Chipotle Mexican Grill, Inc. (CMG)

Investor Update

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Dec 12, 2016

day, and welcome to the Chipotle Mexican Grill Incorporated Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mark Alexei, Investor Relations Manager for Chipotle Mexican Grill. Please go ahead. Thank you, Kevin. Good afternoon, and welcome, everyone, to today's call. Before we begin our presentation, I will remind everyone that our discussion today may include forward looking statements as defined in the securities laws. Forward looking statements are based on information available to us today, and we are not assuming any obligation to update them. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the forward looking statements. We refer you to the risk factors in our annual report on Form 10 ks as updated in our subsequent Form 10 Q for a discussion of those risks. Today, we are joined by Steve Ells, our Chairman and Chief Executive Officer Jack Hartung, our Chief Financial Officer Mark Krumpacker, our Chief Marketing and Development Officer and Kurt Gardner, our Chief Information Officer. This afternoon, we are going to share with you details about the leadership change at our company and briefly outline some of our plans going forward. After that, we will open the call up for questions. But before we get started, I'd like to reiterate that we will not be providing any update to our Q3 financial information, nor will we be providing new financial details about our recovery in the Q4 to date. We are scheduled to report Q4 and full year results in late January or early February. With that, I'd like to turn the call over to Steve. Thank you, Mark, and good afternoon, everybody. I know this call is last minute, so I really appreciate your time today. Those of you who know me already know that I'm a very detail oriented person with very high standards, and this is so true that many of you would describe me as a perfectionist. Given the performance of our company over the last year, you can probably guess I'm not entirely pleased with the way things have been going. It's been an incredibly tough year for our company, and our wonderful teams have been working tirelessly to drive the recovery of our business. Nevertheless, not satisfied with the pace of recovery, and I'm especially not satisfied with the guest experience in many of our restaurants. But I'm not here to dwell on how dissatisfied I am. I'm here today because Chipotle can be as successful over the next 23 years as it was during the 1st 23. I'm here because I believe in our company and in our teams. I'm here because I believe in our mission to bring better food to more people across the country, and I'm here to accept responsibility for allowing our simple business to become overly complex. I'm here because I'm committed to do whatever it takes to ensure the success of this company. I'm committed to our 65,000 employees, to our independent ranchers and farmers, and to our suppliers, our partners and our shareholders. Above all, I'm committed to our millions of loyal customers who have seen something special in Chipotle and stuck with us through thick and thin. When I opened the first Chipotle 23 years ago, potential customers would walk in expecting what they normally saw in a typical fast food restaurant. They didn't understand the open kitchen or the line where they created their own order, so they would turn and walk out, not have to literally chase them down the sidewalk and offer to buy their lunch. Chipotle was something entirely new. We broke the rules of fast food by serving fresh food prepared for hours and hours by hand, but served very quickly. Over the years, people became comfortable with that and what we were doing. In fact, they became obsessed. Chipotle became successful beyond my wildest dream and I'm incredibly grateful to everyone who has been a part of that. But last year, everything changed. People suggested that perhaps we took our eye off the ball or that we grew too fast. They suggested that perhaps we should have seen it coming. No matter what, the events of last year exposed some weaknesses that our momentum in earlier years may have masked. Of course, we expanded our food safety program, and I'm very proud of what we have accomplished. Our food is safer and more delicious than ever. Our new procedures are now part of our DNA, and I'm thankful to our wonderful restaurant teams for that. But the last year also revealed that running our restaurants has become overly complex. It's ironic really because Chipotle is such a simple idea. We have a simple menu of salads, tacos, burritos and bowls. The idea was to focus on just a few things and do them really, really well, and we did that. But over time, we started to make running our restaurants more and more complicated. And on occasion, we lost sight of what really mattered, our customers. More specifically, we created so many distractions for our managers and crews that we were left with too little time to focus on delivering a great guest experience. I know this has been frustrating to the teams in our restaurants, and I take responsibility for allowing this to happen. I understand what it takes to deliver a great experience in our restaurant. I understand the frustration our teams must be feeling as we layer on more and more tasks that are not part of serving safe, delicious food in a welcoming environment. I owe it to our