Chipotle Mexican Grill (CMG) 10-K risk factor changes: FY2015 vs FY2014

[removed: _Risks] [added: Risks] Related to our Growth Strategy and Future [removed: Expansion_][added: Expansion]

While future sales growth will depend to an extent on our opening new restaurants, changes in comparable restaurant sales [removed: (which represent the change in period-over-period sales for restaurants beginning in their 13th full month of operations) will] also affect our sales growth and will continue to be a critical factor affecting [removed: profit growth.][added: our profitability.]

This is because the profit margin on [added: incremental] comparable restaurant sales is generally [removed: higher,] [added: higher] as [added: a result of] comparable restaurant sales increases [removed: enable] [added: increasing the sales base over which] fixed costs [removed: to be spread over a higher sales base.][added: are spread.]

Conversely, declines in comparable restaurant [removed: sales can] [added: sales, as we] have [added: seen since November 2015 as] a [added: result of the food safety incidents discussed elsewhere in this report, have a] significant adverse effect on profitability due to the loss of the positive impact on profit margins associated with comparable restaurant sales increases.

| | • | | executing our strategies effectively, including our development strategy, our marketing and branding strategies, our initiatives to increase the speed at which our [removed: crew serves] [added: crews serve] each customer, expanded use of [removed: fax service lines and] online and other electronic ordering, [removed: and introductions of] [added: increasing sales from our] catering [removed: options] [added: options,] and new menu items, each of which we may not be able to accomplish or which may not have the impact we expect; |

| | • | | initial sales performance of new restaurants, and [removed: potential adverse] [added: the] impact of new [added: Chipotle] restaurants [removed: on existing restaurant sales, which are] [added: in the event customers who frequent one of our restaurants begin to visit one of our new restaurants instead, as] further described below under [removed: “_Our] [added: “—Our] new restaurants, once opened, may not be profitable, and may adversely impact the sales of our existing [removed: restaurants_”;] [added: restaurants”;] |

As a [removed: result of these factors] [added: result,] it is possible that [added: changes in our comparable restaurant sales will continue to be negative or that] we [added: otherwise] will not achieve our targeted or expected comparable restaurant [removed: sales or that the change in comparable restaurant sales could be negative.][added: sales.]

Past declines in [added: the rate of] our comparable restaurant sales [removed: increases] [added: growth] have significantly impacted our stock price.

[removed: Moreover, even] [added: Even] the expectation of declining comparable restaurant sales increases has had a significant impact on our stock price in the past.

For example, when we announced in October 2014 that we [removed: expect] [added: expected] comparable restaurant sales for 2015 in the low to mid-single digit range (as opposed to the double-digit comparable restaurant sales increases we reported for the third quarter of 2014), the price of our common stock declined nearly 7% on the following trading day.

[removed: _Increasing] [added: Increasing] our sales and profitability depends substantially on our ability to open new restaurants in sites and on terms attractive to us, which is subject to many unpredictable [removed: factors._][added: factors.]

We had [removed: 1,783] [added: 2,010] restaurants in operation as of December 31, [removed: 2014.][added: 2015.]

We plan to increase the number of our restaurants [removed: significantly in the next three years,] [added: significantly,] and plan to open between [removed: 190] [added: 220] and [removed: 205] [added: 235] new restaurants in [removed: 2015.][added: 2016.]

| | • | | difficulty ramping up the growth of our international business or new restaurant concepts, including for the reasons described below under [removed: “—_Our] [added: “—Our] expansion into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other [removed: factors_”] [added: factors”] and [removed: “—_ShopHouse] [added: “—ShopHouse] Southeast Asian [removed: Kitchen and] [added: Kitchen,] Pizzeria Locale [added: and other new restaurant concepts] may not contribute to our [removed: growth_”;] [added: growth”;] |

| | • | | any shortages of construction [removed: materials and labor;] [added: labor or materials;] |

Constraints on our hiring new employees are described further below under [removed: “_Risks] [added: “Risks] Related to Operating in the Restaurant [removed: Industry_—_Our] [added: Industry—Our] business could be adversely affected by increased labor costs or difficulties in finding the right employees for our restaurants and the right field [removed: leaders_.”][added: leaders.”]

