Chipotle 2013 Annual Report Download - page 123

Annual Incentives—2013 AIP Payouts
The committee set the target annual AIP payouts for each executive officer during the first quarter of 2013,
based in part by reference to the historical compensation of each officer, each officer’s performance during the
year, and median target bonuses for comparable positions within the restaurant industry peer group. While the
AIP parameters generally allow for maximum payouts equal to 204 percent of the target award, which the
committee believes is adequate to reward achievement of outstanding results and motivate our employees to
drive superior performance, the AIP parameters for development employees (including Mr. Blessing), place a
greater weight on team performance and allow for a higher team performance factor. The committee approved
this plan design in recognition of the coordinated group effort needed to effectively drive strong new restaurant
openings, and as a result, the maximum AIP payout to development employees (including Mr. Blessing) was 229
percent of the target award.
In connection with his assuming the role of Chief Development Officer following Mr. Blessing’s retirement
in October 2013, Mr. Crumpacker’s target AIP bonus was increased from 50 percent of base salary to 60 percent.
His AIP bonus for 2013, however, was based on the general corporate AIP structure and not the AIP structure for
development employees.
For 2013, as with past years, the four measures the committee selected to be used in determining the
company and team performance factors were income from operations (prior to accrual for AIP payouts), new
restaurant average daily sales, comparable restaurant sales increases, and new restaurant weeks of operation.
Targeted performance for each measure (which would result in no adjustment to the company performance
factor) was set at $544.7 million for operating income, $4,558 for new restaurant average daily sales, comparable
restaurant sales increases of 4.8 percent, and 4,179 new weeks of operation. Consistent with our pay-for-
performance philosophy these targets represented stretch goals, the achievement of which would have generally
resulted in our financial results exceeding the base-level forecast results in our 2013 operating plan and equaling
or exceeding the full-year 2013 guidance we publicly issued to investors. Performance on operating income was
weighted most heavily in the computation of the company performance factor, because we believe profitability is
the most important measure of our success and driver of shareholder value.
In order to provide a strong incentive towards superior performance, the adjustment scales for the company
performance factor were set such that overachievement against each goal would have resulted in upward
adjustments at a higher rate than the rate at which equivalent levels of underachievement would have resulted in
downward adjustments.
The targeted performance and adjustments for each of these measures on a regional level, other than new
restaurant weeks of operation, were used to calculate the team performance factor for corporate-level employees
as well, except that the team performance factor for development employees, including Mr. Blessing, was based
on six company-wide measures specific to the development department. The regional performance targets and
variance adjustments were set at the regional level consistent with the scales described above for the company
performance factor. We do not disclose operating results on a region-by-region basis. The measures used for the
development department’s team performance factor were new restaurant average daily sales at a similar target
level to the target for the company performance factor, new restaurant development costs for Chipotle restaurants
in North America, which were targeted at $782,085, 189 new restaurant openings, and measures of restaurant
reinvestment costs, the number of potential restaurant sites added to our pipeline, and subjectively-determined
key initiatives related to the department. Disclosure of the targeted new restaurant reinvestment and the number
of restaurant sites added to our pipeline would subject us to competitive harm. The targeted number of restaurant
sites added to our pipeline represented an expansion of our real estate pipeline to a level that would enable us to
open restaurants at a higher rate than, and at a rate that we believe would allow our profit growth to exceed the
profit growth of, our competitors. It would also represent an ability to capitalize on a relatively high percentage
of the suitable restaurant sites that we believe become available in a given year. Targeted new restaurant
reinvestment costs represented a low cost of operations that would require high quality in initial builds. As such,
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Proxy Statement