Chipotle Mexican Grill, Inc.

Good day and welcome to the Chipotle Mexican Grill first quarter 2026 results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. In today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to introduce our next person, Head of Investor Relations and Strategy. Please go ahead.

Hello, everyone, and welcome to our first edition of Access to Earnings Press Release. If not, it may be found on our Investor Relations website at ir.jeffolay.com. Additionally, is available on our site as a reference for today's call. I will begin by reminding you that certain statements and projections made in this presentation constitute forward-looking statements. These statements are based on management's current business and market expectations, and our actual results could be forward-looking statements. Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Q for a discussion. to vary from these forward-looking statements. Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found on the investigation page within the investor relations section of our website. We will start today's call with prepared remarks from Scott Boatwright, Chief Executive Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. And with that, I will turn the call

Thank you, Cindy.

Before we share our first quarter results, I want to begin by recognizing the extraordinary people who bring our purpose to life every day in our restaurants. The conference bringing together nearly 5,000 restaurant and support center leaders. As we celebrated their achievements, reinforced our commitment to developing world-class people leaders, and sharpened our focus on delivering I have seen that same energy in my recent visits with restaurants that are clean, well-staffed, and run by friendly people with culinary that is outstanding. This is the standard our guests expect, and it is exactly what we intended to deliver. More importantly, it gives me confidence that the work we are doing is taking hold where it matters most, which is in our restaurants. Our first quarter performance exceeded expectations, and we are encouraged by the early momentum we are seeing in our recipe for growth and positioning Chipotle to win in any environment. For the first quarter, we delivered revenue growth of 7.4%, including positive comparable sales and a return to positive transaction growth. In addition to improvements to in-restaurant expectations, supported by the high-protein lime, the return of chicken al pastor, and the launch of cilantro lime sauce, all of which helped drive . We also continue to invest in value for our guests by pricing below inflation because we believe reinforcing our value . Adam will take you through the financial details, but overall, we are encouraged by the momentum we are seeing, which has continued Our recipe for growth strategy is built around what differentiates Chipotle and where we see the clearest path to stronger restaurant performance. As a reminder, the five pillars of our strategy include protecting and strengthening the core by driving operational value for our guests, modernizing our business model with industry-leading technology, including leveraging AI, to elevate the experience for our guests and our teams, evolving the brand messaging and accelerating menu innovation in our restaurants, cultivating the best talent in the industry, energized and focused on speed and agility, by scaling with intention to improve company-owned and partner-operated markets, as well as strategic new regions. correcting the core. We continue to roll out our high-efficiency equipment package, including the dual-sided plancha, three-pan rice cooker, and high-capacity fryer. We're often in as early as 6 a.m. to prepare fresh food every day. These tools are a game-changer. They help teams deploy for peak, while also improving the consistency and quality of our culinary and creating more capacity to meet higher levels of demand. now in over 600 restaurants, an increase of 250 versus the prior quarter. And we are on track to reach 2,000 by year. We are reinvesting the time savings from the equipment back into our restaurants to strengthen throughput and hospitality. And in markets where it has benefits translate into hundreds of basis points of improvement and comp sales.

Hospitality was a central theme

Because we know today's guests are more discerning than ever, and we need to be just as focused on how we make people feel as we are on the ground. At Chipotle, this means extraordinary food, a clean restaurant, fast and accurate service, and friendly teams that make everything possible. As part of this initiative, we are testing a new mystery shopper program to provide an independent view of our operations and At our all-managers conference, we brought our focus on hospitality to life through an on-stage competition that recreated the industry. Real make lines, real food, and guests moving down the line. Each region competed on throughput, accuracy. In our competition, we highlighted best practices our leaders could take back in their restaurants. This powerful visual of what great looks like most meaningful way. I want to congratulate our mid-Atlantic region, which won the challenge. More importantly, our teams came out of AMC energized, ready to execute, and committed to providing great hospitality. We are moving with speed to leverage technology and innovation to improve the experience for both teams and guests. First is our new digital make line display we call Chipotle Kitchen. Built by Chipotle for Chipotle, it is and consistency. Unlike our prior text-based display, it uses clear visual cues for ingredients to integrate new menu items. This improved interface simplifies execution for our teams and reduces the potential for error It is now live in over 100 restaurants, and we anticipate completing the rollout across all locations by the end of the year. We are already seeing meaningful improvements in on-time performance, digital order accuracy, and customer satisfaction, encouraging AI in our restaurants to further support our teams. Avocado, our AI assistant, continues to deliver real benefits freeing up more time for our managers. Now we are expanding AVIS capabilities to assist our general managers with operational planning and cook-to-needs guidance. We are also enhancing our facilities capabilities to triage equipment issues, downtime, and improving restaurant performance. These enhanced capabilities received a standing ovation in our all-managers conference, by the end of the year. Finally, our zipline pilot for drone delivery is showing encouraging early pilot to several more restaurants in second quarter. Taken together, these efforts reflect the speed and breadth of innovation all in service of helping our teams perform at their best and giving our guests more reasons to choose Chipotle. Moving to We have an all-new look and feel designed to widen the funnel, deepen our connection with guests, and accelerate engagement. Loyalty comps meaningfully outpaced non-loyalty, reinforcing the power of the platform and the opportunity ahead. Focus on that momentum through expanded choice, increased gamification, and enhanced value. our in-restaurant business, where only about 20% of transactions are currently linked to rewards, compared to nearly 90% of our customers. This month, we launched an in-restaurant campaign featuring menu panels and QR code signage to make enrollment more seamless and support our customers. We also incentivized our teams to help promote the enhanced program to guests in-restaurant. So far, we are seeing strong increase in daily enrollees. And we are in the process of creating a single scan feature within our mobile app, allowing guests to both further reducing friction.

