Please standby, we are about to begin. Good afternoon everyone and welcome to the Chipotle Third Quarter 2007 Earnings conference call. All participants are now in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded. I would now like to introduce Chipotle’s Investor Relations Manager, Ms Sandra Curlander. Please go ahead.

Thanks Stella. Hello everyone and welcome to our call today. By now, you should have access to our earnings announcement released this afternoon for the third quarter ended September 30th, 2007. It may also be found on our website at www.chipotle.com in the investor relations section. Before we begin our presentation, I will remind everyone that parts of our discussion today will include forward-looking statements within the meaning of the securities laws. These forward-looking statements will include projections of restaurant comp sales trends, the number of restaurants we intend to open, earnings per share, certain expense items, and other statements of our expectations and plans. These 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 our actual results to differ materially from the forward-looking statements. We refer you to the risk factors in our Annual Report on Form 10-K for 2006 as updated by the 10-Q, which we expect to file this week for a discussion of the risks that could impact our future operating results and financial condition. I want to remind everyone that we have adopted a self imposed quiet period restricting communications with investors during sensitive periods. This 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 fourth quarter, it will begin December 1st and continue until our fourth quarter release in mid February. On the call with us today are Steve Ells, our Founder, Chairman, and Chief Executive Officer; Monty Moran, our President and Chief Operating Officer; and Jack Hartung, our Chief Finance and Development Officer. After their comments, we will open the call for questions. With that out of the way, I would like to turn the call over to Steve.

Thanks Sandra. Once again, I’m pleased to report another quarter of strong performance for Chipotle. We generated same-store sale of 12.4% for the third quarter, which brings our year-to-date restaurant comp sales growth to 10.9%. On the strength of these numbers, we are now positioned to reach our 10th consecutive year of double digit cost, which is certainly an extraordinary achievement. We believe that these results are evidence that people appreciate our continued focus on improving the customer experience in our restaurants. Our unit economic model strengthened during the quarter as well, with both average restaurant sale and restaurant level margins increasing. Even while higher commodity costs are pressuring margins, our managers are improving the customer experience while effectively managing the business and they are doing this during a difficult restaurant operating environment. I am really proud of what our managers are able to accomplish. And we continue to grow as we open 20 new restaurants in this quarter and 88 year-to-date. More and more of these new restaurants are staffed with managers that we developed from within and the sales to these new restaurants continued to keep pace with their existing restaurants such that the new opening still attract at 85% of the volume of our mature restaurants, which continue to increase each quarter. A better customer experience, double digit comps, higher margins, and more new restaurants, it all adds up to EPS increasing 72% for the quarter over last year. For years, you have heard me say that we want to change the way the world thinks about and eats fast food. To accomplish this mission, we obviously plan to continue serving great tasty food, using high quality ingredients and classic cooking methods, but we also need to continue to evolve in every aspect that we do. This…

Thank you, Steve. As you good Steve discussed today, our strong performance this quarter is due to our continued focus on things like Food With Integrity, and our culture of empowering managers and crews to reach top performance. So, when things are going well, as they are now, it’s okay to think about what can limit our growth in the future. We've always said that there are two things that could limit our growth in particular. One is our ability to find great real estate and the other is our ability to find and develop great managers to run our restaurants. In a few minutes Jack will talk more about our specific real estate plans. But for now, I’d like to say that we are very optimistic about our ability to find and develop new restaurant locations. In fact, we expect to open more restaurants than we had in any prior year. Of course, to effectively open these restaurants we require even more great managers and crews. Fortunately, our previous efforts to improve to improve the quality of our managers will give us a head start in accomplishing this. Specifically our acknowledgement that the restaurant manager is the most important position, our Restaurateur Program, our new staffing structure, our promote from within philosophy, and the great opportunity that we provide our crews are all examples of steps that we've already taken to ready us for this faster growth. The Restaurateur Program is our foundation to develop better managers. Not only does the program reward our most elite managers, but it also clearly defines the roll of every manager. As you recall, the focus of every manager is simply to develop their best crews into managers as well as building sales by running great restaurants. The Restaurateur Program continues to gain…

