Good afternoon, and welcome to the Chipotle Mexican Grill Second Quarter 2012 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce Chipotle's Director of Investor Relations, Alex Spong. You may now begin your conference.

Hello, everyone, and welcome to our call today. By now you should have access to our earnings announcement released this afternoon for the second quarter of 2012. It may be also found on our website at 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 as defined in the securities laws. These forward-looking statements will include projections of the number of restaurants we intend to open, comparable restaurant sales increases, the impact of menu price increases, trend in food costs and other expense items, effective tax rates and our unit economics and shareholder returns, as well as statements of our expectations and plans. These 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, as updated in our subsequent Form 10-Qs, for a discussion of these risks. I'd like to remind everyone that we have adopted a self-imposed quiet period, restricting communications with investors during that period. The quiet period begins in the first day of the last month of each fiscal quarter and continues until the next earnings conference call. For the third quarter, it will begin September 1 and continue through our third quarter release in October. On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer; Monty Moran, Co-Chief Executive Officer; and Jack Hartung, Chief Financial Officer. With that, I'll turn the call over to Steve.

Thanks, Alex. We're pleased with our results for the second quarter of the first -- excuse me. We're pleased with the results for the second quarter and the first half of 2012, particularly in light of the continued uncertainty about the overall strength of the U.S. economy. During the quarter, we posted comp sales of 8% on revenue of $690.9 million, an increase of 20.9% compared with the second quarter of 2011, adding up to a diluted earnings per share of $2.56 for the quarter. But I'm most pleased that Chipotle's success continues to be driven by our relentless pursuit of improving the strength of our food and people cultures. These unique attributes of our business continued to be the core drivers of our performance and our success. During the quarter, we've reached another important milestone in our quest to serve Food With Integrity, with 100% of our sour cream now coming from milk from pasture-raised dairy cattle. Under our protocol, these animals have daily access to pasture, are never given antibiotics or added hormones and are fed an all-vegetarian diet. We have opted for this protocol for our dairy because we believe it's better for the animals and environment and produces better tasting and more wholesome milk. In most large-scale dairy farms, cows have little or no access to pasture in spite of how those operations are portrayed on packaging or on other marketing materials. In addition to all of our sour cream being made from milk from pasture-raised cattle, about 65% of all of our cheese also meets the pasture-raised protocol. And we're working to get to 100% pasture-raised dairy here, too. With summer upon us, our local produce program is now in full swing, and we're serving a number of produce items in our restaurants from local…

Thanks, Steve. Like Steve, I am pleased with our results for the second quarter, and I'm very proud of our terrific restaurant teams whose hard work and dedication are driving our performance and our success. Our people culture continues to be a key driver of our business, and I'm delighted with how we have developed such an extraordinary and powerful culture so quickly. As we plan to open more restaurants this year than ever before, the need and the opportunity for our top performers have never been greater. In fact, our ability to develop people will increasingly be one of the keys to allowing us to grow effectively. Last quarter, we talked about how much the pace of our people development is increasing. In just a few years, we have gone from having a significant majority of our managers coming from outside the company to having virtually all of them, 98%, coming from within the ranks of our crews. We're also developing Restaurateurs faster and seeing more and more that our general managers when they understand the vision of our Restaurateur culture can become Restaurateurs very, very quickly. Since the first of the year, we have already named 89 new Restaurateurs with 84% of the potential Restaurateurs we have interviewed being accepted into the program. Looking out over the rest of the year, we have identified many potential and promising Restaurateur candidates, and we believe that this will allow us to promote over 150 general managers to the elite position of Restaurateur during 2012. Of course, one of the most important things that our Restaurateurs do, other than create great restaurant experiences, is to develop hourly employees into our future general managers. As you know, when Restaurateurs develop new managers from crew, they earn a people development bonus of $10,000…