These factors could negatively impact our ability to [removed: drive] [added: manage our] occupancy [removed: costs lower as a percentage of revenue,] [added: costs,] which [removed: would] [added: may] adversely impact our [removed: profitability growth.][added: profitability.]

In addition, any of these factors may be exacerbated by [removed: any ongoing] economic [removed: recovery, as] [added: factors, which may result in] developers and contractors [removed: see] [added: seeing] increased [removed: demand.][added: demand and therefore driving our construction and leasing costs up.]

[removed: Our] [added: Any] decision to delay or forego a significant number of new restaurant openings, or our inability to open the number of new restaurants we plan, due to any of the reasons set forth above could materially and adversely affect our growth strategy and our expected results.

Moreover, as we open and operate more restaurants our rate of expansion relative to the size of our existing restaurant base will decline, which will make it increasingly difficult to [removed: maintain our past rates] [added: achieve levels] of sales and profitability [removed: growth.][added: growth that we have seen in the past.]

[removed: _Our] [added: Our] new restaurants, once opened, may not be profitable, and may adversely impact the sales of our existing [removed: restaurants._][added: restaurants.]

This is in part due to the time it takes to build a customer base in a new area, [removed: higher fixed costs relating to increased labor] and [removed: other start-up inefficiencies that are typical of new restaurants, and] a larger proportion of our recent openings being in higher rent sites than we have historically targeted.

If we are unable to build the customer base that we expect for new restaurant locations or [added: overcome the higher fixed costs associated with new restaurant locations, new restaurants may not have similar results as our existing restaurants and may not be profitable.]

In [added: addition, in] the event we are not able to contain increases in our average restaurant development costs, which could result from inflation, an increase in the proportion of higher cost locations, project mismanagement or other reasons, our new restaurant locations could also result in decreased profitability.

We have [removed: now] [added: also] opened restaurants in nearly all major metropolitan areas across the U.S. New restaurants opened in existing markets may adversely impact sales in previously-opened restaurants in the same market as customers who frequent our established restaurants begin to visit a newly-opened restaurant instead.

[removed: _Our] [added: Our] expansion into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other [removed: factors._][added: factors.]

In [removed: 2008,] [added: 2008] we opened our first restaurant outside the U.S., in Toronto, Canada.

In 2010 we opened our first restaurant in the United [removed: Kingdom] [added: Kingdom,] in [removed: London,] [added: London;] in 2012 we opened our first restaurant in [removed: France] [added: France,] in [removed: Paris,] [added: Paris;] and in 2013 we opened our first restaurant in [removed: Germany] [added: Germany,] in Frankfurt.

As of December 31, [removed: 2014, 17] [added: 2015, 23] of our restaurants were located outside of the U.S. As a result of our small number of restaurants outside the U.S. and the relatively short time we have been operating those restaurants, we have lower brand awareness, [removed: lower sales and/or transaction counts,] and less operating experience in these [added: markets and our average restaurant sales and/or transaction counts may be lower in these markets than in the U.S. The markets in which we’ve opened restaurants outside the U.S., and any additional new markets we enter outside the U.S. in the future, have different competitive conditions, consumer tastes and discretionary spending patterns than our U.S.] markets.

[removed: In addition, restaurants outside the U.S. have had higher construction, occupancy and food costs than restaurants in] existing markets, and we may have difficulty finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of ingredients meeting our quality standards.

[removed: _ShopHouse] [added: ShopHouse] Southeast Asian [removed: Kitchen and] [added: Kitchen,] Pizzeria Locale [added: and other new restaurant concepts] may not contribute to our [removed: growth._][added: growth.]