Now shifting to marketing and menu innovation.

Our value proposition differentiated. Delicious food made with high quality ingredients, prepared fresh using classic culinary techniques, and served you can't give anywhere else. This year, we have increased the cadence of menu innovation, beginning with which broadened awareness across the full menu and the value we offer. Add-on protein reached nearly one quarter of all transactions, reinforcing Chipotle as the go-to destination for high-quality, clean protein. We also recently The first four limited time offerings we plan to launch this year. Our guests were excited to have it back and we saw incremental transactions. Last month, we rolled out cilantro lime sauce, which is prepared fresh daily in our restaurant, roasted on the plancha, and then blended with cilantro, lime, sour cream, and spices to create a creamy, bright sauce with It was our first limited-time sauce on the MAPE line, and the first launched with multiple-size options, delivering higher incidence than their Beau Ranch. Yesterday, we brought back Chipotle Honey Chicken, a fan favorite that delivers a balance of sweetness and a touch of sweetness from pure honey. It is one of the best sellers with the highest order rate. As we look to the back half of the year, and additional innovation planned around sides and beverages that we feel confident will keep Chipotle top of mind with our guests all year long. Shifting to group occasions. Following encouraging results in our initial Chicago catering pilot, including the launch on a... We have expanded the program into Boston. Assuming we continue to see similar guest response and strong execution in the restaurant, all rolled out for the end of the year. Build Your Own Chipotle, a family or group occasion for four to six people continues. Because the occasion has proven highly recommendable, we are now testing a sharper pricing architecture and leaning into key marketing moments today. Catering and Build Your Own Chipotle together represent over 2% of combined sales, yet we continue to believe they could become time and a meaningful growth layer for the brand.

Now to our fourth pillar, our people.

We as a people-first company by developing world-class leaders and creating opportunities for growth. At the end of the day, our people story, and we continue to see Chipotle change lives in meaningful ways. At our all-managers conference, including one leader who joined Chipotle 17 years ago looking for a steady job to support her family. She started into a certified training manager. Along the way, she raised her children, built financial stability for employee stock grants, and discovered a passion for coaching others. When she talks about why she loves Chipotle, the real food she believes in, and the joy of seeing people she trained move into leadership roles. Stories like hers show that our purpose to cultivate a better world comes to life in a powerful way through serving real food, creating real opportunity, and developing strong restaurant leaders. And because developing strong restaurant leaders is so critical to our success, we remain deeply focused on behind it as we improve the role of our GMs and refine our apprentice program. The good news is that historically low levels and stability is at a multi-year high. Against that backdrop, one of our priorities is our manager coverage so that our restaurants are positioned to execute at the highest level during the busiest parts of their day. At the same around a designated focus on hospitality. Our early read shows that this combination is improving execution while also improving growth. I want to provide an update on how we are restructuring leadership to support our Resident People Growth Strategy. We are thrilled to welcome Fernando Machado as our new Chief Brand Officer. Fernando is an award-winning, globally recognized His experience includes 18 years at Unilever and more than seven years leading marketing across Burger King, Popeyes, and Tim Hortons, where he helped drive double-digit system sales growth and significant brand value expansion. His proven track record driving category-defining innovation and leading customer-centric marketing strategies is exactly what we need as we continue to elevate our brand. highlight the value of our real food, and accelerate our long-term growth.

We are also excited to introduce Chipotle in the newly created role of Chief Digital Officer.