Thanks, Monty. We're pleased to report another quarter of very strong operating results. Our continued focus on building a special food culture, a unique people culture and a strong unit economic model has allowed us to deliver another quarter of industry-leading financial results. Our operational and financial success demonstrates what's possible when teams of top performers are empowered to deliver a high standard and provide an exceptional dining experience to all of our customers. Our same-store sales were up 8% in the second quarter, and our average sales volume for restaurants that have been open for at least 12 months increased to a record high of $2.1 million. Overall sales for the quarter increased 20.9% to $690.9 million, driven by new restaurant openings and a comp of 8%. Year-to-date sales were $1.3 billion, an increase of 23.2%. The quarter comp was primarily driven by higher menu prices, which added 4.6% to the comp, along with an increase in customer traffic. Year-to-date comps were 10.2%, primarily driven by increased traffic, while menu price increases accounted for about 4.7% of the increase. And our teams are delivering better throughput than ever before. Sales trends slowed during the second quarter, we believe, as a result of a general slowing of the economy and reduced consumer spending. We'll walk you through the trends as we see them. You'll recall that we reported a 12.7% comp in Q1, which included a benefit of up to 200 basis points due to unseasonably mild winter weather and about 100 basis points benefit due to the leap day. So the normalized Q1 comp was in about the 10% range or so. We continued to see comps in that range through most of April, but it began to slow in very late April and continued at that lower comp…

[Operator Instructions] We'll go first to John Ivankoe with JPMorgan. John W. Ivankoe - JP Morgan Chase & Co, Research Division: The question is on new unit volumes. And obviously, you guys don't really report it, and you talked about it qualitatively. But it does look like, at least to our estimates, that for the units that were opened in the last 12 months, in the second quarter, they've been trending at a lower percentage of the average volume, even lower than the units opened in the second quarter last year. Could you comment, I mean, a little bit more specifically in terms of what you're seeing in terms of new unit volumes? In other words, has the economy perhaps affected unit volumes more than it has? Is it the mix of A Models? Is it perhaps the mix of markets? Or is it just a kind of noise that can happen in the numbers on a given quarter?

Yes, John, I think, to be honest, it was kind of all of the above. We look at our openings over a very long time. We continue to open up above our range of $1.5 million to $1.6 million. Opening with those volumes give us the opportunity to expect very strong returns out-of-the-box. And then these restaurants typically comp stronger than our -- the rest of our restaurant base. And so they quickly catch up with the average -- the overall average volume for our stores opened more than 12 months. Those returns on our average restaurants open more than 12 months are in that 60% range. And so opening up at -- above $1.5 million to $1.6 million, which we've been opening in that level for a couple of years now, gives us confidence that we can achieve those kinds of return. What you'll see from quarter-to-quarter is there's going to be a mix of -- we're opening up in different markets. If we open up in the Northeast, for example, we expect higher average volumes. If we open up in some other parts of the country, we might open up at lower volumes. And so looking at quarter by quarter is not necessarily a good indication of whether our new store opening -- whether it's a new trend in terms of them opening up higher or lower. When we look back over the last several quarters, we're very pleased with the openings, and we think the quality is very, very high. And we expect the openings to continue to open up at volumes in this similar kind of range, above the $1.5 million to $1.6 million range. John W. Ivankoe - JP Morgan Chase & Co, Research Division: And in 2011, if we look at it, right, Jack, I mean, it looks like opened even over $1.7 million. Does -- so, I mean, is that like the $1.5 million, $1.6 million is what we should be thinking going forward? Is 2011 -- again, maybe there's a geographic mix that tilted that number high?

Yes, I mean, I wouldn't talk you out of that. We're opening more restaurants this year. And so when you open up more restaurants, we're opening up more in developing markets. Last year, we did open up a slightly higher concentration in our proven markets. This year, we're opening up -- with the incremental restaurants we're opening up, there are more in some of our developing, some of our new markets. Those typically do start out-of-the-box a little bit lower. And again, there were some quarters last year where we had some openings that happened to be concentrated in some of our highest-volume markets that happened to generate higher average opening. But I wouldn't see that as a meaningful trend change. It's more just the way that individual quarters or individual batches of openings, depending on what markets, what types of markets you're going to open in. You're going to get different sales results.

And we'll go next to Joe Buckley with Bank of America Merrill Lynch.

Can you talk about the marketing? I feel like the marketing was a little bit light this quarter. And I know you don't do the type of marketing or some of the marketing you do is not where you get an immediate response, I guess, that direct marketing is. Do you plan to change a little bit with the slowing of the traffic?

