CMG
#Sure, <UNK>.
Thanks for the question.
So, this chorizo that <UNK> speaks of is really delicious.
It's a chicken and pork spicy sausage.
We cook this on our plancha.
It has lots of little crispy bits, so it has nice spice and really good texture, and as <UNK> said, very, very popular with the customers that had it in a couple of our test markets.
When we think about adding something to Chipotle we are very, very mindful of our overall efficiencies, efficiencies in the kitchen, efficiencies in cook time, efficiencies in throughput, and ease of ordering for the customer.
Chorizo fits into this system really, really well in that we have space for it on the main line, and it doesn't detract from throughput.
It's also very easy to rotate onto the plancha to grill between chicken and steak.
The cook time and the method of grilling isn't much different from the chicken and steak already on the plancha.
So, operationally, I would say it's quite easy to execute.
But I think it's very exciting in that it does add a new flavor and texture to the meat offerings, and it pairs well with our existing offerings, our salsas and guacamole and cheese and what have you.
So, again, very popular and I'm excited see how this works.
I think, generally, the changes have gone very, very well.
I won't say all of them have been met with immediate approval.
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 that all of the interventions were in place to make certain 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 restaurants teams do it, they are able to cut it to the exact size they want.
They are able to really make sure that the presentation is exactly what they want, and they can assure the quality of the lettuce.
This was a product which is really just completely prepared in central kitchens.
So what we've been able to do, and what we will be rolling out soon, we've been able to find a way to have this made completely safe by interventions in a central kitchen, but yet still have the entire head of lettuce brought to the restaurant, and give our crews in the restaurant the latitude to be able to cut that properly and assure the quality of that again.
So, we've just been tasting that the last few days in a few of our restaurants here in Denver, and it's delicious.
It's wonderful.
So we are going to be moving back to a lettuce that I think everyone else is very satisfied with.
The rest of the changes have been met very positively.
The soup eating 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 are very, very pleased with how that's going, and our customers seem to be very pleased as well.
The blanching of the ingredients has had ---+ essentially has had no effect whatsoever on the eating quality of ingredients, but it's a wonderful step to ensure, again, food safety and the elimination of potential harmful pathogens or what have you.
So, our crews in the restaurants have done an awesome job implementing that new procedure and have found it quite easy, and they are very proud of it because it makes them ---+ it gives them an even higher level of confidence in the food we are serving.
And again, no degradation whatsoever in what our customers are receiving.
So we are feeling really, really good about the quality of our food in the restaurants and I think it is actually better than ever, I think, subject to that one change in lettuce.
We felt that the bell peppers we were bringing in presliced from a central kitchen were good, but maybe not quite as good as the ones cut in our restaurants.
So what we've been able to do is go back to blanching the bell peppers such that they can be cut by a knife by the skilled hands of our folks in the restaurant and, again, have brought that back to the level of quality it was before but, again, with the blanching to assure food safety of that ingredient.
So, we are very proud of everything we've done.
We think that the intent focus on our food that's been caused by looking at every single ingredient, it's caused our teams in the restaurants to also look at every single ingredient very, very critically and make certain that everything is as good as it can be.
So I think our food is more delicious than ever, with that one sort of asterisk that the lettuce was I think not as good for a time, but we are returning that to where it was, and I think we are very, very proud of where our food stands now.
Thanks for asking.
I think the short answer is, no, we are not preparing for a slowdown of our development, and I think you'll find that we will be able to achieve very easily the guidance that we have given in terms of number of restaurant openings.
But we do have a very strong pipeline coming in from our real estate teams who have been doing an excellent job finding a lot of terrific sites.
But the reason for my comments was that, as we've had a slowdown of sales overall that you are all aware of and the numbers that <UNK> spoke about with a slowdown of nationwide sales as a result of what happened in late 2015, so too has that slowdown affected our new store openings.
But it's not ---+ it's affected them disproportionately.
What I mean is that most of our new restaurant openings have still held the same percentage that they historically have held versus our trailing 12-month sales of our existing stores.
But the exception is that, in the new markets and developing markets, in those markets, there's been I think even more softening of their sales than there has been nationally, say.
So the delta between a new store opening in a developing or new market has been slightly greater than when compared to the rest of our restaurant average daily sales.
So the delta of new and developing markets is a little bit bigger than the delta between proven and established markets.
And so that percentage of all of our newer store openings though is quite low.
It's about 13% of our new store openings are in new markets or developing markets.
And because those sales have been correspondingly a little more soft than the rest of openings, we're going to be taking just a much closer look at those and be more nitpicking as to which ones we do deals on.