In order to see how our model works when we use different ingredients and a different style of food, we opened ShopHouse Southeast Asian Kitchen during 2011 and now have a total of [removed: nine] [added: 13] ShopHouse restaurants, in [removed: Washington D.C.] and [removed: the] [added: around Washington D.C.,] Los Angeles [removed: area.][added: and Chicago.]

We also have a majority ownership interest in a company operating [removed: two] [added: three] fast casual Pizzeria Locale restaurants in Denver, Colorado, and [added: Kansas City, Missouri and] we plan to [removed: invest in and] assist with the [added: further] expansion of Pizzeria Locale in the future.

Notwithstanding our opening of [removed: ShopHouse and] [added: ShopHouse,] investment in Pizzeria Locale, [added: and exploration of other restaurant brand opportunities,] our immediate focus will remain on thoughtfully growing the Chipotle brand.

As a result, we do not expect [removed: ShopHouse or] [added: ShopHouse,] Pizzeria Locale [added: or other concepts] to contribute to our growth in a meaningful way for at least the next several [removed: years, and we may determine not to move forward with any further expansion of ShopHouse or Pizzeria Locale.][added: years.]

[removed: This] [added: These decisions] would [added: each] limit our overall growth over the long [removed: term.][added: term as well.]

[removed: _Our] [added: Our] failure to manage our growth effectively could harm our business and operating [removed: results._][added: results.]

[removed: _Risks] [added: Risks] Related to Operating in the Restaurant [removed: Industry_][added: Industry]

[removed: _Changes] [added: Changes] in food and supply costs could adversely affect our results of [removed: operations._][added: operations.]

Food prices for a number of our key ingredients escalated markedly at various points during [removed: 2013 and] 2014 and [removed: we expect that] [added: 2015 and] there [removed: will] [added: could] be additional pricing [removed: pressures] [added: pressure] on [removed: some of those ingredients, primarily beef,] [added: key ingredients] during [removed: 2015, which we expect will be partially or fully offset by relief in dairy prices.][added: 2016.]

Risks Related to Food Safety Incidents that Occurred During 2015

Our system-wide restaurant sales were adversely impacted beginning in the fourth quarter of 2015 by food safety incidents associated with our restaurants, and we may not be able to regain lost sales.

During late October and early November 2015, illnesses caused by E. coli bacteria were connected to a number of our restaurants, initially in Washington and Oregon, and subsequently to small numbers of our restaurants in as many as 12 other states.

As a result of these reported illnesses and related restaurant closures for remediation, our company-wide sales were adversely impacted, with significant declines in our comparable restaurant sales in the days immediately following announcements related to the incidents.

During the week of December 7, 2015, an unrelated incident involving norovirus was reported at a Chipotle restaurant in Brighton, Massachusetts, which worsened the adverse financial and operating impacts we experienced from the earlier E. coli incident.

As a result, comparable restaurant sales (which represent the change in period-over-period sales for restaurants beginning in their 13th full month of operations) declined 14.6% for the fourth quarter of 2015, including a 30% decline in December 2015.

Subsequent announcements and publicity regarding food safety incidents in our restaurants and the related criminal investigation described in Note 10.

“Financial Statements and Supplementary Data” had an additional negative impact on our sales trends, with comparable restaurant sales declining over 36% in January 2016.

We believe the impact of these incidents on our sales has been exacerbated in part by the high expectations many customers have for us as a result of our Food With Integrity mission, and our failure to meet those expectations may make recovery more difficult for us.

Additionally, the significant amount of media coverage regarding these incidents and the impact of social media (which was not in existence during many past food safety incidents involving other restaurant chains) in increasing the awareness of these incidents may also negatively impact our ability to recover from these incidents.

As a result of the foregoing factors, it may take longer for our sales, and customer perception of our brand, to recover than has been the case during past food safety incidents associated with other restaurant chains, and our sales may not recover at all.

Even if we are able to regain lost customers, we may not recover to the same average restaurant sales we were achieving prior to the fourth quarter of 2015.

