Financial and Operating Highlights for Chipotle Mexican Grill, Selected Years, 2

Question

Financial and Operating Highlights for Chipotle Mexican Grill, Selected Years, 2007-2012 (in $000s) ncome Statement Data 2012 2010 2009 2007 Total revenue Food, beverage and packaging costs $2,731,224 $2,269,548 $1,835,922 $1,518,417 $1,085,782 738,720 561,107466,027 346,393 891,003 As a % of total revenue Labor costs 543,119 453,573 385,072 641,8365 289,417 47,274 128,933 114,218 286,610 251,208 202,904 174,581 131,512 118,590 74,938 68,92 61,308 6,296 23.9% As a % of total revenue Occupancy costs 75,891 As a % of total revenue Other operating costs 6.3% 7.5% 10.5% 183,409 11.5% As a % of total revenue General and administrative expenses 149,426 99,149 75,038 6.5% As a % of total revenue Depreciation and amortization Pre-opening costs Loss on disposal of assets Total operating expenses Operating income Interest and other income (expense) net Income before income taxes Provision for income taxes Net income Earnings per share 3,595 9,585 6,168 2,275,359 1,918,986 ,548,091 1,314,712 977,599 108,183 5,806 350,562 28783 2 203,705 287,831 1,230 457,685 349,705 289,061 204,225 114,002 (179,685) 134,760 110,080) 77,380 (43,439) 455,865 (857) S 278,000 214,945 178,981 126,845 70,563 Basic $8.82 $6.89 $5.73 Diluted Weighted average common shares outstanding Basic 31,51331,217 31,783 31775 31,735 32,102 32,672 Diluted Selected Balance Sheet Data Total current assets Total assets Total current liabilities Total liabilities Total shareholders' equity Other Financial Data Net cash provided by operating activities Capital expenditures 31,775 S 546,607 501,192 S 406,221 S297,454 $201,844 1,668,667 1,425,308 1,121,605 961,505722,115 73,301 381,082 310,732 258,044 160,005 1,245,926 ,044,226 810,873 703,461 562,110 186,852 5745 123,054 102,153 422,741 $419,963 $411,096 $289,191 $260,673 $146,923 197,000 151,100 113,200 117,200 141,000 Restaurant Operations Data Restaurants open at year-end Average annual sales for restaurants open at least 1,230 1,084 $2,113 $213%1,728$1,085 $1,840 12 full months (in $000s) Comparable restaurant sales increases Development and construction costs per newly 10.8% $800 $800 S795 opened restaurant (in $000s)

Explanation / Answer

Know Your Demographics

One of the biggest precursors to success is understanding who your target audience is and catering to their needs and wants. In some cases, this will be a broad demographic that encompasses a large audience. Other times, this will be much narrower and your efforts will be focused on a tiny audience. Basing your products or services, marketing campaign, and company culture accordingly should make it easier to reach your demographic and create a legion of loyal customers.

Focus on Valuable Customers

When applied to business, Pareto’s 80/20 principle implies that 80 percent of customers account for 20 percent of sales, and the other 20 percent account for 80 percent of sales. By understanding and implementing this principle, you can prioritize your efforts and aggressively pursue the top 20 percent of customers that result in the bulk of sales.

Upsell to Your Customers

Whenever a customer is about to make a purchase, it’s smart to make them aware of an additional product or service that can enhance their initial purchase. Perhaps the most classic example is a fast food employee asking “would you like fries with that?” when ordering a burger. Since a customer has an obvious interest in a particular product or service, there is a good chance they will be open to buying something to complement it. For a brick-and-mortar business, this is often done at the point of sale right before a customer is checking out. For an eCommerce store, you can list a relevant product or service on the checkout page.

Capitalize on Trends

Just like in life, the business world is constantly fluctuating. Staying abreast of industry trends should keep your company relevant and increase profitability when something is hot. If consumers are going crazy over a particular product, you could order a large quantity to meet demand. One way to keep an eye on things is with Google Alerts, which provides you with up-to-date information on your industry. Whenever a new trend arises, you will be the first to know, and you can take the appropriate actions.

Strive for Customer Retention

Generating new leads is an important part of business growth. The problem is that some companies are so fixated on this that they fail to retain some of their most valuable customers. From a practicality standpoint, converting first-time customers into repeat sales is very effective and lays out the foundation for a successful future.

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