% and the good news is our order ahead business continues to grow as we build Chipotleings and as we continue to frankly market against the idea of order ahead and pick up yourself.

Today delivery is about call it a little less than 20% roughly 20% in.

The good news is our order ahead business continues to grow and as we build chipotle <unk> and as we continue to.

Frankly market against the idea of order ahead and pick up yourself.

Speaker 2: So, you know, not nearly the margin, pollution that delivery used to be, but still our best margin transaction is the digital transaction where you order ahead and pick up. Check it out.

So.

Not nearly the margin.

Dilution that delivery Houston.

But still our best margin transaction as the digital transaction, where you order ahead and pick up.

Jack I, just want to add anything to that.

Nope, Brian you said at Berkeley.

Okay.

Thank you.

Speaker 1: Thank you. And the next question will come from Andy Barish with Jeffries. Please go ahead.

Thank you and the next question will come from Andy Barish with Jefferies. Please go ahead.

Speaker 11: Hey guys, good afternoon. Just wanted to circle back on...

Hey, guys. Good afternoon, just wanted to circle back on.

Speaker 11: Some of the operational efficiencies, Brian , that you've mentioned a couple of times now, making kind of the team members jobs a little bit easier or implementing technology. Can you give us an example or two of where you're heading down that road and what maybe also what things would be a non-starter in terms of Chipotle's credo?

Some of the operational efficiencies, Brian that you've mentioned a couple of times now, making you know kind of the team members' jobs, a little bit easier or implementing technology can you can you give us an example, or two of where youre heading down that road and what maybe also what things would be a nonstarter.

In terms of.

Chipotle Credo.

Speaker 2: Yeah, sure. So, you know, look, we're trying to find, well, first of all, as I mentioned, right, just getting a better labor scheduling tool that uses artificial intelligence and analytics that doesn't rely on just looking back past four weeks, but can look at things happening real time, so that the team is able to prep accordingly, you know, we should then end up in a scenario where we don't run out of guacamole at the end.

Yeah sure. So look we're trying to find.

Well first of all as I mentioned right just getting a better labor scheduling tool that uses artificial intelligence and analytics that doesn't rely on just looking back past four weeks, but can look at things happening real time, so that the team is able to prep accordingly.

We should then end up in a scenario, where we don't run out of guacamole at the end of the day right and so we're working on technology, where just that occurs how do we help our team members know when to Cook more chicken throughout the day, when they make guacamole and how much guacamole to make after lunch because we want to be in.

Speaker 2: Right? And so we're working on technology where just that occurs. You know, how do we help our team members know when to cook more chickens throughout the day, when to make guacamole and how much guacamole to make after one?

Speaker 2: because we want to be in the Chipotle business from open to close. Nothing disappoints our teams more than what a customer shows up at eight or nine o'clock and they're out of something. And so 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 to disappoint.

The Chipotle business from open to close nothing disappoints, our teams more than when a customer shows up at eight or nine o'clock and they are out of something and so if we can give them tools, where they don't have to worry about making too much or not making enough. It just makes our job so much easier. It eliminates one stress they don't want to disappoint a customer so we're working with that.

Speaker 2: So we're working with that type of technology to help them do just that. And then we're also looking at technology, whether it's robotics, automation. How do we get rid of the jobs people, frankly, don't love doing, right? Clean and dishes all day, not a fun job. Hard job.

Type of technology to help them do just that and then we're also looking at technology, whether it's robotics automation.

How do we get rid of the jobs people frankly don't love doing cleaning dishes, all day, not a fun job our job.

Speaker 2: Frankly, wet job. You know, and it's like...

Frankly wet job.

And it's like if we can find ways to eliminate those tasks right like we're always going to be cutting and coring avocados, but if there was a way to cut and core the avocado. So it all our team member has to do is match and <unk>.