We define average restaurant sales as the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months.

In an effort to invite customers back into our restaurants, we are planning a number of marketing and promotional activities beginning in the first quarter of 2016, including distributing a large number of promotional offers for free or discounted food.

The costs associated with these and other marketing activities will negatively impact our profitability.

Additionally, these activities may not entice customers to visit our restaurants, and even if they do they may not result in customers returning for subsequent visits, and therefore may not be successful in helping us restore lost sales.

Declines in comparable restaurant sales have a significant adverse impact on our profitability, as described further under “Risks Related to our Growth Strategy and Future Expansion – Our sales and profitability will be adversely affected if comparable restaurant sales continue to decline or otherwise fail to meet expectations in the future.”

Changes we have made in our operations, or that we make in the future, to further enhance the safety of the food we serve will adversely impact our financial performance and may negatively impact customer perception of our brand.

As a result of the food safety incidents associated with our restaurants during 2015, we have implemented a number of enhancements to our food safety protocols, and intend to make additional enhancements, to ensure that our food is as safe as it can be.

Many of our new procedures, which go beyond the industry-standard food safety practices that we were previously following, will increase the cost of some ingredients or the amount of labor required to prepare and serve our food.

If we aren’t able to increase sales to offset the increased costs resulting from these changes, our margins will fall well short of levels we have historically achieved.

Even if we were to restore sales to levels we were achieving prior to the food safety incidents, the increased costs from these changes will result in lower margins than we were able to achieve in the past.

Additionally, some of the enhanced food safety procedures we have introduced or may introduce in the future rely on increased use of centralized food preparation, additional in-restaurant preparation steps, or new ingredients, some or all of which may be inconsistent with previous customer perceptions of our restaurant operations.

To the extent customers perceive any of these developments as a move away from our Food With Integrity strategy and/or towards a more traditional fast food experience, our ability to win back customers may be adversely impacted and our sales may decline or recover more slowly than they otherwise would have.

Regulatory actions and litigation related to food safety incidents that impacted us beginning in the fourth quarter of 2015 may adversely impact us.

We are facing ongoing government investigations into the food safety incidents that occurred in 2015, including the criminal investigation described in Note 10.

“Commitments and Contingencies” in our consolidated financial statements included in Item 8.

“Financial Statements and Supplementary Data.” We also have received numerous claims from customers who were or claim to have been impacted by these incidents, and a number of those claimants have filed lawsuits against us.

We are cooperating in the government investigations and with many of the customers impacted by these incidents, but will incur significant legal and other costs in doing so.

We have also been sued in a shareholder class action lawsuit in connection with the decline in our stock price in the wake of the food safety incidents, and defending this lawsuit will subject us to significant legal expense.

Additionally, the liabilities from customer claims and related litigation expenses may be greater than we anticipate due to the uncertainties inherent in litigation.

All of these costs, liabilities and expenses will negatively impact our operating results.

Moreover, publicity regarding any legal proceedings related to food safety incidents may increase or prolong consumer awareness of the incidents or otherwise negatively impact perceptions of our brand, which may hamper our ability to regain lost sales or attract new customers to our restaurants.

Any further instances of food-borne or localized illnesses associated with our restaurants would result in increased negative publicity and further adverse impact on customer perceptions of our brand, which would likely result in further declines in our sales.

Because of customer perceptions about our restaurants and brand in the wake of the food safety incidents described above, any future occurrence of food-borne illness associated with our restaurants would likely have an even more significant negative impact on our sales and our ability to regain customers.

And in any event, no food safety protocols can completely eliminate the risk of food-borne illness in any restaurant, so our enhanced food safety protocols may not be successful in preventing a food-borne illness incident in the future.

Even if food-borne illnesses arise from conditions outside of our control, the negative impact from any such illnesses is likely to be significant.