Thanks Monty. We are really pleased that we are able to deliver these strong third quarter results and what many would describe as a difficult restaurant operating environment both in terms of customers visits as well as operating margins. These results are evidence that customers appreciate better tasting food. As a result of our investment in these higher quality ingredients, but also mean that our empowered managers and crew are providing a special dining experience for customers while effectively managing the business. As a result our comps sales increased 12.4% for the quarter on top of the 11.6% last year. This 12.4% comp was mostly driven by increased customer visits as menu price increases related to the roll of naturally raised meat contributed about 2.6%. While we expect to finish 2007 with a full year comp in a low double-digit range for 10th consecutive year of double-digit comps we do see a slight fall off of the comps starting in mid September, continuing into October. The comps have remained in double-digits. We remain confident, full year comps will be 10% or greater, although, fourth quarter comps may slip into the high single-digit range. Total revenues increased by 35.6% to $286.4 million in the third quarter as a result of new restaurant opening including 28 in the quarter along with the 12.4% increase in comps. For the nine months ended September 30th, comps were in the 10.9% and total revenues increased 32.1%. Our new economic model continues to strengthen with average restaurant volumes now over 1.7 million to the 540 restaurants that have been open at least 12 months. This is up from under 1.6 million at this time last year and just over 1.4 million two years ago. With 28 new restaurants opened during the quarter and 88 year-to-date, our…

Thank you sir. Today’s question-and-answer will be conducted electronically. [Operator Instructions]. And we will go first to Paul Westra of Cowen And Company.

Hi, thanks. Good afternoon

Hi Paul.

Hi Paul.

Question for each of you individually, Mike if you can just talk a little bit more about I guess some of the human resources efforts, you mentioned management turn over can you give us those numbers and comment little bit more about the restaurant 12 program, what percentage of GM’s would you like to eventually get to and a question obvious you would seem to add some I guess responsibility to maybe help other restaurants in the adjacent areas. With the restaurateur we source of field management down the roads, so how much internal churn would you like to ultimately settle down at?

Yes, great question Paul. Number one, on turnover we have continued to see our turnover fall and its now in the sort of the mid 20% percent range, which is the lowest its been. As an interesting side note on turnover as a doors has been our internally promoted folks, see a lower level of turnover and then externally promoted people but actually that gap is narrowed which is such that are people we hire from the outside you have a turnover in the low 30% range and we see that as a great result because of since we are having to hire less people from outside we are able to really focus more carefully on who we hire. So that’s the need. Turnover among our crew has remained in that sort of 100%, about 106% grown. In terms of restaurateurs becoming more taking on more field management, yes it is our goal to try to leverage our restaurateurs more as a way of allowing our area managers to handle more restaurants. but we also have a twin goal of making sure that the restaurateurs remain in the restaurants where they can do the most good, actually impacting customers experiences everyday. So, what we intend to do is start associating some of our restaurateurs with new restaurants which are having less lot with certain aspects of operations and make sure that we leverage the skills of those restaurateurs into some neighboring restaurants. By doing that we will allow our area managers to handle more restaurants and so now we are going through with our regional directors and identifying throughout the country which location these restaurants first going to effect and which area managers can take on more responsibility as a result of that. So, we really taking a look at our field management make sure that each of these restaurant tour area manager or operation director, all are created and defined in such a way that maximum and possible benefit to the most people possible.

And what percentage would you like to get on 10% now of restaurateurs, would you like to get the system up to 40 or 50 or--?

We kind of… ideally we would like to have the more the better in terms of restaurateurs. If all of our managers are restaurateurs, that would be a perfect situation for us. So, our goal is as high as 100%. But we don't really chase a number in particular. What we are looking for is to make sure that when Steve and I interviewed our restaurateurs that we can continue to see greater and greater level of confidence among the first we are interviewing and that we continue to keep the bar pretty high to entry into this sort of elite class of managers. That being said, we are about to go interview almost 40 of them in the next couple of months. We are seeing in larger and larger percentage of those to whom that we are presented with being excepted into the program. So, we believe that over that 40, certainly, better than half if history is any guide will become restaurateurs and so we will increase our percentage quite a bit, just in the next couple of months. But even more exciting is the fact that there is 80 more kind of waiting in the wings in the next six to 12 months. That will be ready for interviews. And so, we are very excited to meet with them as well. And as that happens as we see more and more of these restaurateurs ready to be interviewed, it’s… that's just a function of the fact that all of our managers know what it takes to become a restaurateurs are being given more clear direction as to how to get there, more specific training as to the areas of their weakness and we thing that that will continue to increase in the amount of managers applying of the role.