Carly has a strong track record of leading digital, data, and loyalty. Most recently at Hyatt, where she led a global organization of more than 400 team members and advanced their digital and rewards ecosystem to drive strength. through growth. We believe she will play an important role in accelerating our digital platform and strengthening the connection between our guests. Together, this investment in talent will strengthen our leadership team and fuel our strategy. Finally, to our fifth pillar, starting with our partner operating restaurants in the Middle East, the well-being of our partners and their teams remain our top priority, and we are Given ongoing geopolitical conditions, we expect some delays related specifically to restaurant openings in the Middle East. They result in fewer partner-operated openings than anticipated. However, our long-term outlook for the region remains unchanged for hundreds of restaurants in the region over time. Outside of the Middle East, we continue to anticipate partner-operated openings and South Korea this year, while Singapore will likely open in 2027. In the US and Canada, and remain on track to open around 350 for the full year, with approximately 80%, including at Chipotle. Consistent and strong, and we are confident in our ability to reach 7,000 restaurants over time. In Europe, at westfield stratford one of uk's busiest shopping destinations and it delivered our strongest opening day sales in the region's history and restaurants across europe and anticipate at least one additional opening in frankfurt this year momentum in our european business with positive cops across all countries this performance reflects our ongoing alignment with north american standards across color systems, and operations. We are further strengthening our foundation for future growth and continue to believe Europe represents a .

To close, I want to reinforce the leadership culture that defines Chipotle. Our team and ready to execute and we are seeing in the business.

Be brilliant at the basics stay close to our restaurants and guests, and deliver exceptional food and hospitality with consistency every day. This is and bring our strategy to life, one guest, one team member, and one restaurant at a time. I've never been more confident in our strategy and a very long runway ahead as we continue building Chipotle into a global iconic brand. I will now turn it over

Thanks, Scott, and good afternoon, everyone. Our first quarter performance is an early indication that a recipe for growth strategy has started to translate into real results. The initiatives Scott outlined while continuing to manage the business with discipline. Our approach remains clear. Reinforce guest value and preserve the long-term strength and flexibility of our economic model. Turning to the quarter, sales grew 7.4% driven by a comparable restaurant sales increase of 0.5%. Digital sales of $1.2 billion represent digital sales. Restaurant-level margin adjusted 40 basis points for legal settlements was 23.7% over year. Adjusted diluted earnings per share were 24 cents, representing a 17% decline versus last year. including 42 in Chipotle. As Scott mentioned, our first quarter performance was ahead of our expectations. We saw strength from the return of chicken al pastor and the launch of cilantro lime sauce. For the full year, our comp guidance remains about flat. As our initiatives continue to gain traction, our guidance reflects a conservative outlook given the dynamic consumer environment. For pricing, we ran just under 1% in Q1 and anticipate pricing will be about 1.5% for Q2. For the full year, 1 to 2%. Before I walk through the P&L, I want to highlight a few encouraging trends we are continuing to see in menu innovation and reward innovation. Our protein limited time offers typically generate a few hundred basis points of transaction width over the life of the promotion. few weeks as we see increased frequency as well as more new guests. Also, we sustained part of this conflict longer term as many of our new after the limited time offer ends. Softwares are showing a similar pattern. Beyond the mixed benefit, they are effective in attracting new guests. Taken together, these results reinforce that menu innovation is not simply a short-term sales driver, but a meaningful contributor to building our averaging

pillar of our recipe for growth strategy.

