During a fourth-quarter conference call with analysts, Steve Ells, founder, chairman and CEO, said the majority of the 2007 openings would be in markets where Chipotle already operates. "About 10% to 15% will be in new markets," he said, citing Philadelphia, Jacksonville, FL, Salt Lake City and Birmingham, AL.
A new staffing structure has been initiated that puts restaurant managers in line for "careers," said Monty Moran, president and COO. Called the "Restaurateur Program," it "has increased the number of managers who are being promoted from crew positions and should improve the customer experience in our restaurants."
The program has been implemented at more than half of the chain's restaurants and will continue to roll out this year. It puts managers in charge of crew training and offers incentive-based bonuses. The result, Moran says, is less turnover and reduced costs of recruitment in addition to improved customer satisfaction.
As for the federally mandated increase in minimum wage, he said, "we don't expect much impact. We typically pay wages that exceed the federal minimum."
Ells described the company's "Food with Integrity" program as a mission. He said the chain ended 2006 "serving more than 50% naturally raised chicken and over 40% naturally raised beef." In addition, it recently introduced sour cream that is free of the hormone rBGH.
"We are working towards changing the way people think about and eat fast food, and positioning Chipotle in a way that creates significant value," he said. While chicken prices rose in the fourth quarter and price pressure continues this year on account of rising feed costs, he said, "we'll not move too quickly to go to the menu board" and raise prices, "in case the increases are temporary."
The impact of the California freeze on avocadoes is not yet known, Ellis said. "We've got a few months" to determine the precise impact, and the company has back-up sources." If it cannot obtain quality fruit at an affordable price, the chain could suspend guacamole for a limited time, a tactic he'd like to avoid.
Meanwhile, the company's revenue rose 31.1% to $822.9 million in 2006, helped by fourth-quarter revenue of $219.7 million, a 26.8%-increase compared with the final quarter of 2005. Comp restaurant sales for 2006 were up 13.7% on top of a 10.2%-increase in 2005. Comp restaurant sales lifted 10.1% in the final quarter of 2006, compared with a 14.3%-rise in the final quarter of the previous year.
Income from operations more than doubled to $15.5 million in fourth-quarter 2006. And full-year income from operations also nearly doubled to reach $62 million.
Restaurant-level operating margins for the year were up 20.9%, and up 20.3% in the final quarter. Management attributed the increases to higher average restaurant sales, which lowered fixed operating expense as a percentage of revenue, as well as to menu price increases in some markets. The price increases resulted from the addition of naturally raised chicken or beef.
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