Okay. That's helpful. Steve, just kind of little bit more you mentioned this new equipment test with handheld POS, what’s the goal, I guess, what’s the extensional investment and rewards of the test?

That’s very, very early, Paul. I think one of the things that we really want to do for customers is to give them through faster especially during the busy lunch period. As you know, there are so many people who want to eat at Chipotle and certainly in the busy dense areas that we usually have very, very long lines. Most of the people in those lines know exactly what they are going to order and they also have a credit card. And so, we take care of that problem before they ever start the ordering process. And so, once they get to the line, they order just as they normally would picking and choosing among all our ingredients, and then, once they finish doing that and their breed… or order is ready, then they are just free to go have a seat and they eliminate that 18 to 22 seconds POS experience, which is really not adding anything beneficial to the overall dinning experience. So, we think it’s really going to provide a lot better customer experience, especially during that busy crunch hour… hours during lunch.

So, about 20 seconds, what is the total line time currently?

I haven’t added it up, but just to sort of help you put it in perspective, the tortilla station is probably eight to 10, putting cheese and sour cream and wrapping it up, about another eight seconds or so. The expedite is pretty quick, single digits and then you tack on the POS and that’s all the way up into the high double digits, 18 to 22 seconds. So, a significant amount of time that you can save if you have allowed the guests to prepay.

What’s unique about Chipotle though is that you just need to know chicken burrito and then you can still go through and have all the choices. So, it is not a cumbersome ordering process in the line, it’s just simply the chicken burrito or steak burrito or something like that.

Great. And just two quick questions for Jack, the tax rate you got at 37.7%. You still expect that to come down over time?

Yes, Paul, we said next year to expect to stay at 37.7%. But we think we have some opportunities in state taxes. And as though opportunities materialize, we will tell you about them. They are gaining relatively small, we were at this time last year, we were about 40% so we brought it down quite a bit and now under 48% and we are going to continue to work to bring it down. But there is going to be a limit to how much we can get it down, it is going to be 10 basis points, kind of as we see those opportunities actually materialize, we will let you know through the releases.

Great. Thank you.

Thanks, Paul.

And we will take our next question from Nicole Miller of Piper Jaffray.

Thanks. Good afternoon.

Hi, Nicole.

Hi, Nicole.

Hi. Can you talk to us about… it looks like you have removed the hormone from your cheese in the quarter and did you have an opportunity for pricing because of that?

Could you repeat that question? Nicole Miller – Piper Jaffray: Sure. If… was there an opportunity for pricing in the quarter, I think you… it looks like you went hormone free on the cheese. Is that correct?

Yes, the cheese didn’t… asking that suppliers removed are only source of milk from cows that were not treated with rBGH, did not cost us more money.

Okay. One other last price increase and what are you looking for--?

No, we did not take a price increase associated with that.

Yes, we didn’t… it was… there wasn’t really an opportunity and the messaging around that would be tough, Nicole. So, most of our price increases have really been around natural meats and we do marketing and education with our customers around natural chicken and natural beef. We are running, Nicole, about 2.6% for the third quarter. We are actually right now… the pay for our right now through the fourth quarter is up to 3%. And as you know, that menu price increase is now in across the Board type menu price. It’s really just market-by-market as we've had the Food With Integrity opportunities.

That’s very helpful. Thank you. And then, have any commodities been contracted for next year?

No. We would normally contract cheese or agree on a price with our supplier for cheese, and we did that and we benefited from that for all of 2007. We have not yet done that for cheese. We’ll probably do something before the end of the year. But we're kind of watching what the… what the market would look like. So, right now, we have nothing really contracted for the next year, Nicole.

And then when we look into the development for next year, on a quarterly basis, should it be in your image of this year or is there anything that would shift that?

I really hope so, Nicole. I mean we're really proud that our inventory building was so strong this year that we almost perfectly level loaded with 30 restaurants, 30 restaurants and now 28. I would not necessarily promise you that we’ll be that perfect in terms of level loading, but inventory is nice and strong, and so, it should, for sure not be back loaded the way that we attended store clearly in a way both restaurants, so, it will be relatively even throughout the year.

And then on a labor line, was there… there was a labor system implemented last year. Where are you at in terms of seeing that in the margins?

