Chipotle 2008 Annual Report Download - page 89

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The committee also sets maximums each year for the company, team and individual performance factors.
The committee may, in its discretion, authorize a deviation from the parameters set for any particular
performance factor in order to account for exceptional circumstances and ensure that AIP bonuses further the
objectives of our compensation programs. The committee exercised this discretion to authorize deviations from
the terms of the AIP for 2008, as described below under “—Annual Incentives—2008 AIP Payouts,” and for
2007 as described in footnote 1 to the Summary Compensation Table below.
Annual Incentives—2008 AIP Payouts
The committee set the target annual AIP payouts during the first quarter of 2008, based in part by reference
to the historical compensation of each executive officer, each officer’s performance during the year, and median
target bonuses for comparable positions within the restaurant industry peer group. The AIP parameters were set
to 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.
For 2008, 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 $149.65 million for operating income, $4,164 for new restaurant average daily sales,
comparable restaurant sales increases of 7.0 percent, and 3,665 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 2008 operating plan and
the full-year 2008 guidance we publicly issued to investors.
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 twice the rate at which similar 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,
except that the team performance factor for Mr. Jones was based on four company-wide measures established for
our development department. The regional performance targets and variance adjustments were set at the regional
level consistent with the scales reflected 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 and new weeks of operation (at the same target levels
described above), as well as new restaurant development costs, which were targeted at $900,000, and a measure
of the number of potential restaurant sites added to our pipeline. Disclosure of the targeted number of restaurant
sites added to our pipeline would subject us to competitive harm. The performance target for this measure
represents 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. As such, we believe this target represented a
challenge to our development team members, including Mr. Jones, and although achievable, we believe meeting
this target was substantially uncertain at the time it was set.
The key initiatives targeted for 2008 were developing great managers, developing outstanding crew,
increasing effectiveness of field support staff, improving restaurant throughput, and improving restaurant design
and facilities. The committee’s discretionary determination of our level of achievement against these initiatives
26
Proxy Statement