Mark Alexee - Manager, Investor Relations Steve Ells - Chairman & Co-Chief Executive Officer Montgomery F. Moran - Co-Chief Executive Officer, Secretary & Director Mark Crumpacker - Chief Creative & Development Officer John R. Hartung - Chief Financial Officer.

Brian J. Bittner - Oppenheimer & Co., Inc. (Broker) Nicole M. Miller Regan - Piper Jaffray & Co (Broker) David Palmer - RBC Capital Markets LLC Jeff D. Farmer - Wells Fargo Securities LLC John Glass - Morgan Stanley & Co. LLC Sharon M. Zackfia - William Blair & Co. LLC Jeff Bernstein - Barclays Capital, Inc. David E. Tarantino - Robert W. Baird & Co., Inc.

(Broker).

Good day, everyone, and welcome to the Chipotle Mexican Grill Fourth Quarter and Year End 2015 Earnings Conference Call. All participants are now in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. As a reminder, today's call is being recorded.

I would now like to introduce Investor Relations Manager for Chipotle Mexican Grill, Mr. Mark Alexee. Please go ahead, sir..

Thank you. Hello, everyone, and welcome to our call today. By now, you should have access to earnings announcement released this afternoon for the fourth quarter and full year 2015. It may also be found on our website at chipotle.com in the Investor Relations section.

Before we begin our presentation, I remind everyone that parts of our presentation today will include forward-looking statements as defined in the Securities laws.

These forward-looking statements will include statements about our plans to enhance our food safety program and the cost and effectiveness of those enhancements; projections of the number of restaurants we intend to open; statements about our potential to recover lost sales; planned marketing programs and future restaurant margins; projections regarding food, labor, marketing, occupancy and G&A costs; statements about stock repurchases and future profitability and growth; as well as other statements of our expectations and plans.

These statements are based on information available to us today and we're not assuming any obligation to update them. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statement.

We refer you to the risk factors in our annual reports on Form 10-K, as updated in our subsequent Form 10-Q for discussion of these risks. I'd like to remind everyone that we've adopted a self-imposed quiet period, restricting communications with investors during that period.

The quiet period begins on the first day of the last month of each fiscal quarter and continues until the next earnings conference call. For the first quarter of 2016, it will begin March 1 and continue through our first quarter earnings release planned for April 26, 2016.

We'll start today's call with some prepared remarks and we'll take approximately 20 minutes of questions. On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer; Monty Moran, Co-Chief Executive Officer; Mark Crumpacker, Chief Creative and Development Officer; and Jack Hartung, Chief Financial Officer.

With that, I will now turn the call over to Steve..

preparing tomatoes, lettuce and bell pepper in central kitchen and blanching certain produce items including avocados, onions, jalapeños and citrus in our restaurants before they are used, and a new procedure for marinating chicken and steak, which now happens distinct from and after the preparation of other fresh items.

We're also marinating chopped onions, jalapeños and cilantro in citrus juice when we make salsas and guacamole. This process brings out more flavor from these ingredients and adds another measure of food safety. And third, we have an enhanced crew training program to be sure all of our teams understand all of the facets of our new food safety program.

Through education about food-borne illness and explaining why we have made these changes, we can assure that we are empowering our employees to carry out all of these new protocols.

While individual elements of this food safety program stand on their own as risk mitigation steps, it's the combination of multiple layers of mitigation that provide us a high level of confidence in our food safety enhancements.

The comprehensive nature of these enhancements is designed not only to address our ingredients and preparation procedures, but also to offer redundancies that will improve food safety and help Chipotle become an industry standard in this area.

Of course, none of the changes affect our commitment to Food With Integrity, and we'll continue on our quest to find more sustainably raised ingredients including responsibly raised meat, organically grown produce and pasture-raised dairy, and we'll also expect to continue our local produce program when the local growing season returns this spring.

We've established Chipotle as an industry leader by focusing on doing a few things very well.

It starts by buying high-quality raw ingredients, preparing them using classic cooking techniques and serving them by friendly people in an interactive format so every customer gets exactly what they want, and by creating a unique people culture where top performers are empowered to achieve high standards and can deliver an exceptional and compelling customer experience.