shareholders, our suppliers, our employees and our customers to return to the simplicity that makes Chipotle special. I know that we can scale our company and keep things simple. The changes we need to make are straightforward and we will make them with a sense of urgency. I'm humbled that our Board has asked me to return as the sole CEO, and I'm committed to ensuring our future success. Now, I'd like to walk you through some of what I'll focus on during the coming months. But first, I want to thank Monty Moran for his contributions to Chipotle over the years. Monty and I have been friends since school. I have no doubt that whatever comes next in Monty's life, he will achieve extraordinary success. I consider myself lucky to have worked side by side with Monty for so many years, and I look forward to the next chapter of our friendship. Moving forward, I will oversee all aspects of the company's operations, working closely with our senior operations leaders. We will simplify many aspects of our restaurant operations with a relentless focus on ensuring the best possible guest experience. In order to simplify our operations, we will take a close look at everything we ask our crews and managers to do. Over time, we have added on layers of complexity to our hiring process, our training program, the restaurateur program, and our methods for evaluating the performance of our teams and our restaurants. As a result, we made it increasingly difficult for our teams to focus on delivering an excellent guest experience. As we invite millions of new and lapsed customers into our restaurants, we must deliver an excellent experience. We know that when customers visit a restaurant that provides great service, they become more loyal and more frequent. And increased frequency is key to our recovery and to the future of our company. Moving forward, our teams will focus on and be measured by the things that ensure our restaurants are welcoming and our service is exceptional. We already do an excellent job of preparing our food and executing on our advanced food safety procedures, but we occasionally fall short with regard to customer service. For example, over the years, we became known for delivering fast throughput while customizing each customer's order. But our throughput is not as fast as it used to be and slow throughput often leads to customers leaving the restaurant. The good news is that we know how to deliver fast throughput. We know how to deliver an excellent guest experience, and we have the right teams in place, so I know that they will rise to the occasion and welcome this renewed focus on the customer. Beyond our focus on removing complexity, I'm also committed to fostering innovation in the guest experience. We have recently made important strides with digital, including a new online ordering system at order.chipotle.com, more efficient online credit card payments and online ordering for catering. And all of our digital ordering options are beginning to take advantage of the smarter pickup time, which dramatically shorten the wait time after a digital order is placed. But I envision a future with even more ways for our Chipotle customers to enjoy us. We have recently begun installing an advanced second make line where digital orders are made in each restaurant. This new make line will enable digital orders to be made more quickly, accurately, and efficiently. It will allow for tablet ordering as a way to skip the queue and eventually for things like virtual drive throughs or other ways to order from outside the restaurant. To help us more effectively pursue these digital initiatives and other innovation projects at Chipotle, I am dedicating more resources to the development and management of strategic initiatives at our company. I'm also excited about our potential to bring better food to more people. Chipotle's mission has always been part of our DNA. Despite the challenges of last year, I'm proud that we've been able to maintain extraordinary quality of our ingredients and our commitment to classic cooking techniques. In the wake of last year's food safety crisis, it would have been easy to cut costs by buying cheaper, lower quality ingredients, but instead, we remained committed to our unique approach to sourcing fresh ingredients, which resulted in more delicious food. When we first started out, I was told that this approach would never work. In order to build a successful fast food company, we had to lower the quality of our ingredients and rely exclusively on highly processed foods that could be simply prepared, such as reheating. We took a very different approach, and our success over the years has proven that fast food can be good food. The food at Chipotle is more delicious now than ever, and this is the result of our continued commitment to the art of cooking. When I look at the new fast food businesses that have started up around the country, the common thread many of them share is that they are trying to do what Chipotle has done since 1993, with more food cooked by hand and an enlightened approach to sourcing. It's great to see the emergence of this new generation of fast food following Chipotle's footsteps, and I see this as a measure of proof that we have begun to realize our mission to change the way people think about any fast food. That's why I have stated my commitment to an expanded mission, and that is to ensure that better food prepared from whole unprocessed