Question 5 - Estimating Enrollment into Loyalty Program In this question, we will examine financial information from Chipotle Mexican Grill, Inc. Find Chipotle's most recent financial statements as of December 31, 2021. In the following questions, you will make a rough estimate of the proportion of customers who joined Chipotle's rewards program (link). Although redemption terms are more complex, we will focus on the single term that you can redeem a free meal (entre) after spending $125. For simplicity, let's assume the value of the free entre is $10. (1) How much is Chipotle's food and beverage revenue for fiscal 2021? (2) From Note 3, how much revenue did Chipotle defer out of its sales transactions due to customers earning rewards during fiscal 2021? (3) For simplicity, assume all customers are identical and all meals are also identical with a price of $10. Under that assumption, Chipotle's rewards program lets a customer to get a free meal for 12.5 meal purchases. Assuming that it is certain that the customer will redeem the reward, how much should Chipotle defer in each of its meal sale? (4) Suppose all customers joined the rewards program. For simplicity, also Assume that your answer to (1) is the portion of revenue recognized immediately upon meal sales. Given your answer to (3), how much revenue should Chipotle have deferred out of its sales transactions due to customers earning rewards during fiscal 2021 under those assumptions? (5) Obtain a rough estimate of the proportion of customers who joined Chipotle's rewards program by dividing your answer to (2) by your answer to (4). (6) Re-do the calculations in (3)-(5) by assuming that only 60% of customers who earn rewards redeem them. In Note 1, Chipotle does disclose that earned rewards expire pretty fast (generally within one to two months from issuance). Question 5 - Estimating Enrollment into Loyalty Program In this question, we will examine financial information from Chipotle Mexican Grill, Inc. Find Chipotle's most recent financial statements as of December 31, 2021. In the following questions, you will make a rough estimate of the proportion of customers who joined Chipotle's rewards program (link). Although redemption terms are more complex, we will focus on the single term that you can redeem a free meal (entre) after spending $125. For simplicity, let's assume the value of the free entre is $10. (1) How much is Chipotle's food and beverage revenue for fiscal 2021? (2) From Note 3, how much revenue did Chipotle defer out of its sales transactions due to customers earning rewards during fiscal 2021? (3) For simplicity, assume all customers are identical and all meals are also identical with a price of $10. Under that assumption, Chipotle's rewards program lets a customer to get a free meal for 12.5 meal purchases. Assuming that it is certain that the customer will redeem the reward, how much should Chipotle defer in each of its meal sale? (4) Suppose all customers joined the rewards program. For simplicity, also Assume that your answer to (1) is the portion of revenue recognized immediately upon meal sales. Given your answer to (3), how much revenue should Chipotle have deferred out of its sales transactions due to customers earning rewards during fiscal 2021 under those assumptions? (5) Obtain a rough estimate of the proportion of customers who joined Chipotle's rewards program by dividing your answer to (2) by your answer to (4). (6) Re-do the calculations in (3)-(5) by assuming that only 60% of customers who earn rewards redeem them. In Note 1, Chipotle does disclose that earned rewards expire pretty fast (generally within one to two months from issuance)
