Expanding the Chipotle empire…
What more could fans of Chipotle Mexican Grill, Inc. (CMG) want? Now, after getting their “food with integrity” to go, they can zip back home and eat it while watching a reality tv show with an integral connection to their favorite fast-food restaurant.
Just how integral that connection is – and how tasty the payoff will be for Chipotle’s founder, Chairman, and co-CEO, Steve Ells, became clear in the Related Party Transactions section of the proxy (p. 56) that the company filed yesterday.
After acknowledging that Chipotle is the prize sponsor for the series —America’s Next Great Restaurant, the proxy explains:
“In that capacity we have made agreed to make [sic] cash contributions totaling $2.3 million to ANGR Holdings, LLC, the entity that will operate the restaurants to be awarded as a prize on the program, in exchange for an equity interest in the entity. We have also agreed to provide a variety of corporate and administrative services to the entity in connection with its operations. Our founder, Chairman and Co-Chief Executive Officer, Steve Ells, serves as a judge on the America’s Next Great Restaurant program, and as part of the terms of his involvement with the program is a co-investor in ANGR Holdings. We intend to purchase Mr. Ells’s interest in ANGR Holdings from Mr. Ells during 2011 for $220 thousand, the amount of the cash contribution originally made by Mr. Ells.”
While not everyone is equally appreciative of yet another cooking show that features Bobby Flay as a judge (Does the man ever sleep?), it appears that Ells will definitely get back the
millions money that he invested in the show’s concept. Whether the investment pays off as well for the company itself remains to be seen.
Of course, the company has proven that it’s more than capable of serving up profits in addition to its fresh food. Less than 2-1/2 years ago, when shares of Chipotle were trading at $39.30 a share and the economy was really struggling, a lot of shareholders might have been tempted to sell their shares and take a loss. (That was late November, 2008, whereas just the year before, a share had traded for $125.17.) Those with enough confidence to hang onto the stock are now reaping the reward of Chipotle’s current trading price of $274.00 per share.
As palatable as that run-up has been for the shareholders, though, Chipotle’s top executives are feasting on their metaphorical piece of the burrito bowl, too. Ells, for example, got a total compensation package that is more than 219% higher than the total comp he received in 2009. That included a base salary of more than $1.18 million, stock awards of more than $4.4 million, stock options worth more than $5.9 million, non-equity incentive compensation of more than $2.448 million, and the often-entertaining catchall category “Other” compensation of $163,801. In Ells’ case, though, most of that money appears to have been contributions to his Supplemental Deferred Investment Plan, a company car, and term life insurance premiums.
Whereas Ells’ salary has marched steadily higher in the past few years – typically going up between $100K – $150K each year – the biggest increases in his compensation were to his stock awards (which were $0 in 2009 and $3.634 million in 2008) and his stock options (only $2.8 million in 2009 and $2.3 million in 2008). And, indeed, the pattern for Ells’ raises is continuing in 2011: The Compensation Committee raised Ells’ base salary to $1.3 million for this year. If he ever gets his fill of burritos, that should be more than enough money to pay the tab once in a while at one of Bobby Flay’s many restaurants.
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