Our sales and profitability will be further adversely affected if comparable restaurant sales continue to decline or otherwise fail to meet expectations in the future.

| | | | |

| | • | | perceptions of the Chipotle brand and the safety and quality of our food; |

| --- | --- |

_Our sales and profit growth could be adversely affected if comparable restaurant sales increases are less than we expect, and we may not successfully increase comparable restaurant sales or they may decrease._

We expect 2015 full year

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comparable restaurant sales increases to be in the low to mid-single digit range as comparisons become more difficult, particularly during the final three quarters of the year as we begin to overlap nationwide menu price increases implemented in 2014.

| --- | --- | --- | --- |

| | • | | consumer understanding and acceptance of the Chipotle experience and perceptions of the Chipotle brand; |

| | • | | competition, either from our competitors in the restaurant industry, or from our own restaurants in the event customers who frequent one of our restaurants begin to visit one of our new restaurants instead; |

| | • | | changes in government regulation. |

A number of these factors are beyond our control, and therefore we cannot assure that we will be able to sustain comparable restaurant sales increases.

Beginning in the second quarter of 2012, prior to which we had been experiencing strong comparable restaurant sales growth momentum, our comparable restaurant sales increases decelerated and the price of our stock declined significantly in the wake of this deceleration, including a decline of nearly 22% on the trading day following our second quarter 2012 earnings release.

overcome the higher fixed costs associated with new restaurant locations, new restaurants may not have similar results as our existing restaurants and may not be profitable.

In addition, after several years of lowering the average development cost, net of landlord reimbursements, for new Chipotle restaurants in the U.S. from about $916,000 in 2008 to about $800,000 in 2013, our average developments costs, net of landlord reimbursements, for new Chipotle restaurants in the U.S. have begun to increase.

In 2014 these costs rose to about $843,000, and we expect them to decrease slightly in 2015.

The markets in which we’ve opened restaurants outside the U.S., and any additional new markets we enter outside the U.S. in the future, have different competitive conditions, consumer tastes and discretionary spending patterns than our U.S. markets.

spikes in the prices of some ingredients such as produce or meats.

We could also become subject to

_Instances of food-borne or localized illnesses could cause the temporary closure of some restaurants or result in negative publicity, thereby resulting in a decline in our sales, and could adversely affect the price and availability of the meat, produce or dairy we use to prepare our food._

Instances of food-borne illnesses, real or perceived, whether at our restaurants or those of our competitors, may subject us to liability to affected customers, and could result in negative publicity about us or the restaurant industry that adversely affects our sales.

On a small number of occasions one or more Chipotle restaurants have been associated with customer illness, and on those occasions our sales have sometimes been adversely impacted, at times even in markets beyond those impacted by the illness.

If our customers become ill from food-borne or localized illnesses or if an illness is attributed to our food, even incorrectly, we could also be forced to temporarily close some restaurants, further impacting sales.

Similarly, past outbreaks of E. coli relating to certain food items caused consumers to avoid certain products and restaurant chains, Asian and European countries have experienced outbreaks of avian flu, and incidents of “mad cow” disease have occurred in Canadian and U.S. cattle herds.

well-known brands.

Without this supply, we do not

accruals, and similar requirements and these changes could increase our labor costs.

healthcare plans.

Furthermore, we have been sued in shareholder class action and derivative lawsuits regarding our financial disclosures and our Board’s oversight of our business, and as a publicly-traded company we cannot be assured that similar actions will not be brought against us in the future.

“Financial Statements and Supplementary Data.”

Consumers may also be more price-sensitive during periods of economic difficulty or uncertainty, and we experienced some decrease

in traffic during late 2008 and throughout 2009 that we attribute in part to customer resistance to menu price increases.

A few of our markets have reverted to temporarily serving conventionally raised beef or chicken due to supply shortages, including ongoing shortages of beef meeting our protocols during 2013 and early 2014.

Furthermore, as we grow, the ability of our suppliers to expand output or otherwise increase their supplies to meet our needs may be constrained.