Yes. We implemented that Nicole and it was our national labor matrix and we implemented that really at the end of the third quarter and into the fourth quarter. And so, what you’ll see is that if you go back to last year in the fourth quarter, we started to see labor leverage. We got about 30 basis points of labor leverage in fourth quarter of last year. We got zero labor leverage or virtually zero in the second and third quarters before we implemented this national labor matrix. And so, we're starting to go comp up against that, in the fourth quarter and then for sure into 2008, Nicole, so you will see much less labor leverage going forward than we've seen in the last few quarters.

Okay. And then just one kind of big picture question. The margin… obviously the margin results obviously very impressive. And on a corporate level, could you talk to us about the best performing margin unit? So, are they in classes by in terms of when they open or by region? What do those peak margins look like, and then what would either allow or prevent the corporate to have those margins over time?

Well, Nicole, the very highest margin restaurant rather than by fast food store would be based on the sale and there is an occupancy. And so, for example, we have restaurants that are doing $3 million and they are in Middle America and paying very modest occupancy costs both restaurants can easily do margins in the 30% range or higher. Your next question is what’s preventing really us achieving those types of margins across the country. Well, if we could do $3 million of volume and pay the kind of occupancy costs so we can pay Middle America, we could do that. The reality is we are not going to do $ 3 million every restaurant and we are in New York and we are in now in Philadelphia [ph] and the occupancy costs are much, much higher. So, we don't know… I think the real answer is we have not seen a limit yet to what our volume can be either by market to that individual markets that are averaging 2.5 million across the whole market. I mentioned we got individual restaurants that are well over 3 million. And so, we haven’t seen a limit to really what we can do in terms of sales volumes and we know that our new economic model and our managers focused on strengthening that model we can continue to deliver these very, very nice margins. Now the challenge ahead of us, Nicole, is that we are going comp against international labor matrix and so that's going to see to be though to see more of that labor leverage and commodity cost there’s still pressure there. We don't see really any meaningful relief in the near future and so it’s going to be tough for us to continue to deliver these margins, but our new economic model continues to be strong.

Thanks so much for your time this afternoon and congrats on a nice quarter.

Thanks Nicole.

Thank you.

And we will go next to David Tarantino with Robert W. Baird.

Hi, good afternoon. And congratulations on a great quarter.

Hi David thanks.

Jack, just a follow-up to the margin question. As you look out into 2008 with the pressure you are seeing on commodities maybe less benefit from the labor matrix, what type of same-store sales number would you need to hold restaurant level margins flat next year.

A good question, David. We don't see any worsening of commodities let’s take that off the table so commodities kind of stay where they’re at. Just normal inflation creeping all the line items. Typically need about a mid single digit comp in order for us to hold our margin,

Okay. So, with that implied you are expecting then with your guidance from margin compression next year.

Well, if food cost stay the same and if we can do something I think if we were at the high-end of that range, we could probably hold our margin if we hit the low end of our guidance range in the lower single digits, yes, I would expect to see margins degradation and the way to accept that would be for menu price increase which you have seen over the last couple of years we’re been running kind of it is in the 2% to 3% range. If we could do a couple of percent comp in transactions and a couple 3% comp in margins that in menu price that would be another way to at least keep the restaurant level margins. There’s a lot of different ways to get there, David, but if we don't do a mid single digit comp and we don't have price increases normal inflation would begin to eat away at the margin.

Okay. That's helpful. And then just a broader question about next year’s earnings growth I know you didn't give a specific target for next year, but you said you are committed to 25% plus EPS growth over the long-term. Is that what you might expect for next year and if so whether the components that get you there next year if you are just holding restaurant level margins, flat?

Yes, they would never have broken out given as you know given specific details guidance so we felt comfortable over the long term with that 25% rate, so into next year, I mean we are not going to give a specific whether it is 25% or something different than that but it is going to be more new store openings, I mean based on our current guidance, we are finishing this year with double digit. Our comp guidance, we have been low to mid single digits so that means we have to rely more on the new store openings. Now the good news is, our new store openings continue to perform at exceptional level so even though we are now over $1.7 million with our restaurants open more than 12 months, our new restaurants continue to open up at 85% of that level and so they are… they open up within striking distance, with just a year, couple of years of comp to that $1.7 million, that $1.7 million range. We also look at our restaurant… new restaurant openings as a cash… a cash flow positive within the first 12 months. And within… by the end of the first full 12 months they are not all the way up into what our average margins are today but they… they are way up there and so they are much stronger today than they have ever been before and so relying on new store openings based on a higher number of 130, 140 and based on the better quality , the quality that gets better and better every year, we feel that will be the main driver of our… of our EPS growth for next year.