ingredients is available and accessible to everyone. You can read more about my thoughts on our mission at chipotle.com/mission. Before I open the call up for questions, I want to thank our Board of Directors for their confidence in me, and I'd like to thank our employees for their support. When asked to step up and lead Chipotle into the future, I accepted with a combination of excitement and firm resolve. I'm excited for the future and I'm resolved to do what I believe is best for the long term success of our company. I will not choose to pursue short term results expense of our long term success. I will do what's best for our employees, our customers, our partners, our suppliers and our shareholders. And in so doing, Chipotle will continue to cultivate a better world. Thank you. And to answer your questions, I have Jack, Mark and Kurt with me. So, operator, please open the line for questions. We will take our first question from Sara Senatore with Bernstein. Please go ahead. Hi, thank you very much. Thanks for doing this call. I had a question about the timing of this change and sort of refocus. I guess it's been about a year or a little more since the supply chain issues took place. And as you said, you're already seeing throughput starting to come down. So what is it that has prompted the timing of this now versus maybe earlier in this year or even last? And I guess related to that, Steve, you mentioned that you've seen other concepts try to replicate what you've done and that's truly a testament to Chipotle's success, but does it also speak to just heightened competition and the need to step up to compete with that for customers? Thank you. Sarah, thanks for the question. So as I think about the timing of this, after the crisis, it was really all hands on deck to ensure that we created a food safety program that would prevent what happened would create a program that would prevent this from ever happening again or reduce the odds to as close to 0 as possible. And we've done that. And our food safety program is really extraordinary. It has become now part of our operating system in a way that is quite efficient for our crew members to execute, like preparing fresh delicious food by hand using cutting boards and knives and pots and pans. They're doing the food safety at the same time. In fact, some of the food safety things actually have improved the quality of the food. And but that took time. Then we moved on to welcoming our customers back and Mark and his team did a great job of new exciting marketing messages, Chiptopia and reinvigorating the local store marketing programs and people came back. But what we noticed was that in some of our restaurants where our customer service wasn't what it needed to be, the frequency was less. And so I've estimated that maybe half of our restaurants have a guest experience that is something that could be much better. And when it is better, the frequency occurs. And so we know that one of the keys to recovery is to bring back the kinds of frequencies that we enjoyed pre crisis and this is a step that's going to help us get there. And to your second question about competition, I think that all fast food has taken cues from Chipotle over the years. And I think a lot of people have upped their game because of us. Competition is good. It makes us all better. So a lot of the things that we've been doing lately are in response to just more competition. So, I see that as a good thing. We get customers from fast food too though. So, understand that the heart of Chipotle's success over the past 23 years has been pulling people who normally go to fast food into the Chipotle system, which is the fast casual method. Thank you. We'll go next to Joe Buckley with Bank of America. Go ahead please. Thank you. Steve, did you analyze what made the business more complex? What are the key factors in the menu? Barely consistent and constant. What is the complexity to the business? Yes. So thanks, Joe. In terms of food safety and the preparation and cooking of our food, I think we're doing a great job. As I travel around the country and as I read customer comments and talk to our field leadership, we're doing very, very well at that. The complexity has come in 4 main areas of hiring, training, the restaurateur program and the way we measure our teams, our measures of success, if you will. So in the hiring process, it has become a very elaborate interview process that requires crew members to come back multiple times and we're losing people due to these long lag times. And so the number of people that we have to hire for just a few positions is extraordinary. And so I think we can be much more efficient there. In the area of training, we've really allowed the weighting to go toward softer skills and this is something that I think when we reverse this is going to have a huge positive impact. When we exit interview, our crew members or managers who have left us, what we ask, why did you leave? And they say because the job was too hard. And the reason they say that is because they didn't get the proper training. Conversely, when you sit down and talk to our top performers, they never think that the work is too hard. I mean, yes, it's a we work hard here at Chipotle, but people don't feel like it's too hard if they're properly trained. So we're going to switch the weighting from these soft skills to the things, to the basic blocking and tackling, the nuts