And now with our enhanced food safety program, we are poised to emerge stronger than ever before. Ultimately, we believe that this is what is best for our company and our employees and our shareholders. I'll now turn the call over to Monty..

serving amazing food and empowering others to achieve high standards. And now, the CDC has confirmed that this incident is behind us and resolved, which helps to serve as an all-clear signal to our customers that may've been hesitant in recent months.

On our end, we will make sure our teams are ready to deliver an exceptional dining experience to each and every one of our customers when they return. I'll now turn the call over to Mark..

Thank you, Monty. Based on an expectation that the CDC would likely declare the E. coli outbreaks over during the first week of February, many of our marketing programs are teed up to begin next week. Our marketing activities include both proactive PR communications and traditional marketing programs designed to increase customer visits.

Before I discuss the marketing activities, I'll provide an overview of our current customer research. Starting November 1, we have been running both daily and weekly research studies in order to keep close track of customer awareness and perception.

Not surprisingly, consumer awareness of the issues we have been dealing with for the last few months is high. Our most current research indicates that 63% of Chipotle customers and 60% of fast casual diners in general are aware of the food-borne illness issues at Chipotle.

Of those who are our customers and who are also aware of the issues, right around 60% have indicated that it would cause them to visit less. While this research data's obviously not good news, our weekly data for the last two weeks is encouraging as it indicates a leveling off of what was a downward trend that started in late October.

We have seen a leveling off and in some cases a slight increase in consideration, admiration, first-time visits and date last visited. This is good news as our customers are indicating willingness to return to the restaurants.

We are confident that with the news yesterday from the CDC and our ongoing efforts to communicate all the changes we've implemented at Chipotle, that we will see steady improvement in customer sentiment.

And our research also indicates that once consumers are aware that food safety issues have been resolved, that many of them will come back into our restaurants. Beginning next week, we are launching a variety of marketing programs designed to invite our customers back into our restaurants.

This effort includes a large traditional advertising campaign that covers all of our major markets with outdoor, radio, print and digital advertising. This campaign is the largest in company history, and this current wave is scheduled to run from February through the end of June.

The creative for this campaign with one small exception does not mention food safety or the recent incidents. Instead, it reinforces our commitment to high-quality ingredients and great tasting food.

In addition to traditional advertising, we're launching a large direct marketing campaign using traditional direct mail, mobile and social marketing platforms. Again, this will be the largest direct marketing effort in the company's history.

The direct marketing efforts begin on February 8 and will continue through May, with the last expiration date being May 15. Other promotions including a Big Game catering promotion and a digital game called Guac Hunter will also be occurring during this timeframe.

While most of these activities are focused on Q1 and Q2, we will, of course, be marketing throughout the year. We will use the response from these initial efforts to determine specific plans for the second half of the year. We will also continue with our Cultivate Food and Music Festival series.

This year the festivals will be held in Phoenix, Kansas City and Miami. Our marketing spend for the first half of the year will be significantly higher than previous years. And as we develop plan for the second half of the year, we also expect increased marketing costs for the full year.

In addition to our advertising and direct marketing efforts, we are continuing with proactive communications designed to ensure that our customers are confident that it's safe to eat at Chipotle. On February 8, we're launching a new food safety website which outlines all the steps we have taken in order to make our food as safe as possibly can be.

The site also reaffirms our commitment to Food With Integrity. What is most important is that we have implemented a comprehensive food safety plan. And now that the recent CDC investigation is behind us, we are confident that our aggressive marketing and communication will help welcome many lapsed and new customers into Chipotle.

I'll now turn the call over to Jack..

reduced bonuses, which were $17 million in 2015 lower than 2014; and lower stock comp of around $18 million, primarily as a result of re-valuing the three-year performance shares granted to executives in 2015.

We will also have additional costs in 2016 related to our all manager conference in the third quarter of $11 million, along with normal growth in G&A to support our growing restaurant base. We will continue to invest in our future growth today, but once our sales are fully recovered, we would expect future G&A to grow at a slower rate than sales.

