Chipotle 1Q16 Earnings Call Notes

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Steve Ells – Chairman & Co-Chief Executive Officer

Never more important to delight customers

“Never has it been more important for us to delight our customers on each and every visit and we have great confidence in our managers and crews to remain focused and to provide the extraordinary customer experience our customers expect from us. ”

Seen an improvement in comps since beginning of Feb

“We begin to see sales recover in the second half of the first quarter as our transaction trends reversed course from the lows we saw in January. Since the beginning of February, we have seen an 18-point improvement in comp transactions compared to the full month of January.”

It will take some time to rebuild trust

“We recognize that it will take us some time to rebuild trust with our customers and to fully recover from the issues we faced late last year. And while we are encouraged that the recovery is underway, we know that there’s still a lot more work to be done.”

Montgomery F. Moran – Co-Chief Executive Officer, Secretary & Director

Survey data has come back a bit

“when we give people a list of restaurants including our brand, and ask them how likely they are to visit, before the food safety issues that hovered around 50%, right now that’s recovered to 43%. So we’re down 7% on that one, but it’s picking up at a consistent rate. Admiration before these incidents was 70%, now it’s at 61%. So again, recovering from down into the 50% area. So a lot of the stuff has come back up nicely.”

Lettuce is one example of quality decline for food safety

“Yeah. I think, generally, the changes have gone very, very well. I won’t say all of them have been met with immediate approval. And an example of that is we went over to a lettuce that was pre-shredded at a central kitchen in order to be able to be absolutely certain of the – that all the interventions were in place to make sure that that was food safe. And that lettuce, I think, people found to be a degradation in quality of the stuff that was cut in the restaurants by our teams who – when our restaurant teams do it, they’re able to cut it to the exact size they want, they’re able to really make sure that the presentation is exactly what they want and that they can assure the quality of the lettuce. This was a product which is really just completely prepared in a central kitchen.”

Steak quality has actually gotten better

“The rest of the changes have been met very positively. The sous viding of the steak is delicious. We’ve actually had a reduction in the number of customer complaints. With steak, there’s always been over time some complaints because steak contains naturally some chewy bits and whatnot because we use real steak. And with the sous vide, the technique has allowed us to break down some of those aspects of the steak through kind of a long breathing process in the sous vide process which makes the steak juicier and more tender and more delicious. So actually we’re very, very pleased with how that’s going and our customers seemed to be very pleased as well.”

Mark Crumpacker – Chief Creative & Development Officer

Buckets of customers in terms of loyalty

“We call our most frequent customers top loyal, they come 25 times or more a year. The next group are heavy customers, they come 13 times to 24 times, then medium which is 6 times to 12 times, light is 2 times to 5 times and a new or lapsed customer is one-time. And you’re correct in that we saw larger declines in both new in the two – the top and bottom categories. So these are single-digit drops, but in new and lapsed, and in top loyal”

Integrated back of house with postmates

“We have completed the integration between Postmates, our largest delivery partner and our back-of-house ordering system. This allows Postmates to send orders directly to our back-of-house make line instead of standing in line to order.”