I think it's a timing issue, really. And last year, second quarter, I mean, we were still convinced that a message that connects with our customers on a more emotional level was the right way to do it. But we were doing it through more traditional venues like billboards and radios and things like this. I think with the success of Back to the Start, we realized that our new way of speaking with customers and connecting with them is very successful, but we have to use methods like we use with Back to the Start. And we have a lot of exciting things that are in production. So while you see that maybe our spend was a little bit less in the second quarter this year, that should be no indication that we're lightening up on the message in general. In fact, as things finish production, we'll start to ramp up those efforts and you'll be seeing them later in the year.

And then just a question again on the sales volumes. Are the stores facing capacity issues? I know you're continuing to work on the speed of service, but are the peak hours approaching capacity issues that would somewhat limit the traffic growth going forward or transaction growth going forward?

No, Joe, they're not at all. And in fact, some really neat news surrounding the throughput to the second quarter as well as the first quarter of this year is that we were able to successfully drive a greater comp during the peak lunch, that is to say 12 to 1 p.m. hour, and at peak dinner, that is to say 6 to 7 p.m. hour. Those hours -- we actually had a higher comp during those hours than we did during the rest of the day. And so what that's showing you is that our teams in the field, our teams in the restaurant are capably putting through more restaurant -- more customers to our restaurants during those peak hours. So those hours actually contribute more than their fair share of our comp compared to the shoulder hours or the slower hours of the day. Now that's not to suggest that, that immediately translates into a incremental increase in comp sales, but it does translate right away into a better customer experience, into shorter lines, into shorter wait times during those peak hours. So statistically, that shows you, Joe, that even at a time when we've got more transactions than ever coming through our restaurants and even during the busiest time of year, our field teams have been able to step on the accelerator, so to speak, and put people through more quickly even during the time of day where it's most difficult to do so, that is to say our peak hours. So we're not experiencing any sort of roadblocks of being able to satisfy our customers even during our peak hours, much less during the rest of the day. And even in our busiest restaurants, we're not having a problem grilling enough meat, we're not having a problem with cooking enough food or getting people through the lines. So not at all an issue so far, not even in our busiest stores, not even in our smallest stores, not even in our A Model stores. So we're pleased to report that the sort of the flexibility and the health of each of our restaurants to be able to put -- to continue to grow business is as strong as it's ever been.

Maybe just one more if I could. The decision to hire area managers from the outside or field supervisors from the outside surprises me given the strength of the culture. So talk a little bit about that and the type of person you'd try to recruit for that job and where you would recruit from.

Yes, Joe, I think it's a great question. And you were right. I think you're right to be surprised by it. And it shows that you know us was pretty well, to be honest. It's by far our preference just to continue to developing people from within. And you'll recall that we didn't have this real focus of developing all of our managers from within our crew till about 6 or 7 years ago. And back then, it was sort of maybe 1 in 4, 1 in 5 of our crew members or, excuse me, of our managers came from crew; now it's 5 out of 5 managers come from crew. So obviously, we've had a tremendous amount of success getting the -- getting our managers from crew level. Now to -- and then again getting managers -- general managers to Restaurateur level, we've had a lot of success with that lately. And we're proud that we've had a lot of success seeing a lot of our Restaurateurs rise up to become leaders over 2, 3, 4 or even up to, in some cases, over 50 restaurants. And so that's tremendous, and we're very, very pleased with it and proud of that. The issue becomes that sometimes, we are seeing someone become, for instance, an apprentice team leader who has -- who goes from 4 to 8 restaurants overnight, immediately develops or very quickly develops 4 Restaurateurs such that they're able to become a team leader. And at the team leader level, all of a sudden, we're -- sometimes, we have a tendency to wanting to oversee 20 or 30 or more restaurants. And what we're seeing is that sometimes, that can tend to cause these very skilled team leaders to start being a little bit more reactive in their approach to running their restaurants and to start to act a little bit more like a traditional fast food mid-management leader, which we don't want. We don't want our mid-management leaders to approach their job of -- essentially by putting out fires or chasing symptoms. Instead, what we want them to do is build individual special cultures restaurant by restaurant that are sustainable and that will last even in the absence of sort of constant supervision by that field leader. And what that means is that we don't want to overstretch field leaders to where they have too many restaurants such that they're not doing the wonderful culture building that made them successful. So in order to avoid that, in certain areas where our growth has been very fast and where the growth of mid-management leaders hasn't quite caught pace with the unit growth, we're going to hire some area managers to take a little bit of that pressure off so that these superstars rising up through the ranks remain superstars and we don't push them to a point where they're not successful as they could be. Does that make sense?