Overall, 2016 will be a year of significant investment to ensure our food is safe and to encourage our customers to return to Chipotle. Margins and earnings will be significantly affected as we make these important investments.

But I'm still confident that as we recover sales, over time, we can also fully recover our margins and our earnings capabilities. Given the continued volatility of our sales trends, it's impossible to provide any meaningful outlook for sales comps or margins for the full year 2016.

If appropriate, we will provide interim updates on sales trends as we have done with our two previously filed 8-Ks. While we cannot predict the magnitude and timing of our sales recovery, we can provide some perspective on the impact on margins at various comp levels.

For example, when comps are down 30%, the combined impact of deleveraging, along with the added marketing and ongoing food costs, food safety costs I talked about earlier, would result in expected restaurant level margins in the low double-digit range.

If comps were to recover to down 20%, we would expect restaurant margins in the mid teens to high teens. And if sales fully recover, we would expect restaurant margin to be in the mid-20% range, as we would recapture the margins related to deleveraging, but still be funding the higher costs of the food safety programs.

Of course, our margin recovery will lag our comp recovery as we don't plan to be highly efficient in managing labor and the rest of the P&L while our primary focus is welcoming and delighting our customers. So this should give you a general idea of how the recovery might unfold.

Specific to the first quarter, which will represent a significant investment in our future, when you combine the rough start in comps so far in January, the higher marketing and promo investment, the higher expected investment in labor to wow our customers, the fully loaded ongoing costs for our food safety program, the cost of hosting our all-company meeting, and the higher G&A, it is likely we will post an EPS that is around break-even for the quarter.

Q1 is clearly a heavy investment quarter, and if these investments pay off with a steady recovery of customers, the second, third and fourth quarters will improve dramatically. Also for the full year, we anticipate our effective tax rate to be around 39%, slightly higher than the 2015 tax rate of 38.2% due to slightly higher state taxes.

We continue to be opportunistic in repurchasing our stock. During the fourth quarter, we repurchased $338 million of stock at an average share price of $556, with more than $200 million purchased in the month of December alone at an average price of $527.

During January, we purchased an additional $238 million at an average weighted price of $440 per share, even though January had two less trading days than December. As of January 1, we maintained slightly over $1 billion of cash and investments, which means we continue to be in a position to opportunistically repurchase stock.

And today we're announcing that our Board has approved an additional $300 million of share repurchases, bringing our total life-to-date authorization to $1.9 billion. As of January 31, including the new $300 million authorization, we have $478 million remaining to repurchase stock.

What's most important right now is that we remain focused on executing our food safety protocols and enticing customers to come back to Chipotle and enjoy terrific meals served by enthusiastic teams.

We continue to believe in the strength of the Chipotle brand and the opportunity to return to an industry-leading economic model, which we know has the potential to create significant value for our shareholders. Thanks for your time today, and we'd be happy to open the line for questions you may have..

And we will hear first from Brian Bittner with Oppenheimer..

Thank you. Thank you very much. As we think about the ability for you guys to get back to the average unit volumes that you were at before the incident, I think it'd just be helpful for all of us to know how you think about your customer base.

Meaning, what percentage of your sales volumes before the incident did you see from very heavy customers that you think are going to be much easier to reel back in, versus what percentage of your sales volumes were from much less frequent customers that that you may see as much more difficult to get back?.

Yeah, that's a good question. We break our customers into five frequency bands. We call them new or lapsed customers, light, medium, heavy and what we call our top loyal customers. Our top loyal customers are the ones that come 25 times or more a year.

When we look at the research, we actually saw a falloff in both the top loyal and the new customers, which isn't unexpected with regard to the new customers, they're not as familiar with the brand. We saw a small drop off in that top loyal, so it is definitely one of the targets that we're going after with our proactive communications.

They tend to be people that we can communicate with relatively easily via social media, and many of them are part of our mobile and email marketing databases. So we're definitely going to be targeting them. That group of people can represent up to 20% of our sales, so it's a very important part of our group.