and bolts that empower our folks to be able to do a great job. Also in training, we didn't make it a priority. It's sort of like, well, we'll get to it when we're done with all the other stuff. And so we noticed that a lot of our folks would be promoted on to a next level or to a different station without ever having completed a module. So what we need to do is we need to make training part of our everyday culture. Training is something that we do forever and ever. And so it's not something that we will schedule in and to hurry up and get over with. So the great news is that we know that when we train, we empower our folks and they feel much more confident in their job. The next area where we became complex was in the restauranteur program. It's something that is going to be an important part of our people culture going forward. The thing that's going to change about it though is the process for evaluating our folks. The method by which you become a restauranteur had less and less to do with what made for a great restaurant. The process was became elaborate and really pretty esoteric. So as soon as we realign the things that make for a great restaurant with achieving restaurateur, I think we're going to see a lot of great results from that. Everybody wants to be a restauranteur. We want more of them and we're happy to give the reward commensurate with achieving this elite status. And the last thing that got complicated was the way we measure our success. It's very elaborate, it's very redundant and it's not focused on the guest experience. So what's exciting I think about this new focus is that we know how to do all these things, Joe. This is not something that we're reinventing. This is not one of these situations where we're grasping it to try to do new things. We know that doing the basic fundamental blocking and tackling is empowering to our folks and it results in a better guest experience, which results in people coming more frequently. One more if I can. Do you anticipate adding some senior level management to kind of fill that that the role amount in place? Joe, if you repeat that, we had a hard time hearing that. I'm sorry. I was asking if you expected any senior level management to fill the role that Monty plays? No. So we have a fantastic team. At the officer level, we have Mike Duffy and Gretchen Selfridge, who are Chief Operations Officers. Reporting into them are 4 seasoned field leaders who we call our regional directors. They're responsible for all the operations. And of course, Gretchen and Mike Duffy will report directly to me. So at this time, we will not be adding any level between us. I want to get much closer to the day to day operations and really make sure that we focus on the guest experience. Okay. Thank you. We'll go next to Sharon Zackfia with William Blair. Go ahead please. Hi, good afternoon. I guess, two questions. Steve, how quickly can you implement, that's to kind of restore the simplicity that you're talking about? I'm just not really clear on how quickly that can actually occur. And then secondarily, when you talk about the guest experience, I'm just curious if you have any measures of guest satisfaction and kind of where that's been, where it is now, where you'd like that to go back to? Sure. On the timing, Sharon, that's immediate. I mean, for the last couple of weeks, I've been with all the officers and the field leaders and they're completely bought into this. We're talking about the ways that we can immediately implement these plans to make it simpler for our team and basically just get out of their way to let them do a great job. And that's something that will start to have an effect very, very quickly. In terms of guest measures and satisfaction, I'm going to turn that over to Mark. Sure. So yes, we follow guest satisfaction obviously all the time. And one thing you'll see that's consistent if you look back over time generally is that the number one complaint customers have are long lines. And so that can be good news and that can be bad news. It's good news when we're doing fantastic throughput and that line moves quickly. It's not great news if that line is long because our throughput is off. And we're not at our historical peaks in terms of throughput and it's a very, very large opportunity for us in the near term. The other guest satisfaction issues that we're facing now is running out of food. It's a very common occurrence at Chipotle, perhaps you've experienced that yourself. And it's hard to do to keep up with the demand in exactly the right way. But when trained properly and when they are focusing on the right things, they can do it every time. And the third thing that is often high on the list and is currently our messy dining rooms. So that would just be the tables that weren't bussed quickly enough or a messy drink station And that's another thing that is very easily solvable by focusing our crews on things that are going on in the dining room as much as things that are going on in the kitchen and the other aspects of their job. So we do have those measures. We obviously will be monitoring those as we move forward, but that should give you a sense of sort of the top challenges in that regard. And Mark, just to follow-up, I just want to be clear, have those measures slid over the past year or do you just overall think you can do better on those three things? Well, running out of food has slid, yes. But in my time at