I'm not sure. Where will you recruit from? What kind of people will you have join?

Well, I mean, we're going to cast a very, very wide net nationwide for a very, very few people. And we're -- we plan to interview a whole lot of people in order to get just a few candidates. But what we're going to do in order to interview them is we're having a broad team of people interview them, including at least 3 regional directors who'll interview each candidate, plus Jack and Steve and myself will be involved in personally interviewing the candidates. So it's something that we're approaching very carefully. It's not something -- we don't need to hire them immediately or anything like that, but there's a few places where we think that it's going to be helpful to have some help in -- for the sort of the short term until some of these quickly developing apprentice team leaders get up to the point where we can responsibly give them more restaurants to oversee. So it's going to be a very careful process. We're going to hire a few people after interviewing a whole lot of candidates. And we're going to get those candidates from word of mouth from our existing leadership, from -- and from recruiting messages that we send out to the country as well.

And we'll go next to Nicole Miller Regan with Piper Jaffray.

This is Josh on for Nicole. I want to see if you could provide an update on some of the interesting and exciting tools you're doing on the recruiting side and maybe kind of follow up on Joe's question. Is there an opportunity to use this, not only the hourly restaurant-level team member but also on some of these field teams or area manager positions?

I just missed the first part of what you said, so I'm not sure what the question is. Can you repeat it, please?

Sure, Monty. It just -- it seems like over the last couple of quarters, we've been talking about the new recruiting tool and how you go to market to recruit talent. It's a little bit different and very different from your peers. You're leveraging online, social media and just how you engage those high performers and you seek them out. I wanted to see if we could get an update on that and maybe how that's played out into some of those markets where you have a large turnover, maybe here in Minneapolis or maybe in the D.C. area. Just any learning you had seen on being able to put that into practice.

Yes. Well, we've put into place those recruiting methods. But really, those recruiting methods were more geared towards getting crew members, hourly members, into our restaurants. So those recruiting strategies were geared towards crew, not towards mid-management leadership. So those methods have worked well, and we've got -- we've been able to get a very diverse, very powerful group of crew coming into our restaurants. The teams that we're seeing in our restaurants, especially new restaurant openings, are really some of the best teams I've ever seen. In fact, I feel like it's -- lately, a lot of Restaurateurs are coming from new restaurant openings that have only been open for several months and where these managers are able to recruit new teams, hire very, very carefully and those folks are able to achieve Restaurateur status really, really quickly. So I'm really pleased with that. What -- the other thing I had mentioned here earlier is that we're going to over time look -- take a look at where the -- look at the people we're hiring, where they're coming from and which type of recruitment source is having more and less success in giving us great people. And I think that's what you're referring to. I don't really have an update on that yet because, frankly, it's just too early for us to have done the analysis over which method has been most effective in bringing us the greatest people. So what we're going to do is over time when we assess turnover, when we look at who left and who stayed and who's great and who's not, we will look where we found those people and try to use more of those methods that gave us the superstars and less of those methods that didn't. But that back-end analysis hasn't been done yet and won't be done for a little while until we get a little more experience in the field.

And we'll go next to Sara Senatore with Sanford Bernstein. Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division: I just had a couple of questions about sort of pricing and the promotion, the buy-one-get-one. I wanted to sort of get a sense of how that did. I think I remember when you did something similar, it had kind of an unexpected impact in terms of the margin sales trade-off, and I want to see if you had -- you felt like you had done maybe a little bit more of a scientific job on that now. And then the other piece was about -- I was interested to hear that even though pricing is off, a little less pricing, your traffic is about the same. What -- the difference isn't that big sequentially, but can you -- do you see any change in, I guess, the price, the traffic trade-off, what we would think of as elasticity?