And so what I'll say is we're going after them. We also expect, though, as part of our overall advertising program, that we're going to get new customers. There are still plenty of people who have never been to Chipotle in the United States, and we're going to invite them in, too.

So we're going after both that very loyal group and brand-new customers as well..

And, Jack, just to clarify what you said. So if you get back to your AUVs pre-incident, are you saying we should expect kind of a mid-20%ish type restaurant margin? (31:42).

Yeah, I think we would get back to our full – our high 20% margins – 27%, 28%, something like that except for the cost of our ongoing food safety program. And that would be a couple hundred basis points..

Makes sense. Okay, thank you..

Thanks..

Next we'll hear from Nicole Miller with Piper Jaffray..

Thank you. Good afternoon.

Can you talk about how the employees are feeling? I know you're going to talk to them next week, but is there any increased turnover as they're concerned about what they're experiencing in the store?.

Yeah, Nicole. Just reviewed those numbers recently, and there's not increased turnover in any significant way. So in fact most of our turnover numbers, especially for our hourly managers and salaried managers, have been declining over the last few months and they seem to continue to.

And just having spent a lot of time in the restaurants with our teams and having spoken with our executive team directors and restaurant support officers, all of us are seeing the same thing, which is that our employees are really, really enthusiastic, they're excited to be implementing these new food safety procedures, they're proud of what they're doing, they understand that these things make sense and they're doing a fantastic job.

And they're keeping their heads very, very high. They're also excited now that the CDC has called this thing over and that they can begin to look forward to building the restaurants back to where they had been before and to really delighting these customers as they come in.

So we're seeing that our employees are super-enthusiastic, very understanding of what we're asking them to do and very, very competent in getting it done, even though we've made quite a few changes in a pretty short period of time. So we're very, very proud of our restaurant teams.

And I've received loads of emails from managers and hourly managers and crew out in the field who are just offering, hey, what else can we do, and offering words of encouragement and thanking us for the culture we've built.

And so it's just, it's surprisingly and I guess sort of wonderfully optimistic, and so we're very proud of that, and we think that that's going to be a great base upon which to continue to rebuild to where we know we can be..

That's very helpful. Thank you. And then just a final question. Is there any comment you would make about February and March prior-year same-store sales compares relative to January, and would you be willing to call it the weather impact in January? Thank you..

Yeah, Nicole, not in terms of specific numbers, but I will tell you of the three months last year, January was the toughest comparison, so it's nice to have that behind us. It's nice to have the CDC call their investigation over.

It's nice that we're on the cusp of having a lot of marketing and PR, and this company meeting, which we think will result in a really excited and motivated group. So we've got things now on our side. It's been a tough couple of months. And so with all of that, including the weather comparisons, we're optimistic about what the next few months hold.

But in terms of specific numbers, what we'll do is we'll probably continue to update on a mid-quarter basis just because things have been so volatile, and so expect some updates throughout the quarter as things unfold..

Thanks. Appreciate it..

Thanks, Nicole..

Thanks, Nicole..

Our next question comes from David Palmer with RBC Capital Markets..

Thanks. Good evening.

Could you comment a little bit about that investigation? What is the nature of that, and just what are they looking for? And then separately, with regard to the direct marketing campaign, could you talk about perhaps what messages will be in there? I would assume some messages about safety, and then I would also imagine value being part of that.

Thanks..

Yeah, David, there's not much to say at this point about the investigation because we just don't know tremendously much about it, but basically, there is a statute in California dealing with essentially selling adulterated food or selling food that can be harmful.

And because of that statute, the United States Attorney for the Central District of California has opted to undertake an investigation. And obviously, we're cooperating with that investigation and providing all the documents that they'd like to look at and I think they're just wanting to make sure that everything we did was on the up-and-up.

And I think that obviously we're confident that at the close of such an investigation, that's what they found. And I'm sorry, it's a federal statute under which that investigation is taking place..

And with regard to the direct mail – or the direct marketing campaign, there are a variety of different messages. None of them actually include messages about food safety. The messages on both the printed version of direct mail as well as the mobile direct marketing are really about taste and quality.