Chipotle, long lines, I think, is almost always and every one of the surveys been the number one issue. And so again, like I said, we just don't want those long lines to be needless because of slow throughput. But yes, running out of food is something and when I say running out of food, it's an item on the line. They might not have the white rice or they might not have the brown rice, not running out of all of the food. But yes, that one has been an increasingly frequent problem lately. And throughput, Sharon, this is Jack. Through Quick, it's hard to measure in a 1 hour period when your sales are down for the hour. We also measure it in shorter timeframes like 15 minute periods. And it's clear that we have a long enough line to hit some of the 50 minute numbers that we were hitting a year ago or 2 years ago and we're well off that mark. So we definitely have an opportunity with throughput. A lot of our customers anecdotally say, well, your sales must be all the way back And that's because the lines are back. Well, the lines are long partly because we've recovered somewhat. But the other component is the line is not moving as fast as well. And so that's we think a big opportunity to improve quickly. Okay. Thank you. Next to Nicole Miller with Piper Jaffray. Please go ahead. Thank you. Good afternoon. It was helpful to understand that you wouldn't be adding anyone else at the executive level. I hope it's okay and fair to ask, would you expect any changes at the Board or any other executive management changes, meaning deletions, I guess, if not additions. And I also wanted to take a moment to ask how are your regional managers and GMs doing and do you have an opportunity to bring them together going forward? Great, Nicole. In regards to the Board, we have been slowly over the past few years adding Board members. We have 3 relatively new Board members that are have been added within the past few years. But we understand and we've heard loud and clear that we need to speed up that refreshment process and have been doing that and we've interviewed a number of extraordinary candidates who are not only going to bring great governance and relevant experience to us, but also who are passionate about the Chipotle brand and who know that we're going to recover from this and be stronger than ever. So we will be announcing that news late soon. In terms of other changes, we don't see any other changes right now. We're very happy with the team and especially the operations team. We've been spending a lot of time with them for the past couple of weeks, and I think they feel very, very empowered by this new focus. They know that they can have a dramatic and swift impact on the quality of the experience by simplifying things and so they really look forward to this. We're excited to get back together with them. Thank you for that, Pete. Sorry, Nicole. This is Jeff. Hey, one other thing I just want to clarify is Gretchen and Delphi, I think Steve might have suggested that they were they are our Chief Operations folks, but their titles are restaurant support officers. So we didn't want to imply that there was some kind of a change in their roles. They have been restaurant support officers and that's where we'll continue to play. Thank you. Thanks, Nicole. We go next to Andrew Charles with Cowen and Company. Great. Thank you. Steve, when you're preparing for these changes and reflected back over the last year, do you think you did enough to apologize to the guests to make them feel insured that their food was safe to eat again? I commend you on your Today Show apology last year and the video you provided on Twitter and Facebook towards the end of September. But just given the severe sales challenges that continued through 3Q, were these enough actions were these actions really too little, too late to ensure the guests that your food was safe to eat? Well, it's hard to know exactly how much to apologize and sort of when to move from apology back into solving the problem and rallying the troops and delivering the kinds of messages to our customers that brought us back in the 1st place. I am really sorry about what happened and I reached out in a number of ways to our customers. And I think most of our customers understand that I am personally sorry. Mark might have some perspective about the customer perception. Mark? Yes. So we have a tremendous amount of data, both transactional and research data on our customers. And I think it's very helpful to understand our perspective on this, which the data, everything that we have suggests that there are not large numbers of Chipotle or large number of customers staying away from Chipotle because they feel like either we didn't address the problem properly or that they're afraid of Chipotle. So what we've seen is with current or now they would be lapsed customers who are actually staying away, it's in the low to mid single digits. So it's a significant number of people, but it is not what's responsible for what we reported in Q3 as a minus 19% comp wise. The majority of that is due, we believe, to the fact that during the first half of the year, we effectively cut off the inflow of new customers into our brand, which over time our customers flow in and out of frequency bands. They become more And so we cut off a new the young generation of customers coming in, or I should call them the infrequent generation, until the second half of the year. In the second