Great. That’s helpful and then a broader question. What are your thoughts on expanding the brand and to international markets beyond Canada at this stage?

Well, I’ll say the same kind of thing that I said last time that I certainly think going into the big markets in Europe, U.K., France, Germany are no brainers for us. I think the concept is going to do really, really well. The whole idea of super, high quality ingredients, prepared in front of the customer served in an interactive format is something that’s going to do well. If there is one thing that we have learnt over the past 40 years is that… is that we come out of the blocks really, really strong when we have a great team in place and we pick great real estate and so that’s our plan for our International expansion. But we are not in any hurry to get there… I mean we still have thousands of restaurants that we can build in the United States so that’s where you should expect to see a lot of the short and mid term growth for us. International is a long term opportunity and we are confident that we are going to do it right, we have got the experience and we have got… we have picked out great areas to go into that we are confident are going to be real, real strong countries and cities for us. So again it looks really good but think of it as long-term expansion.

Okay. Great. Thanks a lot.

Thanks, David.

And we’ll take our next question from Stephen Rees of JP Morgan

Hi, thanks. I just wanted to ask about the need and voluntary which do sound like they’re strengthening and growing even closer to the system average. Is this a trend that we should expect to continue into next year or is there anything, I know you mentioned you are going to demote existing markets next year. Should we expect that gap to widen at all?

Well, it’s a good question Steven. First of all let me clarify. Our new store openings have grown every single year. But they haven’t closed the gap. What happened is our average for the restaurants opened 12 months or more has risen pretty dramatically over the last three, four years, really over the last five years. but what’s happened is our new restaurants over the last three years at least, has cut pace at this 85% and so, it’s grown every year at the same pace that a restaurant opens 12 months or more at the same gross rate so in terms of what's in set for next year nothing Steven that we are doing differently in terms of building our pipe line. That would cause us to believe that next year’s numbers would be higher or lower than this 85% range. We're still looking for a high quality real estate. Most of the openings are going to be in markets that we're already in. I mean we did just open up Philadelphia and you never know how restaurant two, three or four is going to be in a new market. But we're not doing anything fundamentally different that would expect that trend would change either way.

Okay. and then just for Steve. You mentioned fast food in your comments but, as you look at your consumer research on some of your more developed and mature markets like a Denver or Dallas. How is your customer using the concept today versus when it was more in it’s earlier stages. Are you still growing traffic in these units and who do you think is the right competition for you at this point is it fast food or is it increasingly casual dining?

It is an ongoing debate that we have here internally and we've even been working with some consultants, some branding consultants and we have that argument with them also. Are we fast food… are we fast casual, are we more toward casual dining but fast. I guess I can't answer that question and everybody should be excited that I can't answer that question. The answer really is that we draw from so many different places. Chipotle was built on my experiences from fine dining. I didn’t know anything else. I didn’t know the fast food rules. So Chipotle was built on fine dining classical cooking methods but done in the format that allows us to serve it fast so if you want to call it fast food go ahead, but realize that the kinds of ingredients that we use are like fine dinning ingredients and so I guess I would summarize by saying our demographics is very, very broad and we draw from all different places, from fast food, from health conscious people, from casual dinning, and certainly, not dive in the middle of where people a lot of people put us in this fast casual. But I think that's good news. I think it’s just drawing primarily from one area that's kind of limiter. So, we are excited that this is a hard thing to define.

Okay. Great. Thank you very much.

And we’ll take our next question from Mark Wiltamuth with Morgan Stanley.

Hi, congratulations on a great quarter.

Hi, Mark. Thank you.

I would like to ask a little bit about your cash levels, what are your plans for your cash and maybe a thought on CapEx and free cash flow generation moving forward?

