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SEC Filings

CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
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months. The following graphs show our average store sales in each of the last three years and for the trailing 12-month period ended September 30, 2004 and 2005.


        Average store sales have increased partly because ramp-up periods have become consistently shorter as new stores have opened with higher average sales for the reasons described under "—Expanding Store Base" above. Average store sales increases have also been driven by strong growth in comp store sales, due mainly to increased numbers of transactions at our stores, as described below. While we believe most of our sales increases will come from opening new stores, we'll continue to focus on ways to improve the customer experience at our existing stores so we can increase comp store sales. For additional information about how we intend to do that, see "What We Do—Where We Go From Here—Expanding Our Operations and Sales—Selling More Food Every Day."

        Comp Stores Sales Growth.    Comp store sales refer to year-over-year sales comparisons for stores in operation for at least 12 full months and do not include sales during the portion of the month in which a store begins operating. Historically, increases in comp store sales, which were 8.7% in the first nine months of 2005, 13.3% in 2004, 24.4% in 2003 and 17.0% in 2002, accounted for a substantial portion of our restaurant sales growth. In 2003, 43.6% of our restaurant sales growth resulted from comp store sales increases, as compared to 26.8% in 2004 and 26.6% in the first nine months of 2005.

        We believe that our strong historical comp store sales growth was mainly due to the growing appeal of our core menu items, increasing consumer understanding and appreciation of our passion for good, higher-quality food and our focus on building customer relationships "one burrito at a time." Comp store sales in 2004 and the first nine months of 2005 grew at a slower rate than prior years and represented a smaller percentage of the growth in our total restaurant sales than in prior years. This slower growth is due to new store average sales in the first 12 months increasing over time and baseline restaurant volumes increasing due to the cumulative impact of positive comp store sales in each of the last three years and the first nine months of 2005. As a result of the effects of these trends, we believe that comp stores sales likely will not continue to increase at the rates achieved over the past several years. Comp store sales also increase when we introduce modest price increases to our menu. In each of 2002, 2003 and 2004, we raised our prices both to adjust for inflation and to cover food, beverage and packaging cost increases and other operating costs. For example, we raised prices in some markets where we began to use more expensive, naturally raised chicken in 2003 and 2004. Our focus on "food with integrity" may cause us to charge higher prices in some cases because right now there are limited supplies of naturally raised and sustainably grown ingredients. See "Risk Factors—Risks Related to Our Business and Industry—New stores, once opened, may not be profitable, and the increases in average store sales and comp store sales that we've experienced in the past may not be indicative of future results."

        Discounting.    Unlike many of our competitors in the restaurant industry, we do not offer discounts or "value meal" options. Instead, we have promotions that allow customers to sample our food for free. We believe that one of the most important ways for us to increase sales is getting people to try our food and


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