Chipotle Mexican Grill, Inc. (CMG)

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Chipotle Mexican Grill, Inc. (CMG)

Raymond James Institutional Investors Conference Call

March 5, 2013 11:00 AM ET


Steve Ells – Chairman and Co-CEO

Monty Moran – Co-CEO

John Hartung – CFO


Bryan Elliott – Raymond James


Bryan Elliott – Raymond James

I’m Bryan Elliott, the Restaurant Analyst here at Raymond James, and happy to have as one of our restaurant companies, Chipotle Mexican Grill, which has put up the single best 10-year track record in the history of the restaurant business, which may be the world’s second oldest profession. I’m still doing research on that, but very, very powerful story.

So representing the company, Chief Financial Officer, John Hartung; President and Co-CEO, Monty Moran; and leading off the presentation, Founder and Co-CEO, Steve Ells.

Steve Ells

Good morning, everybody. I want to remind you that our presentation today may include forward-looking statements and, as you know, actual results may vary. This slide gives you information regarding these forward-looking statements and where to go to get information about risk factors.

With that, so this year marks Chipotle’s 20th anniversary, and of course, I’m proud of our many accomplishments over the years. But more importantly, I’m excited about our potential to continue to change the way people think about any fast food.

What started out as a pretty simple idea – Monty, if you could shut off your phone, please. Thank you. So it doesn’t mean it has to be a typical fast food experience, and that has turned into a national brand. We’re serving almost a million customers every day, and we’ve rewritten fast food rules, sourcing more and more sustainably-raised ingredients, respecting farmers and the environment, animals and, ultimately, our customers.

We’re looking also to maintaining our commitment to preparing all of our food using classic cooking methods. Together, these things are the cornerstone of our food culture, allowing us to serve great tasting food made from sustainably-raised ingredients.

We’re also creating a culture of top performing crew members and managers, who are empowered to achieve high standards, really some of the highest in the industry to become the future leaders of our company, and we’re building exciting restaurants with an eye not only to pleasing aesthetics but with more efficiencies both in the dining room and in the kitchen. We’re using equipment that’s both more powerful and efficient while using less energy and less space. And what’s really exciting is that we’re proving that this is not just a model for burritos and tacos. But for other types of cuisines as well as seen by the success of our ShopHouse Restaurant in Washington D.C.

Our marketing this year’s going to continue to focus on building the Chipotle brand. It will also, however, include heavier emphasis on driving traffic and encouraging trial than it did in years past. Marketing programs this year are going to include a significant ad buy in 25 Chipotle markets including Los Angeles, Chicago and Washington D.C. These ad buys including radio, print and outdoor will take place before the end of the first quarter and will end by July or near the end of the summer depending on the specific market.

In addition, we’re also going to have significant well-developed local sales building plans in many of our best markets. The new marketing effort represents an evolution from talking about ingredients to talking about food preparation, and how our food is skillfully made and the precise way we bring our food to life.

In addition, this marketing effort will emphasize the beautiful and colorful images of our food that we serve and highlight the superior quality of the taste and ingredients. Our marketing efforts will also strengthen our brand and develop a deeper relationship with our customers through our successful non-traditional marketing techniques. This year, we’re going to continue to build on our signature Cultivate event series by hosting the events in Chicago, Denver and San Francisco, and following up last year’s successful Back to the Start animated short film, we’re developing new content programs that will continue to strengthen the Chipotle brand and that will spark conversation about important issues relating to food.

We have a few exciting initiatives underway that you may have heard about. We’ve introduced catering, which was rolled out in mid-January in the Colorado market, which represents about 70 restaurants. Catering is offered to customers in groups of 20 or more, while Burritos By The Box option is available for smaller orders of six or more. It’s been exciting to see people enjoy catering for the first time when they realize they have a chance to come in and experience the typical Chipotle line only in a smaller version, where they serve themselves and customize their meals and get exactly the kinds of combinations that they want.

In the Colorado market, print, radio and online advertising is helping to build customer awareness around catering and our Colorado restaurants also feature a catering menu panel on the menu board to increase awareness. And so far, the order size is over $300 and the early feedback has been positive, including many customer requests to expand catering to additional markets. And so we look forward to a phased rollout of catering in all of our markets across the country in the coming months.

This is Sofritas. We’re currently testing this delicious and flavorful vegetarian offering in our San Francisco Bay Area restaurants, actually only seven of them right now. Sofritas is shredded organic braised tofu with roasted tomatillos and poblanos, roasted chili peppers and a blend of aromatic spices. The early reaction and customer feedback has been really positive and press and media attention leading up to the launch also helped to get it off to a good start. We’re going to explore rolling this out to additional markets in the coming months based on the continued testing and additional customer feedback and we’ll keep you appraised of the progress, as we continue to look at how it goes.

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