And for rewards, we continue to see clear evidence that deeper engagement builds loyalty. Loyalty-driven comms have now outpaced non-loyalty comms for several consecutive quarters, and the gap is widening. In the first quarter, loyalty was only 0.6% of 300 basis points versus the first quarter of 2025. That reflects both growth in active members and higher driven by programs like Summer of Extras and the expansion of Revolvent. With the launch of our new rewards features, we are enhancing the while working to bring more in-restaurant guests into the program. I will now go through the key T&L line items, beginning with cost of sales. Sales in the quarter were 29.6%, an increase of about 40 basis points from last year. The benefits of lower dairy and avocado are more than offset by inflation, primarily in beef and freight, as well as higher produce usage. Relative to our guidance better than expected crop in Mexico. For Q2, we anticipate cost of sales to step up sequentially to about 30% and modest pricing leverage will be more than offset by higher costs across several items, most notably avocados, dairy, We anticipate cost-of-sales inflation to be in the mid-single-digit range in the second quarter, and we'll step down to the low-to-mid-single-digit range in the second half. This results in full-year cost-of-sales inflation of around 4%. Adjusting for 40 basis points, labor costs for the quarter were 25.7%, an increase of about 70 basis points from last year. lower average restaurant sales volumes, and higher benefits expense, including performance-based bonuses, partially offset by the benefit of . We expect our labor costs to be in the low 25% range, with wage inflation in the low single-digit range. Over 15.6%, an increase of about 120 basis points from last year, primarily driven by higher marketing, utility, Marketing costs for 3.4% of sales in Q1, an increase of about 40 basis points from last year, as we increased our marketing spend in the quarter to support menu innovation. We expect marketing costs to be in below 3% of sales in Q2 and for the full year. For Q2, we anticipate other... ...10% range. G&A for the quarter was $204 million on a GAAP basis, or $198 million on a GAAP basis, and $3 million related to net restructuring costs associated with our recipe for growth strategy and certain legal contingencies, and attention and equity awards ran into key executives in August of 2024. G&A also includes 142 $24 million related to non-cash stock compensation, $5 million related to payroll taxes on equity, and $27 million related to our All Managers Conference, which was held in March. We expect G&A in the second quarter to be around on a gap basis, which will include $151 million in underlying G&A as we invest in technology and people. around $30 million in non-cash stock compensation, although this amount could move up or down based on our actual performance. $7 million for 3.1% of sales. For 2026, we expect it to remain around 3% of sales. 5.4% on a GAAP basis and 25.3% on a non-GAAP basis. For fiscal 2026, tax rate to be in the 24 to 26% range, though it may vary based on discrete items. Our balance sheet remains strong. Cash, restricted cash, and investments, and no debt. During the first quarter, we purchased $701 million of our stock at an average of 14 cents. And at the end of the quarter, we have $1 billion remaining under our share repurchase authorization. To close, brand. We are able to invest in the highest quality ingredients, offer accessible price points, and still deliver industry-leading economics. It's very difficult to replicate. Our recipe for growth initiatives further strengthen these advantages by sharpening execution, deepening guest and long-term demand for the brand. With a strong balance sheet, clear priorities, and a team energized to win, we believe Chipotle is well-positioned long-term value for our guests, our teams, and our shareholders. And with that, let's open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. On your phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to... The first question today comes from Danilo Gargiulio with Bernstein. Please go ahead.

I'd like to have a quick clarification on the question. It seems that you have... suggested some encouraging trends also in April. So I was wondering in the early weeks. And the real question maybe, Scott, for you is, you know, very exciting that you're hiring Fernando Machado and of his past broad-based QSL experience, you're expecting him to bring into Chipotle. Thank you.

Yeah, I'll start. So, yeah, it's specific to April. We saw a nice step up in April. Part of it was the Easter shift. You know, Easter was about two weeks earlier than it was the prior. Just cilantro lime sauce. It's really done an amazing job. It's actually outperforming red chimichurri, which was our most popular sauce up until that point. And, of course, the rewards relaunch. So we believe all of those things contributed to a nice step up in April.

Yeah. Hi, Danilo. Thanks for the question. comprehensive search for the exact right individual and we found that in Fernando and I'll tell you beyond his deep global numerous awards and accolades what he has accomplished in his career is really unprecedented and I'll tell you what I admired most was in my car in the earlier conversations we met several times before we made the decision to partner is his thinking of Chipotle his love for the brand his affinity both high-quality fresh food and great culinary. And he's always been a fan, although be it from a distance, of our great brand. He is seen from our advertising historically, and where he would take it to the next chapter, if you will, was groundbreaking for me.

Again, he is an incredible marketer, and he will do well here at Chipotle Mexican Grill. The next question comes from Lauren Silberman with Deutsche Bank.

Thank you very much. I guess if I could just start with, I know there's a lot of noise during the quarter. I'm going to follow up on the comp side. Any color that you can give in terms of how you move through the quarter? I'm really encouraging to hear about the momentum in April. Just any color on what your guide embeds for comp?

Yeah, so I'll kind of walk through and then Scott, please add in. And so starting in January, I mean, we caught up on January in the last call, but just to reiterate, I mean, we saw and it not only drove transactions, but we also saw a double digit percentage increase in double protein and single tacos. And the amazing part about that increase in double protein and single tacos is really sustained even through April. And then we saw the weather impact. You know, at one point, about half of our restaurants were closed, so that was about 100 basis points to the quarter. But then as we rolled around to February, we really saw our trends improve even further, and that was really around the launch of Chicken Al Pastor. And this was the third time that we've had half in our restaurants compared to the first two, so that was really great to see. And then in March, there was a little bit of softening in our trends right around the time where the Iran conflict in April that I talked about earlier on Danilo's question. And so when this kind of rolls into April and how we're looking at Q2, we're really plus 1% range. And that's kind of what our expense line guidance is based on in my prepared comments. And this comp estimate from Chipotle Henny Chicken, which launched yesterday. But we are excited about the momentum that we're getting so far from our Recipe for Growth initiatives. So want to remain cautious on our outlook given the dynamic consumer environment. Scott, anything to add?