Moreover, we have made a significant commitment to serving local or organic produce when seasonally available, and a small portion of our restaurants also serves produce purchased from farmers markets seasonally as well.

These produce initiatives may make it more difficult to keep quality consistent, and present additional risk of food-borne illnesses given the greater number of suppliers involved in such a system and the difficulty of imposing our quality assurance programs on all such suppliers.

Quality variations and food-borne illness concerns could adversely impact public perceptions of Food With Integrity or our brand generally.

philosophy.

proceedings in the future relating to these types of incidents.

Additionally, negative publicity about our employment practices

[removed: _You] [added: You] should read the following discussion together with Item 6.

“Risk Factors” and elsewhere in this [removed: report._][added: report.]

[removed: Overview][added: Overview]

Our approach is also guided by our belief in an idea we call “Food With Integrity.” Our objective is to find the highest [removed: quality] [added: quality, safest] ingredients we can—ingredients that are grown or raised with respect for the environment, animals, and people who grow or raise the food.

A similarly focused people culture, with an emphasis on identifying and empowering [removed: top performing] [added: top-performing] employees, enables us to develop future leaders from within.

[removed: 2014] [added: 2015] Highlights and [removed: Trends][added: Trends]

As of December 31, [removed: 2014,] [added: 2015,] we had [removed: 1,783] [added: 2,010] restaurants in operation, including [removed: 1,755] [added: 1,971] Chipotle restaurants throughout the United States, with an additional [removed: seven] [added: 11] in Canada, [removed: six] [added: seven] in England, [removed: three] [added: four] in France, and one in Germany.

Our restaurants include [removed: nine] [added: 13] ShopHouse Southeast Asian Kitchen restaurants, serving Asian-inspired cuisine, and we are an investor in a consolidated entity that owns and operates [removed: two] [added: three] Pizzeria Locale restaurants, a fast casual pizza concept.

New restaurants have contributed substantially to our restaurant sales growth and we opened [removed: 192] [added: 229] restaurants in [removed: 2014,] [added: 2015,] and expect to open between [removed: 190] [added: 220] and [removed: 205] [added: 235] restaurants in [removed: 2015,] [added: 2016,] including a small number of [added: Chipotle restaurants outside of the U.S. and] ShopHouse and Pizzeria Locale [removed: restaurants.][added: restaurants within the U.S.]

Average restaurant sales were [removed: $2.472] [added: $2.424] million as of December 31, [removed: 2014, increasing] [added: 2015, decreasing] from [removed: $2.169] [added: $2.472] million as of December 31, [removed: 2013.][added: 2014.]

We define average restaurant sales as the average trailing 12-month sales for restaurants in operation for at least 12 full calendar [removed: months.][added: months, and as a result, the foregoing average restaurant sales include approximately 10 months of operations prior to the adverse impact of the food-borne illness incidents described above.]

[removed: Our comparable] [added: | Comparable] restaurant sales increases [removed: were] [added: | | 0.2% | | |] 16.8% [removed: in 2014.][added: | | | 5.6% | | | | |]

Comparable [removed: restaurant sales] [added: revenue] increases [added: contributed $530.0 million of the increase] in [removed: 2014 were driven] [added: restaurant sales, due] primarily [removed: by an increase] [added: to increases] in customer visits, and [removed: to a lesser extent from] an increase in average [removed: check,] [added: check amount,] including the [removed: impact of a] [added: benefit from] menu price [removed: increase during the second quarter of 2014 at all U.S. Chipotle locations.][added: increases.]

Menu price increases accounted for [removed: 3.8% of] [added: a 3.5% increase in] our comparable restaurant sales increases for [removed: 2014.][added: 2015.]

[removed: _Food With Integrity._] In all of our restaurants, we endeavor to serve only meats that were raised without the use of non-therapeutic antibiotics or added hormones, and in accordance with criteria we’ve established in an effort to improve sustainability and promote animal welfare.