Okay, Sara, on the first question, with the buy-one-get-one, I think you're referring to over a year ago, we had an online offer and it was way oversubscribed. It did have an impact on our comps, had an impact on our margin. We had more promo costs in that quarter. I think it was in the first quarter of last year or maybe spilled in the second quarter. And we have more promo costs than we had in a long, long time. And we weren't really happy with that promotion at all because we felt like rather than inviting a lot of customers, either new customers or customers that haven't been in a while, we kind of felt like people were just kind of reprinting the offer. We didn't really have it controlled well. And so there was a reprinting and people were oversubscribing and coming back over and over and over again. That's, I think, the promotion you're referring to that we didn't like. We've always done and we've always liked the direct mail where we can target who we're sending to and we can take an individual restaurant. We can kind of draw a ring around it, and we can send out direct mail. And the direct mail offer that Steve mentioned would be a buy-one-get-one. We like buy-one-get-ones because, first of all, our Chipotle customers are excited to get a deal like that, and they're going to be anxious to come in. In fact, our redemptions are very, very high. They're in the high teens to 20% range, which is much higher than what the industry average would be. But better than that, they get to bring somebody. So we hope that they're going to bring somebody that has never been or hadn't been in a while.…

Yes, the other thing I would clarify is that when -- and a lot of restaurants get resistance. When they increase prices, they either see resistance in people spending less on each visit or they visit less. We don't usually see that. So last year when we raised prices, we didn't see any kind of decline in transactions, we didn't see any kind of decline in average check. So when we go comp against that, we don't see a positive benefit either. And so that's why it's not unusual at all to not see a rebound as we're lapping that. We're seeing a slowdown. I mean, there's no other way around it. We were humming along nicely in the first quarter. We were humming along nicely in April. And then we saw a slowdown. Now part of the slowdown, we do think, is the tough comparison. We're up -- when you add the 8% in the second quarter, we're up since the recession. When you're adding 3 years' worth of comps, it's about 25% since the recession. But the comparison in the second quarter was a tougher comparison. We're comparing against 18% versus the 16%, or 18.7% versus 16.7%. So we think that was part of it. But we are seeing a flattening and then a slight slowing of our comps. We think it's related to just general consumer spending. We're not seeing anything that's specific to markets. It seems like it's a -- it's pretty broad based. It's not a significant slowdown, but it is a slowdown.

And we'll go next to David Tarantino with Robert W. Baird. David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division: Maybe just following up on the last point you just made, Jack. I think in the past, you talked about Chipotle being more resilient to consumers' slowing patterns. And just wondering what your thoughts are on why you think the brand is seeing it this time around and how you're drawing the conclusion that it's the broader macro environment and not something that might be related to the comparison or something internally at Chipotle.

David, I wish I had a better answer for you. You're right, we always expect that we're not a very good leading indicator of the economy slowing. When we look back to the recession, the very significant recession, we were very late to see any kind of slowing down of our comps back then. And then when the recession started to end and the recovery started, we were very early in the recovery process. And so we felt like we would -- when there would be a slowdown, that we would see it later and then we will recover sooner. And so we don't really have a great answer at this point. We do think part of it is comparisons. We do think that the fact that we're comparing to a high teens, the 2-year high teens, is part of it. And other than that, we're not really sure. We do sense that there has been a pickup in advertising with some other restaurant companies. I don't know how broad based that is. It's possible that maybe, the advertising that often happens with other restaurants is it is transaction building. It is -- there's an offer involved, whether it's a new menu item or something like that. It's possible that maybe that's causing people to visit other restaurants. But we just don't know. It's a very fairly sudden trend, and it's still a trend that we're trying to figure out. And so we're still -- look, we're still studying and still trying to figure out what the trends mean. David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division: Okay, that's helpful. And then maybe just one more. As you think about the 87 openings year-to-date, it seems like that's on a faster pace than for the annualized number you're targeting. I'm just curious to know your thoughts on whether that type of pace is something that you might think about looking forward. And is there opportunity to step up the unit growth, I guess, is the question.