half of the year, we saw a very remarkable turnaround in that regard and we've seen 33,000,000 new customers over the last 6 months of the year and the vast majority of those customers did not come to Chipotle with an offer of any kind, less than 3% did. So there's very, very large numbers of new customers coming in. And when you combine that with all of the other research data we have, there just aren't large numbers of customers staying away. So what you're seeing is these new customers not having yet become frequent or as frequent as the customers that we lost. And so they've yet to build that frequency. There is another factor in that minus 19%, which is of the customers who did stay with us, they're slightly less frequent. And so, you know, if somebody comes 25 times a year now, they may have come 20 8 times in the previous period or in the last year. And those three occasions are occasions that we probably lost to other pretty good competitors. And so those are going to be a little bit harder to get back. But what we're seeing in general is data and behavior and research that doesn't really support the idea that we did an inadequate job of apologizing or inadequate job of convincing people that we fixed the problem. Is that helpful? Yes. I guess one follow-up there. I mean, just with the data, I mean, can you help tie it just externally? I mean, when we're sitting here looking at sales over the last three quarters, they're kind of pretty similar on a 3 year basis. And obviously, the recovery is kind of taking longer than you guys expected, obviously, too. What kind of leading indicators does the data have in terms of showing the same store sales recovery is on the right trajectory? Well, I mean, I'm not going to speak to the sales data. I'll let Jack talk to the trends that he sees in that. But what I'll say with regard to the customer data is that what we're seeing is a trend that I like when I look at customer frequency. So of those 33,000,000 customers that I mentioned that have come in over the last 6 months, we know basically, I'm getting that number because I have credit card data on 28,000,000 of them. I've grossed it up to 33,000,000 to make up for the 28% of our customers that pay in cash. But of those ones that we of the 28,000,000 for whom we have actual data, we know that 36% of those customers transacted again during that period. And of those 36%, 50% of those transacted 3 or more times to become what we're going to consider regular customers for that timeframe. That's a net conversion rate of about 18%. So I like what I'm seeing. I don't have enough data to go back 2 years or 3 years ago and tell you if that 18% conversion rate is better or worse than it was before. I know that in general, from partners that we work with on this sort of data, they suggest that industry is more like 12% or 13%. So those are the leading indicators that I look at when I look to when I look at this data to say that look, people are coming in, they're converting the regular customers at a good pace. My job on the marketing side is not only to keep those new customers coming in, but to ensure that as they come in, they become more and more frequent. One of the challenges to making them become frequent is what we're talking about here today, which is the customer experience. If they come in and they don't have a great experience, we know from the data that they're slightly less likely to become frequent or their return rate becomes less. And so it's all these are all pieces of a complicated puzzle, but that's the indicator on the customer data side. Jack, I don't know if you'd like to comment on the sales side. Yes. And the only thing the comps have been slow recovery. I mean, we're not thrilled with the slow recovery. But the two things that we see underneath it might be somewhat overlap with what Mark said is we've seen very encouraging trends with our most frequent customers and we've done things to encourage that with things like Zootopia. And so on the most loyal customers, we've seen the greatest recovery in that group. And the new customers that Mark talked about, where he took $28,000,000 and grossed them up to $33,000,000 The $28,000,000 credit card customers that were new or last customers in the last 6 months, we're now at a surplus in terms of new customers coming in. What I mean by that, earlier in the year, we were gaining 20,000,000 new customers in the 6 month period that hadn't been there in the 6 months before, but we also lost $29,000,000 So we were at a deficit of 9,000,000 customers during the 1st part of the year, the 1st 2, 3, 4 months of the year. That basically broke even where we were gaining and losing about $24,000,000 And this gets back. We've constantly got customers coming in and out of these very infrequent bands. We were gaining about $24,000,000 unique customers and we're losing about $24,000,000 unique customers in the middle of the summer. And the surplus has been building. So, as Mark talked about, we've got 28,000,000 new credit card customers that have come in, in the last 6 months that didn't come in, in the 6 months before. We lost $20,000,000 during that period. So we turned from a $9,000,000 deficit to an $8,000,000 surplus. Now these are very infrequent customers. So you're not really seeing much in the comps yet. But if we treat them to an excellent guest experience, that 8,000,000 surplus or the 28,000,000 total credit card customers