Yes, Mark, we don't really plan to do anything different with our cash balance frankly there are limits without getting into it there are limits of what we can do in terms of buyback or dividends of any thing like that because of the separation we had with McDonalds. But we plan to we have invested it in highly liquid highly safe high quality instruments. We are doing things like… we are taking a small step into Canada. We feel like we are very privileged to have this very strong balance sheet such that if we decide that Canada opens very well and we have got a very strong team there and we want to dialed it up, we’ve got the capital to o that. I think that here in the U.S., we… the inventory building is going well our development of our people is going very well. So, we can step up our openings from this range of 130 to 140. And so, we feel privileged to be able to do that without have to go to a bank or without having to raise more money. So, we don't plan to really change our balance sheet in any kind of fundamental way. Going forward, Mark, I would expect that we’ll continue to invest the vast majority of our cash flow that generates from the business in the new restaurant and in maintaining our existing restaurants. We might takeaway from that cash balance a little bit, we might add to it a little bit, but I wouldn’t see any really dramatic change in that cash balance either way as we move forward.

Okay. And when is the restriction on the McDonalds over, so you could start doing share purchase or other activities.

Well, there really isn’t an over. There are some dates where it's a really hard and fast cant do anything and that's a couple of years October of 2008. But even beyond that, it then, Mark, boils down to facts and circumstances that we would not want to do ant thing we would be very thoughtful and careful not to do any thing that might affect the tax free nature of split up that McDonalds entered into back a year ago.

Okay. Thank you very much.

Thank you, Mark.

And we’ll take our next question from Glen Petraglia of Citigroup.

Hi, this is Jeff actually talking on behalf of Glen. How are you?

Hi Jeff.

Question for you, mention before about commodity costs and your expectation of they not going to get worse from here. If you given any thought as to maybe doing some purchase or spot purchases on cheese, for instance, for next year? Have you ever done that in the past, or is it typically all contracted?

First of all, Jeff, I don't think I said that they should not get worse. I think I said I don't see them getting better. If anything we see continued pressure and all the key commodities that have caused pressure for this year so far what we have actually… we have brought into cheese like for example this year we are not seeing any of the degradation of our margin due to cheese at all like other restaurant companies are because we did lock into with our supplier a fixed price for the entire year. We have the ability to do that again for next year. Normally, we would have done it by now. We just have kind of been waiting because the market has been so volatile. We expect that we will probably lock into a price for some maybe all of the cheese for next year so we have taken advantage of that in the past.

Okay. And then are there any pockets of consumer weakness that you maybe seeing from a regional prospective i.e. certain states not performing as well as maybe the Company average.

It's a great question and we seen that other restaurant companies have reported pretty severe weakness in a number of markets I can tell you we have not see what I would call severe weakness the way other restaurant companies are defining it. In markets like California and Florida and those hyper markets where there is a housing bubble has happened one market that we have seen some softening that other markets have as well is in Arizona in Phoenix. We’ve got about 25 restaurants there and we did see our sales are still well in the kind of mid single digits range in terms of comps, but earlier this year they were in low double digits and so we have seen impact there, but that's really the only one our sales in California continue to impress our sales in California so very, very strong. And so, we have not seen what I think you have been reading about with other restaurant companies.

And has there been any price increases in Arizona at all--?

No, there’s not although. We are hoping in the near future we can introduce nature meats to Arizona and so we think there is an opportunity to really talk to our customers and talk to them about the high quality ingredients… about nature meat. So we hope that might happen by the end of this year.

Okay. Then one last one for you. I thought you had mentioned about a potential same-store sales fall off in this coming December. Is that correct?

Well, no what I wanted to tell you is… is we did see a fall out in the second half of September.

Okay.

Ends up trouble so far, so double digits but we didn’t want anyone to expect that our comps will sequentially increase in the third quarter because that’s what a comp has done each quarter, they kind of climb from the first quarter to the second, from the second to the third. So far we have seen, it’s just a slight fall out so double digits still very strong but not as high in terms of the third quarter.

Okay. Thanks a lot.

Thanks Jeff.

And we do have time for one final question. We will go to Rachel Rothman of Merrill Lynch. Rachel Rothman – Merrill Lynch: Hey guys.

Hi Rachel. Rachel Rothman – Merrill Lynch: Same store sales first got it. I guess if you go back 58 to this time last year and the guidance that you gave out for ’07 was low to mid single digit. Can you maybe talk about what surprised you the most in terms of the comp stores this year, what drove the upside surprise and how we should think about the conservative… the conservatism of next year’s guidance in that context.

