Chipotle 2006 Annual Report Download - page 7

PART I
ITEM 1. BUSINESS
General
Chipotle Mexican Grill, Inc. (“Chipotle” or the “Company”) operates more than 570 restaurants in 26 states
and the District of Columbia, with an additional eight franchise restaurants as of December 31, 2006. Our
restaurants serve a simple menu of tacos, burritos, salads and burrito bowls (a burrito without the tortilla), made
using fresh ingredients. People outside our company tend to categorize us as a “fast casual” concept—restaurants
that are a step up from traditional fast food, but not casual, sit-down places. We’ve never worried much about
what category we’re in. Instead, we remain focused on trying to find the best ingredients we can get to make the
best tasting food we can; on recruiting and retaining really great people to ensure that the restaurant experience
we provide is unique and genuine; and on building restaurants that are complementary to the food we serve,
while also operationally efficient and with increasing awareness and respect for the environment.
Chipotle began with a simple philosophy: Demonstrate that food served fast doesn’t have to be a traditional
“fast-food” experience. Over the years, that vision has evolved. Today, we’re working to change the way people
think about and eat fast food. We do this by looking to fine-dining restaurants for inspiration. We use high-
quality raw ingredients, classic cooking methods and a distinctive interior design, and have friendly people to
take care of each customer—features that are more frequently found in the world of fine dining. We also are
pursuing our vision of “Food With Integrity”—which to us means finding the best raw ingredients from the best
sources, including naturally raised meats, where the animals are fed a vegetarian diet and not given antibiotics or
hormones.
We manage our restaurants based on three regions that all report into a single segment. Financial
information about our operations, including our revenues and net income for the years ended December 31, 2006,
2005, and 2004 and our total assets as of December 31, 2006 and 2005, is included in our consolidated financial
statements and accompanying notes in Item 8, “Financial Statements and Supplementary Data”.
Our predecessor corporation, World Foods, Inc., was founded in Colorado in 1993. McDonald’s
Corporation made an equity investment in us in February 1998, becoming our majority shareholder, and
simultaneous with McDonald’s initial investment in us, World Foods, Inc. merged with Chipotle Mexican Grill,
Inc., a newly-formed Delaware corporation. We completed our initial public offering of class A common stock in
January 2006. McDonald’s sold a portion of its interest in us in the initial public offering, sold an additional
portion of its interest in us in a secondary offering of class A common stock in May 2006, and disposed of its
remaining interest in us in an exchange offer to its shareholders that was completed in October 2006. As a result
of the completion of the McDonald’s exchange offer, we now have two publicly-traded classes of common stock,
class A and class B, and McDonald’s no longer owns any interest in us.
Our Menu and Food Preparation
A Few Things, Thousands of Ways. We serve only a few things: burritos, burrito bowls, tacos and salads.
But because customers can choose from four different meats, two types of beans and a variety of extras such as
salsas, guacamole, cheese and lettuce, there’s enough variety to extend our menu to provide more than 65,000
choices. We plan to keep a simple menu, but we’ll consider additions that we think make sense. For example, in
2005 we rolled out a salad that uses the same ingredients as our burritos and tacos, with the addition of
chipotle-honey vinaigrette that we make in the restaurant daily. And if you can’t find something on the menu
that’s quite what you’re after, let us know. If we can make it from the ingredients we have, we’ll do it.
In preparing our food, we use gas stoves and grills, pots and pans, cutting knives, wire whisks and other
kitchen utensils, walk-in refrigerators stocked with a variety of fresh ingredients, herbs and spices and dry goods
such as rice. Ingredients we use include marinated chicken, carnitas (seasoned and braised pork), barbacoa (spicy
shredded beef), marinated steak and pinto and vegetarian black beans. We add our rice, which is tossed with real
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