of 33,000,000 in total including cash are more likely to come a second time and then a third time and a 4th time. So that's why right now you're seeing us not as a new idea, but as these new customers are coming in or these last customers are coming in, we owe it to them, we owe it to ourselves, we owe it to everybody involved to treat them to a great experience. And then we'll see hopefully frequency pickup. And so that's when we're hoping to see that the comp recover. So it's a leading indicator, but we haven't seen it really come into the comp yet, but hopefully that will happen soon. That's helpful. Thank you, guys. We'll go next to David Palmer with RBC Capital Markets. Please go ahead. Thank you. Steve, how much of the service degradation do you think has been the result of the slowing sales, which has meant lower pay and higher employee turnover in the last year? I'm not sure what you mean by lower pay. Well, it's just there perhaps lower bonuses because the sales were down or even lower opportunities for promotion that can cause a vicious cycle where those managers and in turnover can increase. Sure. I understand. Our the turnover at the crew level was, I think, was hurt by the job post crisis with all the new food safety programs that were going into place. We had a lot of experts, national experts, leading experts giving us advice about what to do and we threw a lot on our team. That made the job very hard and that did I think contribute to higher turnover. Once we brought in Doctor. Jim Marsden, who is our in house food safety expert, He really did a great job of streamlining these procedures and integrating them into the prep and cooking procedures in a way that it's just become part of people's everyday tasks, right? It's really great the way he integrated them. They're not burdensome in any way. So I think we might have had a little spike in turnover, which might have been one of the contributing factors to less of a stellar customer experience. But that's I mean, I would say that's one part of many things that contributed to it. And when you look at the service, are you seeing that this broader issue with complexity and focusing on the right stuff has shifted the level of performance sort of broadly down? Or has there been a drop off in that bottom quartile or is this going to be about segmentation and more local fixes as well? Let me first just say that, that as we unburden the teams from the complexity around the hiring and training and restaurateur program and our overall measures of success. These things dominate their workday. And so if you think about what made Chipotle successful over the years, it was doing just a few things and doing it really, really well. We added a lot of things, well intentioned things, but they didn't directly improve the overall guest experience. But we've got to reverse that. And when we do in circumstances where we see people focusing on training and providing our teams with the basic blocking and tackling, they deliver a great experience. Our teams are capable. We just need to sort of get out of their way and allow them to be the great restaurant operators they are. Thank you. And we'll take our final question from John Glass with Morgan Stanley. Please go ahead. Thanks. Just two clarifications. First, Jack, is it fair to assume you can do this in a margin neutral way or is there some incremental incentive compensation needed or field management needed to achieve these goals? That's question 1. Yes, John, I don't think there's anything that we're talking about that will cost more money to invest here. I think if anything, we're stripping some of the complexity away and that will not cause us anything to strip this away. So we're not talking about a big investment either in terms of expense or capital to get it done. Okay. And then Steve, you talked about the timing, it can go into effect immediately, but there's a lot of changes that have to take place. So was realistically the first time you think we should be able to start to see the benefits of this in sales? Is it a quarter away? Is it 2 quarters away? How do you think of the timeline where you're actually going see the benefits in the stores? So I think the way we'll see this is that we can immediately change some things to refocus our crews' efforts and they will go immediately toward a better customer experience. As customers come back, the better the experience, the more frequent they'll come back. And so as you can see this progressing over weeks months, it's just it will just amplify as we get better. So exactly how long this takes and exactly what those numbers are, I'm not sure. But I will say that this is not a case where we have to sort of reinvent the way we do things and then implement a new system and expect for it to take years. This is not like that at all. We can have very, very immediate impact on our restaurants. That does conclude our Q and A session for today. At this time, I'd like to turn the conference back over to Mark Alexey for closing remarks. Thanks, Kevin. And thank you everyone for your time today. Just in terms of calendar planning, we will be attending the ICR Conference in mid January and then look forward to providing our year end financial and operating results in late January to early February. Thanks again. This does conclude today's conference. Thank you for your participation.

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