Yeah, I think what we should highlight here is what we did was really our ability to engage with our customer base in new ways and drive incremental sales and activate against a broad range of consumers or age groups.

Great. And just a follow-up

I'm outpacing non-loyalty, I believe, in 2025. What kind of growth have you been seeing in membership in recent quarters? And I guess it's focused on bringing in new customers, bringing in lost customers, or trying to drive engagement with the existing membership page. Thank you.

Yeah, I'll jump in here. We've seen about a 25% uplift in new members coming into the funnel. So not only did we widen our main goal with our engagement with existing loyalty members, but what we found is we were able to widen the funnel, bring more users into the funnel, reactivate with some of the journeys that we've talked about historically. And we've made great progress of really redesigning a program, removing the friction in 2025. And the new benefits are obviously the chips and guac welcome offer. Free monthly Chipotle drops. We heard loud and clear. That's what our... To choose their own rewards. We call it rewards on repeat. And they can choose whatever reward and how they want to use their points in the loyalty program as well. The UX features that had friction points in them as well. We're able to simplify the in-app experience. So exchange, wallet, extra.

They're just easier to find and easier to use. Great. Thanks so much.

This question comes from David Palmer with Evercore ISI. Please go ahead.

Thanks. I'm just wondering how this year might play out, and one of the things you seem to be saying here is that by doing more frequent LTOs or you're not only do you get a boost, but that boost sticks around, so the two-year trend gets a lift each time, and that with the comparisons we see ahead of you that comp trends would accelerate from here. Is that your base underlying environment, but is your base case that seeing what you're seeing in terms of the performance of these LTOs that you will see comps climb?

doesn't deteriorate and I have a quick follow-up that's exactly right David and so what we learned through our demand map reef before now is that consumers were looking for menu innovation and they were screaming for greater innovation at a greater frequency and we have done in stage gate processing in our culinary center to solve that challenge evidenced by what you will see here in 2026 and which I think we saw for in the app refresh and relaunch. And then they were looking for culturally relevant marketing, which we've done some of that. Expect to do more of that with Fernando joining here in the next couple of weeks. So I think we're targeting the right ways to activate against the core concerns into our brand.

The other thing I wonder about is how you think about – was around before obviously chicken al pastor and you know honey chicken you know you're bringing them more frequently but they are they're familiar or the stuff that you've done before I wonder to what degree do you feel like doing new new is going to be something on the horizon and I'll pass it on it absolutely is David we have a couple of things that are in process or in test as we

center-of-the-plate protein items we have a few more will test in the back end of the year that will inform the 2027 strategy but that's exactly tried and true favorites occasionally not every time and then pepper in new menu items that will drive interest drive occasion that are on brand exactly the strategy thank you the next question comes from

Please go ahead.

Yeah, thanks. Good afternoon. Adam, could you just... ...components of seems for sales and kind of, you know, what your outlook, at least on the mix side, might be?

Yeah, sure. So... 0.5% transactions were up about 60 basis points, and check was a slight decline, call it about 10 basis points. Price was around MIX was a drag of about 100 basis points to net to that check. And so when you're looking at MIX, it's still driven by lower group size. This is kind of that really high group size that we saw around COVID. And then there's also some other elements in there, for example, rewards when people come in and redeem a free entree, as well as other more recent things that we've done around BYOC. For example, there's a little bit of cannibalization, not a lot. six entrees previously is now only getting one item, so that's providing part of that drag, as well as some of the other menu items like protein. To a smaller extent, but we are seeing people come in during snack occasions to get those items, so that's also putting some pressure on group size. But on the flip side, we are seeing, for example, from the protein campaign, it's providing a nice mix lift as well as sides. I mean, first it was with chimichurri kind of earlier in the quarter, and then And so when you kind of look at these going forward, I would expect mix to be closer to flat in Q2, and that's really thanks to sauce. And then in the second half, it's really going to depend on a few factors, really around LTOs, kind of the protein LTOs and the pricing around that, as well as sauces. So we'll keep kind of – continue to really flush out our LTO strategy for the rest of the year.