Speaker 2: If we can find ways to eliminate those tasks, right? Like we're always gonna be cutting and pouring avocados, but if there was a way to cut and pour the avocados, so that all our team members have to do is mash and add the salt, add the lime, add the onions, that would make their job so much better. So it's those types of things, we're not going to walk away from having great quality. You're always gonna see our chicken sizzle.

The salt and the line and the unions that will make their job. So much better. So it's those types of things, we're not going to walk away from having great culinary youre always going to see our chicken Susan on the bunch of alright.

Speaker 2: That's just one of the sounds and sites of Chipotle and frankly the smell that I think makes our experience unique. And then also we're looking for ways to be even more accurate and more timely on the digital make-up. So there's real opportunities there. I think we've got a great system. I think we can build on what has really been something that's worked really well for us. So that kind of gives you a flavor of the various things we're looking at.

That's just one of the sounds and sights of Chipotle and frankly the smell.

That I think makes our experienced unique and then obviously, we're looking for ways to be even more accurate and more timely on the digital make lines. So there's real opportunities there.

I think we've got a great system I don't think we can build on what has really been something thats worked really well for us. So that kind of gives you a flavor of the various things we're looking at.

Very helpful. Thanks.

Sure.

Speaker 1: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Brian Nichol for any closing remarks.

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

Speaker 2: All right, thanks. And thanks everybody for all the questions and you know, dialing in. Obviously very proud of our team. Everybody in the restaurants, you know, 2021 was...

Alright, thanks, and thanks, everybody for all the questions and.

Dialing in obviously very proud of our team.

Everybody in the restaurants 2021 was or.

Speaker 2: A lot of ups and downs, but I think couldn't be prouder the results. There's a deliver a comp in north of 19%. And it'll business now bigger than $7.5 billion, $3.5 billion.

A lot of ups and downs, but I think it couldnt be prouder of the results and to deliver a comp.

North of 19% and our business now bigger than $7 $5 billion.

Three $5 billion digital business.

Speaker 2: You know, these are all big milestones for a company. You know, we opened over 200 and we opened 215 restaurants.

These are all big milestones for our company, we opened over 200%. We opened 215 restaurants I mean, we're literally.

Speaker 2: I mean, we're literally achieving new highs in all fronts. You know, our average unit of volumes are, you know, well beyond the 2.5 million.

Currently achieving new highs in all fronts. Our average unit volumes are well beyond the $2 5 million now. So obviously the fourth quarter had some challenges inflation is something that we'll continue to deal with staffing.

Speaker 2: So obviously the fourth quarter had some challenges. Inflation is something that we'll continue to deal with.

Speaker 2: staffing, we've made tremendous progress on. And you know, as I look at where we are in 2022, I just believe we're positioned to execute the Chipotle business better than we probably have in a while. And it's exciting to be staffed at pre-COVID levels again. It's excited to see people getting promoted in our organization.

Tremendous progress on and as I look at where we are in 2022 I just believe we're positioned.

To execute the chipotle business better than we probably have in a while and.

It's exciting to be staffed at pre COVID-19 levels again, it's exciting to see people getting promoted in our organization and it's exciting to see.

Speaker 2: And it's exciting to see, you know, the customer reward us with their business every day. So, you know, again, really...

The customer reward us with their business every day so.

Again really strong position for our company I think it demonstrates our pricing power, our resilience and the strength of our culture and people and Luckily we get to celebrate with everybody at our all manager conference in March and.

Speaker 2: Strong position for a company, I think it demonstrates our pricing power, our resilient.

Speaker 2: and the strength of our culture and people. And luckily we get to celebrate with everybody at our All-Mandra Conference in March.

Speaker 2: and look forward to catching up with everybody next quarter. So thank you for all the questions. And hopefully you get out there and try the plant-based tarrito. All right, take care guys. Thank you. Bye.

Look forward to catching up with everybody next quarter. So thank you for all the questions and hopefully you get out there and try to plan phase III. So alright take care guys. Thank you bye.

Speaker 1: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now.

And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

[music].

Yes.