And the messages with regard to food safety are things that we drive out through PR communications and on our owned channels like our website and the new food safety website that I said that we were launching earlier in my prepared statements. So, the direct marketing is very much about delicious and wonderful food.

It's very similar to what we've done in the past in that regard. And it's proven to be very effective for us at driving traffic in the past. Now we don't know of course exactly how these incidents will impact redemption on these things, but given how successful they've been in the past, we're confident that they're going to drive substantial traffic..

Thank you..

Our next question will come from Jeff Farmer with Wells Fargo..

Thanks.

Jack, you called out that 36% same-store sales decline in January, but can you provide detail on how the quarter progressed?.

Well, the month, Jeff, of January, I wouldn't say there's anything meaningful within the various weeks. There were some highs that were in the high 30%s, there were some lows in the lower mid-30%s.

A lot of that was driven – like the one that was in the high 30%s or even 40% was driven – well, it was during a time when the weather was really bad in the Northeast and so I'd say that was weather-driven. So there's nothing during the quarter that would say there was a progression.

I would say that we kind of held in that kind of mid-30% negative range throughout most of the month if you were able to exclude the weather because we were in the press a lot.

There was a high awareness a lot, and that's why we're so anxious for the CDC to call this over so we can put it behind us and we can start talking about what we've done in a productive way so we can invite customers in and put it all behind us. So there is no progression either up or down other than weather that I would point out enter January..

Okay. And then just one more. In mid-November, you reopened the 43 restaurants across Oregon and Washington State.

And more from a case study perspective, I'm just curious from the early marketing strategies you guys chose to pursue in those really early days, actually, so what were they and did they get customers back in the restaurants, and what lessons, if any, did you learn that you can bring with you as you move into sort of this next phase of getting these customers back in the restaurants?.

Well, there wasn't a whole lot of marketing per se that we did with regard to the initial closures. The primary effort there were letters from Steve to our customers published in newspapers across the country. We actually did that twice during the course of this.

And we saw, actually, after the initial reopening of those restaurants that you mentioned and the subsequent publishing of that letter a nice recovery of our customers. Unfortunately, the nature of the E.

coli outbreak was different than we expected and we saw additional cases creep in over the following weeks and subsequent eight additional announcements by the CDC of additional cases here and there. And so, that combined with the norovirus outbreak in Boston, was sufficient to cause people to have general sort of lingering doubt.

And that's really where we stand now and we're seeing that subside a little bit, but a lot of our customers took a wait-and-see approach, and so to the extent we learnt anything from those is that being transparent and honest with our customers works.

What we need to do, though, is make sure that they are completely confident that it's safe to eat at Chipotle, which it is, and so that's the primary effort that we're making with regard to communications right now is just for those customers who don't yet know it's safe, we're trying to make sure that they do..

Thank you..

And from Morgan Stanley, we'll hear next from John Glass..

Thank you. Jack, I wanted just two cost questions. One is on the G&A for 2016. I'm sorry if I missed it.

Where are you pointing us toward if G&A was $250 million I think for 2015? Did you say it was $60 million higher net of anything or what is the right number, as you look at it?.

$65 million higher. Yes, John, it's going to be in dollar terms $65 million higher. And in my prepared comments, which hopefully you picked up on those, there are number of discrete things that are happening that are causing the majority of that, and when you look at the underlying non-discrete growth, the growth is relatively modest.

But overall when you take into account kind of the fact that we had some pretty extraordinary performance-based adjustments in 2015, we'll have the All Managers Conference. Overall we expect to see G&A go up by $65 million..

Okay. That's helpful. And then what is nonrecurring in the first quarter? That's a fairly significant decline. I appreciate there's a lot of things going on.

How much of what you would say in the first quarter is nonrecurring in nature, consulting or whatever else?.

I don't have a great number on that, John. I'll be able to do a better job of telling you that as the quarter unfolds.

I think the best thing to take into account is when I gave the various what we think the margins will be, I tried to take into account some sloppiness, either inefficiencies or some kind of one-time costs, even though it's hard to pinpoint exactly what those one-time costs are now.

