Chipotle 2013 Annual Report Download - page 2

Dear Shareholders:
Chipotle’s mission is to change the way people think about and eat fast food. At the heart of this lofty goal are two deeply held
commitments. Our unique food culture results in our constant effort to find higher quality, more sustainable ingredients, along
with better cooking techniques to prepare and serve the best tasting food possible. And our special people culture, which focuses
on attracting and building teams of top performers empowered to achieve high standards, allows us to create an extraordinary
dining experience for our customers and internally develop our future leaders to sustain our growth. Not coincidentally, these
characteristics of our business are the primary drivers of our success and helped us deliver very strong results in 2013.
We opened 185 new restaurants in 2013, bringing our total to 1,595, and delivered revenue of $3.21 billion, an increase of 17.7% for
the year. Our restaurant-level operating margins were among the best in the industry at 26.6%, delivering diluted earnings per
share of $10.47, an increase of 19.7% over 2012.
Our food culture has always been a defining characteristic of Chipotle and continues to set us apart from other restaurants. We
have always used delicious, high quality ingredients and our food is prepared using classic cooking techniques. But for many
years, we have also recognized that to serve the best tasting food we can, we need to understand how animals are raised and
how vegetables are grown. Food With Integrity represents our ongoing quest for better, more sustainable sources for our ingredi-
ents. We believe this quest allows us to improve the quality and taste of the food we serve, strengthen rural communities around
the country by supporting better farming practices, and deepen the bonds we have with our customers as they discover the
lengths we go to source our food. Through these efforts, we believe the food we serve today is better than it was 10 years ago,
and that our food in the next 10 years will be even better than today.
In 2013, we made progress in many areas in how we source our food. Most notably, in March, we became the first national restau-
rant company to voluntarily disclose genetically modified organisms (GMOs) in the ingredients we use. We did this because we
believe that people have the right to know what is in their food. At the same time, we have made considerable progress switch-
ing to ingredients that are not genetically modified in areas of our supply chain where GMOs currently exist. We have completed
the transition away from cooking with soybean oil (which we used to cook our chips and taco shells, and in certain other recipes),
and replaced it with sunflower oil and rice bran oil, both of which are non-GMO. We are also working to incorporate non-GMO
alternatives in our other ingredients, chiefly our flour and corn tortillas, and hope to complete that transition by the end of 2014.
Our commitment to serving Responsibly Raised meats helped us realize new milestones in 2013, including purchasing over 140
million pounds of Responsibly Raised meats coming from animals that are raised in more humane ways and without the use
of antibiotics or added hormones. We expanded our local produce program during the year, purchasing more than 20 million
pounds of locally grown produce in our US restaurants, an increase of more than 20% from the previous year. We also purchased
more than 5 million pounds of organically grown produce and over 7 million pounds of organically grown black and pinto beans.
We also made significant inroads in strengthening our unique people culture during the year. We finished 2013 with more than
400 Restaurateurs who are overseeing nearly 40% of our restaurants. Recall that Restaurateurs represent our elite managers
with a demonstrated capability for elevating the people around them, and this extraordinary group of leaders personifies, more
than any other, what our people culture is all about. When you include field leaders who have come through the Restaurateur
program -- those who have been promoted from Restaurateur to Apprentice Team Leader, Team Leader, or Team Director, for
example -- we have nearly 500 Restaurateurs overseeing more than two-thirds of our restaurants.
The Restaurateur program is the cornerstone of our people culture and demonstrates how we are developing the future leaders
we will need to sustain our growth. Restaurateurs, and the cultures they are creating in their restaurants, are allowing us to serve
better tasting food, provide a better dining experience for our customers, and deliver better financial results. Our unique and
compelling people culture is having a tremendous and growing impact on our business, and is one of the key drivers behind our
success.
Finally, recognizing that our mission to change the way people think about and eat fast food will be stronger if we offer more
than burritos and tacos, we added a new potential growth seed through an investment in Pizzeria Locale. Pizzeria Locale started
in Boulder, Colorado as a casual dining restaurant founded by Executive Chef Lachlan Mackinnon-Patterson and Master Somme-
lier Bobby Stuckey, and serves classic Neapolitan-style pizza. Working together, we’ve developed a fast-casual version of Pizzeria
Locale that uses the same great ingredients as the original, and makes pizzas inspired by the Neapolitan-style, with exceptional
attention to detail. The first Pizzeria Locale developed with Chipotle opened in 2013 and we are looking for additional sites in
Denver. Pizzeria Locale joins ShopHouse Southeast Asian Kitchen as another one of our growth seeds. At the end of 2013 we had
six ShopHouse locations with more planned to open in 2014, and we remain encouraged by the potential for all of the growth
seeds we are planting.
We are extremely pleased with our results in 2013, and we’re delighted that more and more people are choosing to visit our
restaurants every day. We’re optimistic about the tremendous opportunity that lies ahead of us, and we are confident that our
special food culture and unique people culture will continue to attract more customers to visit Chipotle.
Sincerely,
Steve Ells, Founder, Chairman & Co-CEO Monty Moran, Co-CEO