Yes, David, we've always said that we -- we're going to grow as fast as we can find great real estate and great managers. And it's never been our goal to chase a certain number. It's never been our goal to grow as fast as possible. It's always been our goal to grow our brand in order to meet an increased demand for what we're doing in the markets where we're serving customers and in new markets. And that's what we're doing. We're very pleased with the sort of pipeline of real estate that we're seeing. We think that we are leasing very, very good locations. We're opening to very healthy volumes. And so for that reason, we have increased the guidance we've given, the 155 to 165, which is the fastest we've ever grown. And we feel like the pipeline for our future growth looks really good, too. And then in speaking with our field teams, we are feeling really bullish about the number of Restaurateurs we're developing. Like I said, we're predicting that it'll be something like 150 Restaurateurs developed this year versus only 102 last year. And so Restaurateurs is being sort of the foundation of our people culture and the foundation of our future leadership group. That gives us confidence that we're going to continue to have great leadership to open restaurants. So for that reason, we're very bullish that we're going to be able to continue to grow at a brisk pace. But it's not our goal to sort of hit red line or push the gas pedal all the way down on growth because we don't want to have anything not be as good as it can be with regard to if we try to grow too fast, I mean, it could impact real estate, it could impact our people and we don't want to do either of those things. But we think we're growing quite quickly. We're pleased, like I say, with our growth, with our EPS growth and with the health of the business. We want to grow sort of quickly but responsibly so that we can continue to feel really good about the health of our business.

And we'll go next to Sharon Zackfia with William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: Jack, I wanted to talk a little bit more on the slowdown that you've seen. Just curious if you're seeing it at lunch and dinner and weekdays, weekends. Anything kind of more granular. If you're seeing it across the country, anything specific you could give us.

Yes, Sharon, there's nothing in particular. There's nothing really by market that stands out. If anything, our highest comps. We can look at our comps by hour of the day. And our peak hours at lunch and at dinner are the highest throughout the day. Those are our 2 highest hours. We think that's because of the focus on throughput. So we're not losing really at dinner, we're not losing at lunch. I can tell you that the one thing that's interesting, it doesn't explain the slowdown. A significant percentage of our increase is takeout. And so we do have more people coming in and leaving. And I don't know what that means. It does mean that we are selling a few less drinks. I wouldn't say that the few less drinks that we're selling are significant in the overall scheme of our sales comp. But that's the only thing that we've seen. And again, I don't think that explains the slowdown, but there's nothing in terms of by market, by day of the week, anything like that. It seems like just kind of a general leveling off than a general slight slowdown across the markets, across the days and across the hours. Sharon Zackfia - William Blair & Company L.L.C., Research Division: I just want to be clear. I think if you kind of impute the math from like a 10% comp. In April, you're probably running 7s in May and June, which will be kind of similar to the traffic level you were running in July. So do you feel like things really have leveled off? Or is it choppy day-to-day or week-to-week?

I think they have, Sharon. The April, while we're running 10s, we actually got a more negative trading day than we expected. So April ended up at, net of the trading day, close to the other months. So that benefit that we had running through most of April, we lost, and part of which was just literally trading day, that we traded 2 weaker days for 2 strong days last year. But when you went back to the 2 days we lost last year, which I think were a Friday and a Saturday or a Thursday, Friday, 2 of our best days, they were kickass days. And we -- they were really, really strong individual days last year. And so April ended up being close to the other months even though the underlying weekly trends were strong. So I do feel like we've leveled off. Or at least from what we've seen so far moving from April to May and June and then into July, the transaction trends we're seeing are similar to what we saw kind of overall on average during the second quarter. Sharon Zackfia - William Blair & Company L.L.C., Research Division: Okay. And then one last question. If your comps do kind of steady in the low to mid-single-digit range and it's primarily transaction, do you still feel comfortable with the pricing power of Chipotle? If grains prove to be an issue, if your proteins -- going into next year, I mean, how do you think about that going forward?