The biggest single impact that we're going to have on our margins is going to be sales recovery. And so if we recover say 20%, for example, we can have margins in the high-teens. In terms of the single biggest thing that's going to hit the first quarter is going to be promotion and marketing. That's going to be 6%. So 6% of sales.

And that will be a lot, lot, lot higher than we spent in the past by four times in terms of percentage of sales and 3.5 times in terms of dollars that we spent last year. That's going to be the single biggest non-recurring.

Other than that, there's going to be little nonrecurring things here and there that it's hard to get a handle on right now, but I'll be able to tell you guys as we close the quarter about what some of those non-recurrings are in our first quarter release..

Okay. Thank you..

And our next question comes from Sharon Zackfia with William Blair..

Hi. Good afternoon. Question on the marketing....

Hi, Sharon..

I know historically you've talked about marketing as a percent of sales, which you did today. But it's a little hard on our end – probably on your end, too – because you don't really know how the cadence of sales will progress throughout the year.

So I was hoping maybe you would talk about the marketing plans in dollar terms for the first quarter and the full year? And then I'm just curious as to – I think you've said in your research the Northeast and the West Coast have been hit harder in terms of consumer response.

I was wondering if you were going to disproportionately target some of the areas where you've seen more of that pushback from consumers?.

Yes, Sharon, during the first quarter and during January as well, we did see the Northeast and the West Coast hit the hardest. And to give you an example, for the fourth quarter, the overall comp for the company was a negative 15%.

And the Northeast and including mid-Atlantic those comps were down in the high-teens, and the rest of the country – so you're talking about the middle of the – and the West Coast as well – was down in the high-teens. The rest of the country was down more in the low-double digits.

So there wasn't anybody that was down like double company average and somebody was down half. It was a relatively tight range, but there was definitely – throughout the quarter and into January – more of an impact on the West Coast and in the Northeast.

In terms of Q1, just to give you a rough idea on dollar terms, Sharon, we'll spend probably around $50 million in combined marketing and promo. Now that's an estimate on the promo side, because we're guessing as to what the redemptions will be. So that number will vary depending on how many people come in and want to redeem their offer.

I hope to be able to come back and tell you that that cost is a lot higher because a lot more people redeemed their offer, because that means they're willing to come back to Chipotle, they trust Chipotle, and we have a confidence level, if people will come in for the offer, that they'll come back afterwards knowing that it is safe to visit Chipotle..

Okay, great. Thank you..

Thanks, Sharon..

And moving on, we'll take a question from Jeff Bernstein with Barclays..

Great. Thank you very much. Two questions, just one on the sales recovery. I can appreciate when you mention it's hard to predict and you gave us good sensitivity in terms of where the margins would fall out.

But how would you directionally define a successful or reasonable recovery? How do you see that playing out? Is it just time is going to heal all this and you'd expect trends to just sequentially improve every quarter through the year? Or how would you look back and say, you know what, that's what we kind of expected in terms of pace of recovery?.

You know, Jeff, it's really hard to predict. When we looked at other events, other companies that have gone through something like this, the recovery typically takes four or five quarters or so. We know that there are things that are different than what happened in previous cases.

For one, we've had a couple instances here, so that kept us in the news a lot longer. Secondly, the news travels faster. There's a lot more chatter on social media, and so the word really traveled fast. Sometimes accurately, sometimes inaccurately. And so we know that there are differences that might make this a little tougher.

Our main objective was to – once we had an event that signaled that this was over, and we now have that in hand – to be very aggressive to invite customers in. And we're doing that. Mark talked about that.

We're spending a lot more money on marketing and promotion than we've ever had before in dollar terms and in percentage of sales terms than we ever have before. We're telling our teams to staff their restaurants as if the steep recovery is coming for sure, so that when the recovery comes, if it comes a little slower, we'll still be ready.

And so our main objective is to be aggressive with bringing customers in, being ready for when they come in and we're hoping that that will accelerate the recovery. If it took four or five quarters, as it has in other instances like this, I think that would be a fair way to think about it.

But we won't know until the recovery starts and then we'll share with you the cadence as it happens..