Okay. Tough question. I will give it a shot, Rachel. We were going up again when we were at the same time last year, we were looking ahead to the first quarter where we were going up against the 19.7% comp and that was very scary. We are going up again, the awareness building from the IPO which we know was significant. We are going up again, kind of an initial surge that we saw in our comps due to Cooper because we kind of had the increased awareness about food poisoning and we are much more aggressive in communicating what works for food poison and really holding out our fastest stores and telling all the restaurant managers how the stores are performing at the level that they are performing and so it was scary at the time last year to be going up again so outlook was very, very strong trying to… at this time this year, it’s still very, very difficult to predict. We now are a restaurant company that has relative 500 restaurants that are averaging over $1.7 million and so and looking ahead into next year, following on our tenth consecutive year of double digit comp we did don’t know what to expect for next year. We are not going to change what our strategies are, we are going to continue to focus on running great restaurants, so that we have great managers, developing great food and focus on “Food and Integrity”, focus on serving the very best food that we can and we hope that we both end better comps than what the guidance says but we don’t know what the comps are going to be and so we feel like it’s the appropriate guidance to give at this time. Rachel Rothman – Merrill Lynch: And then should I… sure you guys comment just a little nature contributed 150 bits of those 190 and if that is correct, does that mean that the insurance was the incremental 40. How should we think about that rolling through? Is that going to continue for the next three quarters as you now occurred a lower rate or was that a one time reversal of some prior…?

No, what… for the… you are talking about the insurance? Rachel Rothman – Merrill Lynch: Yes.

Yes, that’s a recurring number but we are going to go comp against that in the middle of next year, okay? So you will see the benefit for another quarter For the… you are talking about the insurance? Rachel Rothman – Merrill Lynch: Yes,

Yes. That’s a recurring number but we are going to go comp against that in the middle of next year. Okay, so you will see this benefit for another quarter or two and then you will going comp against them you won’t see that benefit any more. Rachel Rothman – Merrill Lynch: Okay. And then one last one, on the incentive comp or restricted shares and options, I know you talked about it being higher dollar impacts in next year G&A. Can you just talk about that given it I mean is it based on a fixed number of shares, or is it a fixed dollar amount of compensation that given that your share prices doubled, you would just be allocated fewer shares?

Well, it’s hard to perfectly answer that. Rachel Rothman – Merrill Lynch: Well I am not phrasing it well but.

And I get your question and I’ll answer to it the best I can. We don’t know what the grants are going to be and we really need to let our comp committee do that and they will look at a number of different factors that you can imagine and notice what your perfect comp rate would be but to give you an example what happens is you are layering on whatever the grants are in terms of stock and in terms of stock options whatever the grants are they are going to be at the higher price than they were last year based on stock price today. What’s removed from our stock option expense is options that were granted back in 2004 which were at a much, much lower rate and so, for example if we issue the same number of options and the same number of shares exactly as last year, and we should have done it last year price which is less than a half what we are at today, we would see a 50% increase in our stock comp from kind of $8 million to $8.5 million this year to a 50% higher number like a $12 million to $13 million number. If we issued the same number of shares as last year, at this much, much, much higher price, our stock comp would more than double. So it’s a dramatic increase. It’s going to be increasing no matter what, we don’t know exactly what the numbers are going to be, we need our comp committee to do that but we wanted to let you know that this is ahead of us and no matter how we slice it and no matter what matter we go through, its going to have a meaningful impact on our G&A next year. Rachel Rothman – Merrill Lynch: Should we think about it as a number of shares or based on the out performance that you guys have been giving this year, I guess is there any way let’s imagine?

Numbers, it’s non-cash and so last year we issued 275,000 options and a 120,000 restricted shares. And so, we don’t know what numbers are going to be issued for next year but the accounting expense that contacting our G&A it’s a non cash expense and so, I would leave it up to you in terms of how you want to deal with that non cash expense. First of the dilutive effect that will happen in the future, when a restrictions lifted and these options are exercised. Rachel Rothman – Merrill Lynch: Okay, thank you.

Thank you, Rachel.

And there are no further questions at this time. Ms. Sandra I’ll turn the call back over to you for any additional or closing remarks.

Thank you everyone for joining us. We certainly appreciate your time today.

Thanks everyone.

Thanks Dana.

Thank you. And that does conclude today’s conference call, you may disconnect at this time.