Chipotle 2008 Annual Report Download - page 31

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In 2007, occupancy costs decreased as a percentage of revenue due to higher average restaurant sales on a
partially fixed-cost base, partially offset by higher rents for new locations.
Other Operating Costs
For the years ended
December 31,
%
increase
2008 over
2007
%
increase
2007 over
20062008 2007 2006
(dollars in millions)
Other operating costs ..................... $164.0 $131.5 $102.7 24.7% 28.0%
As a percentage of revenue ................ 12.3% 12.1% 12.5%
Other operating costs as a percentage of revenue increased in 2008 primarily due to increased utilities,
repair and maintenance costs, and credit card processing fees resulting from a higher percentage of our customers
using credit cards. The increase was partially offset by lower marketing and promotional spend.
In 2007 other operating costs declined as a percentage of revenue primarily due to the effect of higher
average restaurant sales on a partially fixed-cost base and operating efficiencies that were realized as we grew.
We also realized a benefit in 2007 related to our promote from within strategy which reduced the dollars we
spent on training external hires.
General and Administrative Expenses
For the years ended
December 31,
%
increase
2008 over
2007
%
increase
2007 over
20062008 2007 2006
(dollars in millions)
General and administrative expense ............ $89.2 $75.0 $65.3 18.8% 14.9%
As a percentage of revenue ................... 6.7% 6.9% 7.9%
The increase in general and administrative expenses in 2008 primarily resulted from hiring more employees
as we grew, an increase in stock-based compensation expense resulting from the stock-based compensation
awards granted in 2008, and the cost of the all manager conference held in the third quarter. This increase was
partially offset by lower performance related bonus accruals. As a percentage of revenue, general and
administrative expenses decreased in 2008 due primarily to menu price increases and lower performance related
bonus accruals.
The increase in general and administrative expense in 2007 primarily resulted from hiring more employees
as we grew and stock-based compensation awards granted in 2007. The increase was partially offset by the
reversal of the credit card contingency reserve in the second quarter of 2007 and the impact of costs incurred for
the exchange offer conducted by McDonald’s in the third quarter of 2006, a secondary offering of our common
stock in the second quarter of 2006 and severance costs incurred in the first and second quarters of 2006. As a
percentage of revenue, general and administrative expenses decreased in 2007 due primarily to the effect of
higher restaurant sales on a partially fixed-cost base, the reversal of the credit card contingency in 2007 and the
costs incurred for the secondary and exchange offers and severance negatively impacting 2006.
Depreciation and Amortization
For the years ended
December 31,
%
increase
2008 over
2007
%
increase
2007 over
20062008 2007 2006
(dollars in millions)
Depreciation and amortization ................. $52.8 $43.6 $34.3 21.0% 27.3%
As a percentage of revenue ................... 4.0% 4.0% 4.2%
29
Annual Report