Understood. And then just your comment on there's finally some closure with the CDC signal yesterday. It sounds like there's no longer any trace of it, but it's still a struggle in terms of the certainty on the cause.

So I'm just wondering with that kind of as an open-ended item, like, how do you respond or how do you advise your existing suppliers who maybe are looking for guidance on proper food safety to avoid incidences similar to this in the future? I'm guessing you would've preferred if the CDC had totally identified what the cause was.

Like with this ambiguity now, how do you think about that going forward as suppliers look to make sure of their food safety measures going forward?.

Well, so because we don't identify the item that caused the E. coli, we have gone to all of our suppliers, especially the suppliers that have high-risk items, meats and produce, and have implemented high-resolution testing as laid out by Dr. Samadpour, who we brought on board right after the outbreak.

He is very familiar with these types of cases and has put in an extraordinary testing procedure. So we test a lot of our high-risk items.

Those items that can't be tested, like whole avocados, whole onions, things that we bring into our restaurant, we've put in place a blanching procedure which actually is boiling these items in water for a brief period of time, five seconds, which destroys any microbe that might be on the surface.

So even though we haven't identified the specific item, all of our items now that are high risk go through either this testing or this blanching kill step. And we think now Chipotle is much safer than it's ever been, and this really puts us in a position to be industry leaders in terms of food safety..

Understood. Thank you..

Thank you, Jeff..

And we do have time for one additional question today, and that will come from David Tarantino with Robert W. Baird..

Hi. Good afternoon. My question's on the unit growth outlook. And this year, no change in the outlook, I assume, because your pipeline was fully set.

But I guess the big picture question is, why not slow down a little bit while you're getting your arms around some of the food safety issues, and perhaps defer some of the openings so that you can make sure the quality of the existing unit execution is good versus continuing to charge ahead on the unit openings?.

Sure. Great question, David. I would say, first of all, though, that we have implemented this extraordinary food safety program. And that is up and running and the teams are executing it very, very well. We expect that we're going to bring our customers back.

And we would not want to be in a position where we slow the pipeline for 2017 finding that our sales have recovered and then not have the opportunity to satisfy the demand as we have had in years past. So we feel it's prudent to stay on course with our existing plans of expansion..

Also, David, right now we have the very best ratio of field leaders to restaurant managers and restaurants that we've had for quite some time. So we have the leadership. We have the managers to run these restaurants really, really, really, really well. And so our real estate people are out filling that pipeline, doing a great job finding real estate.

We have the managers to run those restaurants. And if we thought that slowing down growth would help us to implement the food safety procedures that we have implemented, we would do so. But the reality is, we have a lot of confidence that that implementation has gone really well and will continue to go really well over the coming months..

Yes. Hey, David. This is Jack. Just to add something to that. What you're talking about here is execution risk. Are we taking additional execution risk by opening up stores while implementing these procedures? A lot of the procedures are not happening in the restaurant, meaning the testing is happening outside the restaurant.

So a lot of this food safety program is designed to prevent anything unwanted from ever getting into the restaurant. We're doing that by testing or we're doing that by doing some of the washing and some of the prep in a central kitchen, so it's guaranteed that nothing will get into the restaurant.

And then the procedures that are in the restaurant, they're not subtle in terms of whether they are done or not. What Steve talked about with blanching, if you blanche for just a matter of a couple seconds in boiling water, it's an instant kill step. So it's not like you're relying on some kind of complex procedure or new process in the restaurant.

It's a very clear step that, when followed, it is going to make each ingredient absolutely safe. And so the execution risk in terms of opening up new restaurants is very, very low. If there was execution risk, we absolutely would do something to make sure we would reduce that execution risk.

But we feel really good about the way the teams are handling all these procedures so far..

Great. Very helpful. Thank you..

Thanks, David..

And that will conclude the Q&A session for today. I will turn it back over to our speakers for additional and closing remarks..

Thanks, everyone, for joining the call today. We will be participating in the Bank of America Consumer Tech Conference in mid-March in New York, and then we anticipate speaking with you next during our first quarter conference call on April 26. Thank you so much..

Ladies and gentlemen, that will conclude today's conference. Again, we thank you all for joining us..