So, it's going to be a very slight effect in terms of number of openings, and we have such a strong pipeline that we don't think it's going to affect the overall numbers that we've shared with you that we plan to open, but it's going to give us I think the ability to be a little more discerning on a few of our locations and just make sure that any ones for which the development cost is perhaps a little bit high or the rent structure isn't quite advantageous, we might walk away from some of those deals that we might have pursued a year ago today for example just to be responsible with our investments.
I had mentioned it would be in the 3% to 4% range.
Now, keep in mind our sales during the second and third quarters are higher, so you're talking about a 3% to 4% figure on top of higher sales.
So, it will be meaningfully reduced, and what you'll see is the reduction is going to be in the promo.
We hit promo, as you know, very, very heavy.
We gave away about 6 million entrees during the first quarter, and we did that intentionally.
We wanted to hit that really hard.
We wanted to signal that the event was over.
We signaled that within a week or two after the CDC called their investigation over.
And so we did that intentionally.
Going forward, as <UNK> mentioned, we're going to be transitioning to more BOGOs, which have a lesser impact on our promo line.
Offsetting that, we are actually going spend more on advertising during the second quarter for sure, probably third quarter.
But overall, I would expect that to be in the 3% to 4% range.
Now, that's still higher than historical because if you look at second quarter and third quarter of last year, I think that's right around double or a little more than double what we did as a percentage of sales last year.
Listen, we are not locked to a number at all.
That just happens to be the number based on the next wave of the strategy.
We're moving into more brand advertising, moving into more of the BOGOs.
That just happens to be the number.
We are prepared to do what we need to do to continue to invite customers in, to continue to give them a great experience.
And so if we needed to invest more, if we thought that would be a good investment, we would certainly make it, but right now, we think it's going to be in that 3% to 4% range.
That's correct.
Yes, it is because we saw early March was down 22%.
Then we had the news coming out of Boston.
Our sales spiked up to ---+ or spiked down to a ---+ down 27% for a couple of weeks near the end of the month.
And you've got a lot of choppiness with Easter this year at the end of March, and then you compare it to Easter last year and early April, but we are starting to see recovery back into that kind of low to mid 20% range at the end of March.
Our sales dollars, we moved from the end of March to April, got better.
They improved by in that 3% to 4% range, but we are comparing to seasonal sales that in the past and last year kind of followed the pattern of increasing more like 6% to 7% range.
So our dollars moved up from March to April, from late March which, is in that low to mid 20% range.
Our dollars from that range moved up in April but, because of the tougher comparison, our comps did retrench a little bit and they moved back to 26%.
Now, in the last week, we've seen a number of days in a row, it's not a pattern yet, but we've seen a number of days in a row that have gotten back into that mid to low 20% range.
And so we're hoping that maybe seasonality just is showing up a little bit late where we're going to get that bump.
We do know that there was some cold and some wet weather throughout parts of the country early in April.
So we will see whether we're going to get this up or not.
But our comps did get worse but our sales dollars did continue to move up from March to April.
I would not ---+ listen, it's so hard to predict because I gave almost excruciating detail about the sales during the quarter and then in April just to give you an idea of how volatile it is, how tough it is for us to see is there recovery taking hold and then it gets interrupted by the news out of Boston.
So I wanted to give you as much detail as possible.
So with all that volatility, it's hard to predict.
But I would not expect a loss in the second quarter.
I would expect, because we have fewer of the one-time costs, because I would expect to see some recovery, because second quarter is seasonally a better quarter for us compared to the first quarter, I would not expect to see a loss in the second quarter.
Sure.
Now you're going to ask me what EPS is going to be in the second quarter, aren't you.
I wouldn't say we have.
I know there's inefficiencies in there.
We are really not going to go hard after them.
When you look at labor, for example, labor is worth I think 850 basis points.
Of that, 600 of that is deleveraged because of sales.
So the most important thing we can do is get our sales back.
Another 100 basis points is due to the very heavy promo that we did in the first quarter.
So we had a lot of people visiting, a lot of people dining at Chipotle, but they didn't pay for all or part of their meal.
We have to staff the restaurants, so there's about 100 basis points of that.
And then there's another I think it's 150 to 200 basis points or so of what I will call inflation.
It's stuff that we did last year.
We had merit increases for our managers and crew.
We rolled out or introduced an education program, college education or education, but usually college education.
We started to pay sick pay and then we enhanced our vacation pay.
So, those are all inflationary things that were in that kind of 150 to 200 basis points range.
So those are the big pieces.
Underneath all that is are there some efficiencies.
Sure, but maybe that's 100 basis points or so.
We don't want to go out and squeeze labor right now and drive those efficiencies at a time when what's most important is for us to have a fully staffed team, to have the four pillars in place, have a team that feels ready to greet customers when they come in and hopefully at an accelerated rate.
So I wouldn't want to go after 100 basis points on the labor line when what's most important is to have a great experience and let's encourage the sales to happen.
