Chipotle 2006 Annual Report Download - page 2

Dear Shareholders,
2006 was an extraordinary year for Chipotle. We completed a successful IPO in January 2006, made significant
progress on our Food With Integrity mission and have taken important steps toward building a culture which
appeals only to the highest performing employees.
We continue to serve 100% naturally raised pork in all of our restaurants, and at the end of 2006, about 55%
of our chicken and more than 40% of our beef was naturally raised. All of our naturally raised meat comes from
animals that are humanely raised, fed a pure vegetarian diet, and never given antibiotics or added hormones. We
now serve more naturally raised meat than any restaurant company in the world, yet we are constantly working
with existing and potential suppliers to help us serve only naturally raised meat in all our restaurants.
Our food is better today than ever before because our raw ingredients are the best they have ever been. By caring
more about our ingredients, and respecting the animals, the land and the farmers who produce the food, our food
will continue to taste even better and we will continue to strengthen the bond we have with our customers.
We also took a number of important steps to enhance our restaurant culture during the year, and to develop
the very best managers in the industry. Our Restaurateur Program elevated the stature of our best restaurant
managers, creating a culture where all of our restaurant managers identify and train our best crew to become the
future managers of Chipotle. Many of our best managers started as crew, and we are confident that by having our
best managers hire and train our crew, we are developing a strong bench of great managers.
Another step we took this past year was to create a new restaurant staffing structure which allows our crew to
follow an efficient and logical path into management roles. We invested in communication and training programs
which make the position of manager clearly accessible to those with a strong work ethic and a passion for great
customer service. These programs will reduce the costs of recruiting, interviewing and training outside candidates
while improving our bench of great managers and lowering crew and manager turnover. Today, more than half of
our managers are promoted from crew positions and our turnover at the manager level has decreased to less than 30%.
Throughput enhances customer service by reducing the amount of time our customers wait in line. On top of
significant gains we made in 2005, we continued to improve throughput in 2006. We will continue to focus on
better throughput in 2007 through better equipment, better training and by improving the management in our
restaurants.
In 2006, we grew our revenues by 31.1% to $822.9 million, increased comparable restaurant sales by 13.7%, and
opened a total of 94 restaurants. 2006 marks our ninth consecutive year of double-digit comparable restaurant
sales increases, which illustrates our ability to attract new customers as well as build strong relationships and
greater customer loyalty with our existing customers. We increased average restaurant sales 11.9% to $1.611
million, improved our restaurant margin to 20.9% for the year, and nearly doubled our income from operations
to $62.0 million.
Chipotle was originally designed to be a very simple and efficient restaurant with very few moving parts. This
allowed us to serve great food using fresh raw ingredients and classic cooking techniques, but also serve it to our
customers fast. Chipotle is better today because we built upon this foundation by always challenging ourselves to do
better. We will continue to challenge ourselves to improve the quality of our raw ingredients, provide increasingly
attractive opportunities for our employees, and make investments in equipment, technology and design to enhance
our customers’ experience in our restaurants. By doing these things, we believe we will achieve our goal of changing
the way Americans think about and eat fast food.
I believe the best is yet to come. Our enhanced restaurant culture will allow us to tap into the entrepreneurial
spirit and talents of our employees, and we will have only the highest performing managers running Chipotle
restaurants.
Sincerely,
Steve Ells
Founder, Chairman & CEO