Chipotle 2012 Annual Report Download - page 13

Increasing our sales and profitability depends substantially on our ability to open new restaurants, which
is subject to many unpredictable factors.
We operated 1,410 restaurants as of December 31, 2012. We plan to increase the number of our restaurants
significantly in the next three years, and plan to open between 165 and 180 new restaurants in 2013. However,
we have in the past experienced delays in opening some restaurants and that could happen again as a result of any
of the following factors:
• our potential inability to locate and secure new restaurant sites in locations that we believe to be
attractive;
• obstacles to hiring and training qualified operating personnel in the local market;
• delay or cancellation of new site development by developers and landlords, which may become
increasingly common during periods of economic uncertainty or tight credit;
• difficulty managing construction and development costs of new restaurants at affordable levels,
particularly in competitive markets;
• difficulty negotiating leases with acceptable terms;
• any shortages of construction materials and labor;
• lack of availability of, or inability to obtain, adequate supplies of ingredients that meet our quality
standards;
• failures or delays in securing required governmental approvals (including construction, parking and
other permits); and
• the impact of inclement weather, natural disasters and other calamities.
One of our biggest challenges in opening new restaurants is staffing. We seek to hire only top-performing
employees and to promote general managers from our crew, which may make it more difficult for us to staff all
the restaurants we intend to open. Constraints on our hiring new employees are described further below under
“Risks Related to Operating in the Restaurant Industry—Our business could be adversely affected by increased
labor costs or difficulties in finding the right employees for our restaurants and the right field leaders.”
Another significant challenge is locating and securing an adequate supply of suitable new restaurant sites.
Competition for suitable new restaurant sites in our target markets can be intense, and development and leasing
costs are increasing, particularly for urban locations. These factors may be exacerbated by any ongoing economic
uncertainty, as developers may continue to delay or be unable to finance new projects. Delays or failures in
opening new restaurants due to any of the reasons set forth above could materially and adversely affect our
growth strategy and our expected results. Moreover, as we open and operate more restaurants our rate of
expansion relative to the size of our restaurant base will decline, which may in turn slow our sales and
profitability growth.
Our progress in opening new restaurants from quarter to quarter may also occur at an uneven rate, which
may result in quarterly sales and profit growth falling short of market expectations in some periods. Similarly,
our growth strategy and the substantial investment associated with the development of each new restaurant (as
well as the impact of our new restaurants on the sales of our existing restaurants) may cause our operating results
to fluctuate and be unpredictable or adversely affect our profits.
Our new restaurants, once opened, may not be profitable, and may adversely impact the sales of our
existing restaurants.
Historically, many of our new restaurants have opened with an initial ramp-up period typically lasting
24 months or more, during which they generated sales and income below the levels at which we expect them to
normalize. This is in part due to the time it takes to build a customer base in a new area, higher fixed costs
relating to increased labor and other start-up inefficiencies that are typical of new restaurants, and a larger
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Annual Report