Okay, got it. Thanks. Scott, I know you've sort of –

for a while and just renewed focus on that. What, you know, I guess what is it that's specifically, what did you kind of zero in on? And is this just, you know, is deployment something that kind of addresses it best or like are there changes in the stores and how would that show up?

Yeah, it's kind of a broad answer. So I'll try to be brief. We learned last year that the customer was much more discerning on how they spend their cash. And hospitality was a component that more meaningful way than they have since COVID. And so we leaned into it pretty aggressively. Jason Kidd and his team really rallied around this. Deliver not only speed down the line and great culinary, which we do a pretty good job, I'd say a pretty darn good job of that. or treat the guests like a guest in your home. And so we really pushed on it at AMC. The team really bought in, and we saw the manifest in things like better KPIs on staffing, best at model levels we've seen in years, GM turnover, food and GSAT scores that are moving up and to the right. Now, it's not to say we don't still have opportunities in pockets around the country, but all teams and how they've executed in Q1 and how they're leaning into Q2 in a really meaningful way and really driving this idea of great hospitality.

The next question comes from Gregory Frank.

Go ahead. Hey, thanks for the question. Scott, I think you guys have pretty good price Maybe you've had a little bit of a pricing perception issue over the last, you know, year or two. I guess as Fernando's come on board, how much do you want to integrate the marketing message and how much have you tasked him with doing that? And just what could that look like and how important is that to what he's tasked with? Thanks.

I will tell you is we are open to testing many different ideas, and we won't handicap Fernando with historical things. We won't do anything to detract from the overall brand health and brand growth. And I think I've said this many times. I believe we charge a very fair price point. You know, high-quality ingredients, the best ingredients in the world, prepared fresh with classic culinary techniques at a speed and abundance you can't get anywhere else. And so we continue to grow our pricing power by underpricing the industry now for the second consecutive year. as we try to protect or drive demand for our organization. We think it's the right thing to do. We're still a 20% to 30% discount to our family. We need to grow that gap year over year. So that gives us pricing flexibility and pricing power that we could pull that lever at some point, whether that's a better entry-level price point like we did with the high-protein menu at $3.50 for a taco, or test other We're in a couple of weeks in one of our markets where we're testing a happier hour from 2 to 5 with tacos at $2.50. And so to understand where do we have pricing power, elasticity, where may we have a challenged market from a pricing perspective, and what let's us feel like they're not getting good value, they're getting extraordinary value.

The next question comes from Sarah Senatore with Bank of America. Please go ahead.

I guess a data question and then a real question. I know in the past you were talking about softening younger cohorts, also maybe not just lower, but also middle-income cohorts. I guess your comment about engaging customers, are you seeing... the gaps converge there in terms of the transaction growth with those under pressure between those and the rest of your customer base?

Hi, Sarah. Thank you for the question. Here's what I would tell you. Through targeted messaging and really driving culturally relevant moments, we're able to get the younger consumer more engaged with our brand. or over the last year, I should say. And, you know, we're seeing an uplift and an uptick across all ages and all income cohorts for Q1. What levers do we pull to ensure we're being thoughtful about engaging all of those individual cohorts the right way to keep moving the needle? Confidence that is built into our recipe for growth strategy that does just that, and we'll continue to do that for many months and years to come.

the real or non-data question is actually about Europe. You mentioned, you know, seeing some of the highest volumes in terms of opening, recent opening in that region. Our kind of unit economic stand there, or whether it's the AUVs or the middle of the P&L, I think those have been kind of the middle, those have been kind of before you accelerate unit growth. So, you know, any update on that and whether that means, you know, perhaps you're at an inflection start to pick up the pace?

We absolutely are, Sarah. So we're now in the double digit range on margin. New restaurant growth year over year. I'm sorry, 40% return on investment in year two, forgive me. On the new restaurants we're opening, are we on track? But we need to begin to look for real estate in a more meaningful way in central London and in Germany. I think we are released

Thank you.

The next question comes from John Ivanco with JPMorgan.

Hi, thank you. The question is on competition, but I want to go a couple ways with this if I can. You know, on a chain basis, it does seem like a lot of the competition is coming in chicken, Mexican, and I'll just say very broadly, but kind of bowls on a top five. On a local basis, certainly one could make the argument or at least have the observation that it's very much the same, the same type of concept grows. The opportunity to not just think about marketing on a national basis or through the app, but even thinking about competition locally to where different markets would have specifically different opportunities and different needs based on where competition is growing. and I don't know if it's fully related, it did look like to us, at least in our calculation, that new unit volumes may have been a touch light. Timing or other types of factors, you know, that could have influenced that or how new unit volumes were relative to your own expectations on an applied basis in the first quarter. Thanks.

