Chipotle 2008 Annual Report Download - page 28

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Labor. Although we have not been directly impacted by recent minimum wage increases, we experienced
some upward pressure on our restaurant wages in 2008 and expect further pressure into 2009. As a result, we do
not expect to see improvements in our labor expense as a percentage of revenue into 2009.
In addition to excelling in providing quality food and customer service, restaurant managers are expected to
contribute substantially to the development of their crew. Our restaurant management structure is designed to
facilitate the development of crew members into restaurant managers, and we emphasized the importance of
hiring and developing great crew at our first all managers conference we held in August.
We continue to focus on ensuring our employee practices are as exceptional as our food. We have sought to
ensure that we have an effective and efficient field support system for restaurant managers that supports our
efforts to identify people with potential, develops crew into managers and ensures high operating standards of
our restaurants. In an effort to achieve this we continue to develop the Restaurateur program, which is designed
to encourage the restaurant manager position as a career opportunity for our top performing restaurant managers.
We have also been working to leverage our Restaurateurs’ leadership by giving select Restaurateurs
responsibility for mentoring nearby restaurants. This provides the opportunity for Restaurateurs to develop into
field leadership roles as well.
Food With Integrity. In addition to continuing to serve naturally raised pork in all our restaurants, we now
serve naturally raised chicken in all of our restaurants in the United States and naturally raised beef in about 60%.
However, current economic conditions have led to natural chicken supply shortages. As a result, we temporarily
suspended serving naturally raised chicken in certain limited restaurants for a short period of time. We define
naturally raised as coming from animals that are fed a pure vegetarian diet, never given antibiotics or hormones,
and raised humanely in open pastures or deeply bedded pens—which is more stringent than the USDA’s new
standard for naturally raised marketing claims. In 2008, 30% of all beans we bought were organically grown and
we have increased the percentage to 35% for 2009. Also during 2008, we purchased at least 25% of at least one
produce item while in season for each of our markets from small and midsize local farmers. We expect to
increase the amount of locally grown produce purchased during 2009. At the end of 2008, 10% of the milk used
in our cheese came from cows raised in pastures and we expect to increase that percentage during 2009.
Marketing. While our marketing approach has often been considered edgy and innovative, we recognize the
need for our marketing to evolve, much as we have evolved our food culture and our unique people culture. In
January 2009 we hired our first chief marketing officer and a new advertising agency, and we are taking a fresh
look at our marketing strategy and direction with an eye to making our marketing more effective.
Stock Repurchase. In September 2008, our Board of Directors approved the expenditure of up to $100
million to repurchase shares of our class B common stock, of which we purchased $30.0 million in 2008. We
have entered into an agreement with a broker under SEC rule 10b5-1, authorizing the broker to make open
market purchases of class B common stock from time to time, subject to market conditions. The repurchase
agreement and the Board’s authorization of the repurchase program may be modified, suspended, or discontinued
at any time.
Cash and Securities. As of December 31, 2008, we had cash and securities of $188.0 million. Given the
recent financial turmoil, we have focused on capital preservation and invested our cash and securities solely in
U.S. Treasuries, Treasury backed funds and FDIC insured accounts.
2008 Accounting Adjustments. We completed an analysis of unredeemed electronic gift card liabilities and
recognized $2.3 million in revenue as a one-time cumulative adjustment for the recognition of unused gift card
balances.
We implemented lease management software to perform the calculation of straight-line rent expense and
deferred rent. During the implementation, we identified certain adjustments related to our historical straight-line
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Annual Report