Well, we do, Sharon. We felt like we've got as -- again, as much, if not more, pricing power than other restaurant companies. When we talk to our customers and survey our customers, they feel great about the value that we offer at Chipotle. They feel great about the quality of the food. They trust where the food comes from. With our marketing message, they're increasingly understanding that -- the care that we take to go buy the finest ingredients we can. They like the idea that we're sourcing ingredients that are sourced with respect for the environment, the animals, the farmers. And so the more people discover about Chipotle, the better they feel about the experience. And so we think we still have very, very strong value scores. Now considering that our transactions have slowed, it just reinforces our conviction that we're not in a hurry to raise prices. We're not going to raise prices to boost up our comp. We have really strong margins, really strong returns. And so we'll sit tight on the prices. But there's nothing in any of the research or any of the trends that we're seeing that suggest that we don't -- still have very strong value and as strong a pricing power as we've ever had. Yes. And in fact, there was a recent study that kind of across-the-board in terms of the quality of the food and Chipotle in terms of being the top choice. There were a number of different attributes that were used -- and this wasn't a study that we did -- that we were kind of across-the-board the #2 restaurants. I'll let you guys figure out what the #1 restaurant was, but -- and that's the kind of thing that we consistently see there in our research. Or in outside research, we continue to see that customers feel very good about the Chipotle experience. So that hasn't changed our mind about our pricing power.

And we'll go next to Michael Kelter with Goldman Sachs.

I wanted to ask because since you guys are attributing the slowdown mostly to the macro, I guess that implies that you don't plan to do anything company specific to try to reaccelerate your own trends and kind of take it into your own hands? I don't mean deep discounting or anything like that, but is there something that you should be doing that makes sense for Chipotle?

Well, our initial reaction, Michael, would be if we were to do something, that would be a kind of a reaction. And we're not going to -- I'll tell you what we're not going to do. We're not going to do things that traditional QSR might do. So we're not going to do discounting, and you already mentioned that. We're not going to rush out and come up with the next new menu item. And so our formula for focusing on our food culture, making sure that the ingredients we buy, the way we prepare and cook the ingredients and serve those ingredients, the people that we hire to make sure that the experience of every single customer is an extraordinary experience, the way we design our restaurants to make sure it's a pleasant experience, those things have worked really, really well for us. And so we're not about to -- because of a slowdown in monthly or quarterly comps, we're not about to change that formula. We're still going to study this, okay? And so to the extent that we find something that perhaps we're not connecting with the customer, not getting the message across, to the extent that we're -- in any way a restaurant can do something better -- I mean, throughput is one thing we're focused on because we think that is going to help our customers have a better experience. When we find things that we can do to improve the dining experience of our customers, we will do those things. In terms of short-term, gimmicky things that other restaurants have done, I would not expect us to resort to those.

And then on the recent spike in commodities, what does that mean for you given your focus on sustainable sources? Have prices in the last month for sustainable ingredients gone up more or less than traditional food inputs? How do we think about that?

They've remained relatively stable. We haven't seen any spike per se. The increases that we're expecting in the near term are the same increases that we talked about for a few quarters now. So we expect some continued inflation in beef. We expect some continued inflation, although it's more seasonal, with our avocados in the next quarter. We think it's probably out a couple of quarters into the fourth quarter maybe in the next year that the extreme weather and the drought that we think will have an impact on the feed and then could have an impact on, we think, primarily our meats and our dairy. But we haven't seen -- we haven't felt, with the ingredients that we buy, anything immediate, any kind of recent spike in what we're buying.

And then lastly on -- I just wanted to ask about breakfast. And you guys are no longer serving. If I understand it right, you're no longer serving eggs at the Dulles Airport location and selling lunch, dinner food before 11 a.m. I'm curious what you've learned in doing that and whether there's any potential for you to open earlier across the system even with the existing menu.

Sure, Michael. Well, I'd tell you, we really changed the breakfast menu because of customer demand. We had a lot of customers who were asking for the regular menu, the menu we serve at lunch and dinner, and really wanting that first thing in the morning. It would be very difficult in our existing format to serve both, to serve both the regular lunch dinner menu and a separate breakfast menu. So we switched over to this -- to the regular menu all day long and have continued to build on our breakfast business. And people seemed to enjoy that very much. I think your question whether or not that might be something that we would want to do in other restaurants is a good one. In fact, we've asked the same question of ourselves and have looked for a restaurant or 2 where we might be able to test that. So we're in the process of doing that.

That does conclude our question-and-answer session. I will now turn the call back over to the speakers for any additional or closing remarks.

Thanks, everyone, for joining us, and we look forward to speaking with you next quarter.

Thanks, everyone.

Thanks, everyone.

Thank you. That does conclude our conference. You may now disconnect.