Yeah, I'll jump in here and I'll add and follow up on the second part of your question. We did a deep dive analysis on competition in Florida where our main competitors, albeit they're small today, are growing the fastest. And while we see some of those restaurants opens up near a Chipotle in the first six months or so, it recovers pretty quickly in months six, seven, and eight. Industry trends or Chipotle standard trends from there. So what we're seeing is when one of those competitors trade area, which is helping buoy our restaurant performance long term. And so, you know, obviously we think about competition. I own competition, but as it stands today, it's low levels of impact. As it relates to marketing spend, we know that our marketing work the hardest on the national level. And to bifurcate that spend to attack something locally would be costly.

Yeah, and then to follow up on the store productivity, John. So we're seeing about 80%, which is where we've been the last couple of years. So we're really where we've been trending over the last year. What you're probably looking at is you don't have the details on the cadence. So they may have been pushed a little bit later in the quarter than versus last year. But, no, we're still kind of in that 80% of our comp restaurants in terms of where they're opening at.

Fair enough. That's why I asked. Thank you.

The next question comes from John Power with Citi. Please go ahead.

Hey, guys. Thanks for taking the questions. Maybe starting with Greg's question around value perceptions of the marketplace, I would argue maybe your delivery channel is one area where you get perhaps lower values the in-store experience. So I'm just curious what you're thinking about there with respect to the premium that is currently charged for delivery for an opportunity to improve the value scores.

Hi, John. Yeah, so we did some testing on different across DoorDash and Uber. And people use those platforms in different ways. They primarily use Uber as a discount platform. There's a premium, faster order time, faster delivery time platform. So you have to market on those platforms very differently. Even at an elevated MPI on Marketplace, we're still below our peers in the channel. And so we did see another tick up in our delivery performance last quarter. What I'm most excited about is we surpassed 20% of order our consumers being more discerning on how they spend those dollars and coming to the restaurant to pick up their orders versus having it delivered. And so delivery long-term. We will have Arlie Sisson starting next week, who will take a hard look at our third-party aggregators to see if we have opportunity and really take the learnings from the testing we did last year to inform our go-to-market strategy and

Great. Thank you. And then just maybe on the labor side of the equation, it sounds like you're rolling out quite a few tools at the store level. In the store, the hourly employees become more efficient. I think some of the pushback that I consistently hear from investors is. Curious to get your take on where you think the labor levels at the stores need to settle out if you're kind of fully staffed.

opportunity to invest there I think there's more opportunity to invest if I'm being honest and here's how we're doing that the heat program hours of productivity which we're reinvesting back in the business other initiatives like the Chipotle kitchen things like the GM assistant on the hiring side all those hours are freeing up the manager and freeing up the team to be more efficient and deliver a better team member and we are reinvesting that time back into the business and not taking it out to further bolster the consumer experience which will always last. We're also taking a hard look at our management complement to ensure that we have the right managers covering peak day parts all 14 days of the week. I think we're challenged there today. Jason and his team have put a plan in place that they're executing against today to ensure that we have the every single day and not give up on Saturday and Sunday to ensure we have the best management coverage, which will lead to a better team member, a better consumer. We're making along the way to free up the manager to be more effective, train better, deploy better, and lead to a better customer experience.

Thank you.

The next question comes from Drew North with Baird. Please go ahead.

questions on the margin trajectory and appreciate the color on q2 but as we look further ahead wondering if you have any updated perspective to the second half I know the expectation has been for pricing versus inflation and the gap there to narrow as a year progresses thoughts on how you're thinking about the shape of the restaurant margin or what comp or traffic figure might be needed to see expansion as we

Hey, Drew. So you're right in the sense that kind of the first half of the year is when margins are going to be under the most pressure on a year-over-year basis. I mean, the price that we're... ...9% compared to inflation is kind of in that mid-3% range, so that's providing the majority of that dislocation. As we get... ...is going to drop down a bit, mostly because we'll start to lap kind of the elevated beef prices from the year before, and we'll continue to see... approach that we're going forward with. So I would expect towards the end of the year for that dislocation to be, you know, minimal based off the going forward, you know, at that point and going forward, really the flow through on being able to get margins higher is going to come through our usual strategy of just utilizing and getting margins higher through incremental transactions.

That's helpful. Thanks, Adam. And

We're seeing from the high-efficiency equipment package in early days. Scott, I know you mentioned the hundreds of basis points of comps outperforming. Is it widened versus control for some of the early restaurants with the equipment? And maybe just how to think about the pace of rollout through the year. Thanks.

