Chipotle 2006 Annual Report Download - page 11

We compete with national and regional fast-casual, quick-service and casual dining restaurants. Our
competition also includes a variety of locally owned restaurants and the deli sections and in-restaurant cafés of
several major grocery store chains. Many of our competitors have greater financial and other resources, have
been in business longer, and have greater name recognition than we have, and are better established than we are
in the markets where our restaurants are located or are planned to be located.
We believe we’re well-positioned to continue to grow our market position in existing and new markets
given current favorable consumer trends, including the increasing impact of Hispanic culture on food and flavors,
the growth of the Mexican food segment and increasing awareness and concern among consumers about what
they eat and how it is prepared. Some of our competitors have formats similar to ours. We believe, however, that
Chipotle is rapidly becoming one of the most recognized fast-casual restaurants and is known for its focus on
using a variety of fresh ingredients and commitment to “Food With Integrity,” which we think represents a
significant competitive advantage in the segment in which we operate.
Seasonality
Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily
restaurant sales are lower in the first and fourth quarters due, in part, to the holiday season and because fewer
people eat out during periods of inclement weather (the winter months) than during periods of mild or warm
weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For
example, restaurants located near colleges and universities generally do more business during the academic year.
Our Intellectual Property and Trademarks
“Chipotle,” “Chipotle Mexican Grill,” “Chipotle Mexican Grill (in stylized font),” “Unburritable,” “Food
With Integrity,” “Fresh Is Not Enough, Anymore,” “The Gourmet Restaurant Where You Eat With Your Hands,”
the Chili Pepper Logo design, the Foil Burrito design and the Chipotle Medallion design are U.S. registered
trademarks of Chipotle. We have filed trademark applications for a number of other marks in the U.S. In addition
to our U.S. registrations, we own the trademarks for “Chipotle Mexican Grill” in Australia, Brazil and Mexico
and for “Chipotle” in Australia and the European Union, among other countries. We have filed trademark
applications for “Chipotle”, the Chili Pepper Logo design and the Foil Burrito design in Canada and have applied
to register some of our marks in a number of additional countries.
We also believe that the design of our restaurants is our proprietary trade dress. From time to time we have
taken action against other restaurants that we believe are misappropriating our trademarks, restaurant designs or
advertising. Although our policy is to protect and defend vigorously our rights to our intellectual property, we
may not be able to adequately protect our intellectual property, which could harm the value of our brands and
adversely affect our business.
Information Systems
Chipotle uses an integrated information system to manage the flow of information within each restaurant
and between the restaurants and the corporate office. This system includes a point-of-sales local area network
that helps facilitate the operations of the restaurant by recording sales transactions and printing orders in the
appropriate locations within the restaurant. Additionally, the point-of-sales system is used to authorize, batch and
transmit credit card transactions, to record employee time clock information, and to produce a variety of
management reports. Select information that is captured from this system is transmitted to the corporate office on
a daily basis, which enables management to continually monitor operating results. We believe that our current
point-of-sales systems will be an adequate platform to support our continued expansion.
Employees
As of December 31, 2006, we had about 15,000 employees, including 1,500 salaried employees and
13,500 hourly employees. None of our employees are unionized or covered by a collective bargaining agreement.
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