Chipotle Mexican Grill, Inc. — 2024 Q1

Yes. So thanks, David. Well, first, I got to give a big kind of applause to our operators. We've really done a great job, I think, of staffing, scheduling and deploying and then really executing against our 4 pillars of great throughput.

Yes. No, you're exactly right, David. So 2014 was kind of our high-water mark on throughput. And we believe we've got years of opportunity in this. Just from what we're seeing, we still have a lot of opportunity to execute against the 4 pillars to great throughput. So our teams are doing a much better job than we were just last month or even 6 months ago. But there's still so much upside in what our teams can do and perform.

Yes. Thanks, David.

Yes. Sure. So this is Brian. I'll get started, and Jack, feel free to chime in. The good news is, obviously, we had some weather in January, and then we had the timing of the Easter holiday in March and April. But consistently, what we saw was a step-up from that bad weather. And then really our transactions have been running kind of in this mid-single-digit range, which has been, I think, a real testament to the work that's been going on both in the restaurant around throughput and then obviously some of the marketing work that we've got going on both with barbacoa and Chicken al Pastor.

And then, Brian, the only thing to add was transactions were up almost 5.5% during the quarter, and that was offset by check increase by about 1.5%. That was driven by part check and then offset by a little mix -- a little negative mix mostly due to group size.

Yes. Yes, that's exactly right. I think we've talked about this in the past. When you know the line moves quickly, you're willing to get in line. And also what happens is the experience is just all that much better, right? The culinary moves faster, and then you get to your experience faster. So our teams run more efficiently. The food, I think, comes across even better prepared. And then you as a customer move through the line faster. So it is one of those things where kind of speed begets speed is the way to describe it.

Yes. And Brian, I was just going to ask -- add the -- in terms of the in-store channel, it's the fastest-growing channel during the quarter, and that's coming from 2 areas. One, we've got our in-store customers. Those customers that tend to come in store are coming more often. And it makes sense that when the lines are moving, they're going to come more often. And we're actually also seeing a little bit of shift from some of the order-ahead. Those folks are shifting into the order -- into the in-store channel as well. Again, when the lines are moving well, when the restaurant is running well, people like to come in and select their meal along the front line.

Thank you.

Yes. Andrew, it's -- so it's hard to parse out the transactions and say how much is due to things like Chicken al Pastor, how much is due to things like barbacoa. Barbacoa, we think, drove some transactions as well and then throughput -- how much is driven by throughput specifically.

Obviously, this comes up every once in a while, people bring it up. And the thing I would say is, right now, we're much more focused on just turning Chipotle into an iconic brand that I think it can be not just in the U.S. but outside the U.S. Obviously, if the opportunity presents itself, where it would make sense for us to do something outside of the brand, I never want to say never, but it's just not a focus area for us right now.

Yes. Sara, you're right. Pricing in the quarter was like 2.7%, 2.8%. The only change going into next quarter and the next couple of quarters is we've got the California pricing. That's somewhere around 100 basis points or a little bit less. So Q2 and Q3 will be somewhere in that 3.5% range, and then Q4 will fall off and be more in that 1.5% range because we'll compare against last year's pricing.

Yes. It's a good question, Sara. We're actually seeing within the, call it, 1.5% of negative -- or it's a 1.5% positive with a mix impact of, call it, about 100 basis points or so. What's happening is the group size is more like declining by about 2%. We actually do have side -- additional side attachment. But we're seeing the side attachment grow in both digital and in in-restaurant, and we are seeing the side attachment increase faster in restaurants than the side. So there is a positive factor there.

Correct.

Yes. I don't know how to think about our frequency relative to some competitive opportunities out there. What I can tell you is the folks that are in our Rewards program, we see -- with their high engagement, we see higher spend and more frequency. And then also what we're seeing in the business, which I think is really nice to see as a result, I think the efforts both in better operational execution and I think our advertising around just the base business, this idea of real ingredients, real culinary, fast customization. We're just seeing the base business grow.

Look, I mean, we're delighted with what's happened or what's occurred in Canada 5, 6 years ago. We were struggling to make the unit economics look very compelling. Now they're very compelling. It's right there with the U.S. And as a result, that business is closing in on 50 restaurants. And pretty soon, we'll have 100 restaurants up there. And then I think we'll be talking about having hundreds of restaurants in Canada, which is really exciting.