Yeah, and what we're seeing right now is outperformance on throughput, taste of food, OSAT. in those restaurants, and that ranges from 200 to 400, depending on the restaurant, I will tell you. We are at 600 restaurants a year end. This quarter, I think we're at 35, 30 installs per week. We're going to move to 45 installs per week here. We are going as absolutely quickly as we possibly can, but doing it in a responsible way where we don't have to close restaurants to get on these installs to ensure we don't affect the business, and then make sure we do it the right way where the teams are trained correctly to use the equipment. It does require some level of training, and it takes the team about a month, if you will, to really get up to speed on how to use the equipment most efficiently.

I think we can get the full portfolio done at some point late 27, early 28.

The next question comes from Chris O'Call with Stiefel. Please go ahead.

Thanks. Regarding the heat package, how long does it take to see the same store sales improvement that you're experiencing in these test stores?

About two months, Chris. So it happens pretty quick. It takes about a month to really get proficient, and then a month to kind of hit your strides. Some pretty material uplift in the business.

Okay. And then the marketing spend grew, I think, 22% in the first quarter and in the fourth quarter. While you've seen positive inflection in comps, the marginal lift relative to that level of investment appears, you know, obviously a little modest. So, are you seeing a strong enough conversion trend to justify maintaining this level of marketing?

Yeah, I mean, I'll start and then Scott definitely add in. we're spending especially around supporting for LTOs is we're getting some really good returns on you know that incremental spend as well as well as you know some of the more Chipotle's as we call them around the tattoo BOGO and some of the other things and so we measure them individually and really ensure what you're seeing to though with that incremental spend is there is still some noise especially when it comes to consumers and and kind of what we're up against and so we're But the team does a phenomenal job of really looking at each individual investment, assessing and determining where we go from there.

Yeah, I think it's a tail, right? So as you think about marketing spend, your goal is sales overnight and brand over time. So there's a component of it that is really driving. There's another component that is brand building, which will serve you well for many years to come. And so as long as we look at the return on ad spend as being

which I think is the right way to view it, we'll continue to incrementally spend there. Okay. Thanks, guys.

This is from Andrew Charles with TD Cowan. Please go ahead.

Great. Thank you so much. Adam, I want to ask you about the bill. The bill is up one relative to 1Q's 50 base points increase. It's commensurate with the 50 base points step-up in price quarter over quarter. You also caught versus down 1 and 1Q. So I'm curious why 2Q is embedding a 50 base points traffic decline versus what you saw with 1Q. How do you categorize 2Q guidance as similarly conservative to the full year 26 guide?

Yes, I mean, I think what you're picking up there is right. Like I said earlier, on the increase that we expect to get, not only from Chipotle Honey Chicken, which launched yesterday, but some of the other initiatives that we have planned, just given especially with the conflict in Iran and gas prices. And so we're going to remain cautious on that outlook, but we believe that there's upside from there.

That's helpful. And then, Scott, I wanted to follow up. You know, the Sustainability Report published earlier this week, it indicated a large pickup in hourly turnover in 2025 following three years of declines. What drove this? And can you talk a little bit more about the plans in place to improve throughput in 26 outside of heat, you know, leading to a faster experience?

Yeah, so the first part of the question, 2025, I believe, was just an anomaly as sales decelerated, which I hate to talk about, as you can imagine. There were fewer hours, which drove some attrition. And then this new focus on hospitality caused us to give a hard look at the employees we have in our restaurants and which ones were naturally friendly and have a natural inclination to smile and take care of our guests. And so we had to make some hard decisions there. I'm happy to report Q1, we're back to our historical low levels again. of turnover, so I know we're on the right track and we're back where we need to be as it relates to turnover. And what was the second part of your question, Andrew? I'm sorry.

No, you hit it. That was it. I was just wondering, you know, what drove it and what you're doing to fix it.

Okay, perfect. Thank you.

Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Scott Boatwright for any closing remarks.

Thank you, everyone. We're pleased with the results in the quarter. As you can imagine, showing progress and reinforcing that our recipe for growth strategy is working and driving traffic across all income cohorts. I want to leave you with the ideas that we're building on a strong team with the addition of a new chief brand officer and chief digital officer. We expect our initiatives to continue building throughout the year and have transactions improve as innovation on ideas like heat, group occasions, rewards, and restaurant execution scale over time. And we'll continue to lean into what makes Chipotle great. Great hospitality, generous portions, great culinary, and great throughput. And with that, I just want to say thank you to our teams out in the field that really do the hard work for us and the heavy lifting in this brand for all that they do to make our brand great. And I wish everyone a good day.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.