Chipotle 2009 Annual Report Download - page 91

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 $144.9 million for operating income, $3,889 for new restaurant average daily sales, comparable
restaurant sales increases of 2.0 percent, and 2,744 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 2009 operating plan and
equaling or exceeding the full-year 2009 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 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
as well, except that the team performance factor for development employees, including Mr. Jones, was based on
four 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 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 $880,000, 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 2009 were developing great managers, developing outstanding crew,
increasing effectiveness of field support staff, improving restaurant throughput, treasuring every customer, and
improving restaurant efficiencies. The committee’s discretionary determination of our level of achievement
against these initiatives would result in specified adjustments to the company performance factor, though the
impact of adjustments attributable to the key initiatives is designed to be less than the other metrics impacting the
company performance factor.
As a result of our strong performance during 2009, we greatly exceeded the targeted operating income
performance level, and were above target for each other AIP measure except new restaurant average daily sales,
which were slightly below target. As a result, 2009 AIP bonuses throughout the company were based on a
company performance factor at the capped level of 150 percent.
With regard to the team performance factor, the strong regional performance that led to our overachieving
our goals at the company level also led to a team performance factor at the maximum level of 150 percent for
corporate employees (including each executive officer other than Mr. Jones), and 146 for development
employees (including Mr. Jones). The development team performance factor was slightly below the cap due to
the adverse impact of the economic environment on development activity.
The committee determined the individual performance factor for each executive officer in view of the strong
performance we achieved versus our goals and relative to our peers during 2009, and taking into account our
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