No, not really. I mean the good news for us is it's pretty broad based, right? It's coming across all income cohorts. It's coming across lunch and dinner and the afternoon. So it's not like there's one thing that I would identify as like this change in consumer behavior.

No, no real shift. I mean I think we like this cadence of 1 or 2 items a year. The good news is we've got now a great proven group of menu news that we can provide. And the good news is we've got a really talented culinary team and a talented marketing team that continues to help us find, I think, new flavors that make sense that can be executed correctly at Chipotle.

Thank you.

Yes. Sure. So obviously, all this stuff is really exciting. The dual-sided grill, we've expanded to a few more restaurants, specifically our high-volume restaurants. We think that's not only a great unlock for consistency in the culinary of our proteins and meats, but it's also a nice unlock for high-volume restaurants because you can cook the chicken faster. It allows the teams then to start prep closer to when we want to serve customers, which is really exciting. So we're continuing to test and learn on that front. We've also made some nice progress on the energy usage associated with it, which was something that was a bit of a barrier.

Yes, Sharon. So the average ticket in California is similar to the rest of the country. Until this increase, our menu prices in California were very similar to the averages throughout the country, even though the cost of doing business out in California tends to be higher. After the increase, we still have burritos that are going to be reasonably priced. The chicken burrito is going to be around $10. It's very early, as you mentioned. It's too early to tell. We're not seeing any kind of change in consumer behavior yet, but it's only been a matter of a few weeks so far. So we'll keep a close eye on it.

Yes. We don't envision that occurring. The thing that makes Chipotle pretty special is all the customization, and we would hate to screw up that experience. And that's why -- you might remember this. I remember when we first did this. Everybody was like, oh, people are going to be confused, how are they going to know how to order, so on and so forth.

Yes. I think one of the things that's pretty interesting that over the last, I'd say, couple of months has really worked well for us is kind of between machine learning and AI. I'm not sure what the right label is here. But we figured out how to identify somebody that might go less frequent so that we can keep them in the mix. And that's proving to be pretty powerful. Still a very small cohort that we're learning on. But the good news is we're seeing nice progress with that cohort that I'm optimistic kind of in our stage-gate process, we'll take that learning and figure out how to apply it on a much bigger scale so that then you can feel it across the digital business.

Yes, definitely. Look, I think one of the things that's happening is because we're getting better at forecasting, better at deploying, better at the scheduling, the job is becoming a better job, right? And one of the ways you see it is in our turnover numbers, right? Our turnover numbers are the lowest they've ever been. We've got some regions well below 100% turnover at the crew level, which I've never seen in my time in this industry. I think some of the lowest numbers I've ever seen, frankly, at Chipotle.

Yes. So to answer your first question, it is a new tool that we rolled out in January that gave them real-time visibility, which has been hugely powerful. It's great because now when I visit restaurants and ask people, "Hey, how are you doing?" They can tell me what their best 15 has been so far. And a lot of them now are so well aware like, hey, I know we can do better than that. So like we might have did 25 in the last 15, but I think we're going to do 35 in the next 15, which is really exciting to hear them have that type of visibility and have kind of clarity so that as a team, they know what they're all working towards. What was your other question?

It was the range on throughput.

Oh, the range to the top and bottom?

Yes. And I can take that one. We will see at the bottom -- and these tend to be lower-volume restaurants. You'll see restaurants that are doing in the mid-teens, call it. And then I don't think this is maybe the top 20%. But when we look at the top restaurants, which tells us what the potential is, Brian gave an example during the prepared remarks. In Boston, we've seen as high as 80. We've seen some even higher than that. But I would say the top-performing restaurants are consistently -- or at least on a peak day, it's not going to be in that 40, 50 range. So it's a very wide range. And we're still towards the lower end of that range with a lot of potential ahead of us.

Yes. Thank you.

Thank you.

Okay. Thank you. And thanks, everybody, for the questions. Obviously, I appreciate the kind words of recognizing how we're off to a great start. Very proud of the momentum that the business has and really proud of what our operators are doing in our restaurants.