We brand these meats as “Responsibly Raised TM.” In addition, a portion of some of the produce items we [removed: serve is] [added: served was] organically grown, and/or sourced locally when in season (by which we mean within 350 miles of the restaurant where it [removed: is served), and a portion of the beans we serve is organically grown and a portion is grown using conservation tillage methods that improve soil conditions, reduce erosion and help preserve the environment in which they are grown.][added: was served).]

[removed: cheese and all] [added: Milk used to make much] of our [added: cheese and] sour cream is sourced from pasture-based dairies that provide an even higher standard of animal welfare by providing outdoor access for their cows.

Without this supply, we [removed: cannot] [added: were unable to] get enough pork [removed: that meets] [added: to meet] our standards for all of our restaurants, and [removed: we will] [added: were] not [removed: be] able to serve carnitas in [removed: about one-third] [added: many] of our U.S. restaurants [removed: until we can find additional sources which meet our standards to make up] [added: for a portion of] the [removed: shortfall.][added: year.]

[removed: More] [added: Additionally, some] of our restaurants may periodically serve conventionally raised [removed: meats] [added: beef or chicken or stop serving one or more menu items] in the future due to supply constraints.

[removed: _Stock Repurchases._] In accordance with stock repurchases authorized by our Board of [removed: Directors] [added: Directors,] we purchased shares of our common stock [added: during 2015] with an aggregate total repurchase price of [removed: $88.0 million during 2014.][added: $485.8 million.]

The existing repurchase agreement and the Board’s [removed: authorization] [added: authorizations] of the repurchases may be modified, suspended, or discontinued at any time.

[removed: Restaurant] [added: Restaurant] Openings, Relocations and [removed: Closures][added: Closures]

| | [added: Year ended December 31,] | [removed: Years ended December 31] | | | | | | | | [added: % increase] | | [added: % increase] |

| | [removed: | 2014 | | | | 2013 | |] [added: 2015] | | [removed: 2012] [added: 2014] | | [added: 2013] |

| Beginning of [removed: period] [added: year] | [added: 1,783] | | 1,595 | | [removed: | |] 1,410 | [removed: | | | 1,230 | |]

| Openings | [added: 229] | | 192 | | [removed: | |] 185 | [removed: | | | 183 | |]

| Relocations | [removed: | | (4 | ) | | | — |] [added: (2)] | | [added: (4)] | [removed: (3] | [removed: )] [added: \-] |

| [removed: Total] [added: Total] restaurants at end of [removed: period] [added: year] | [added: 2,010] | | 1,783 | | [removed: | |] 1,595 | [removed: | | | 1,410 | |]

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

As [removed: our business grows, as] we open more restaurants and hire more employees, our restaurant operating costs and depreciation and amortization increase.

[removed: _Revenue_][added: Revenue]

| | [removed: 2014 | | | | 2013 | | | | 2012] [added: 2015] | | | [added: 2014] | | | [added: 2013] | | | [added: 2015 over 2014] | | [added: 2014 over 2013] |

| | [removed: | (dollars] [added: (dollars] in [removed: millions) | | | | | | |] [added: millions)] | | | | | | | | | | | |

| Average restaurant sales | [removed: |] $ | [removed: 2.472 |] [added: 2.424] | | $ | [removed: 2.169 |] [added: 2.472] | | $ | [removed: 2.113 | | | | 14.0 | %] [added: 2.169] | | [added: (1.9%)] | [removed: 2.7] | [removed: %] [added: 14.0%] |

| Number of restaurants as of the end of the period | | [removed: | 1,783 | | | | 1,595 | | |] [added: 2,010] | [removed: 1,410] | | [added: 1,783] | | [removed: 11.8] | [removed: %] [added: 1,595] | | [added: 12.7%] | [removed: 13.1] | [removed: %] [added: 11.8%] |

| Number of restaurants opened in the period, net of relocations | | [removed: | 188 | | | | 185 | | |] [added: 227] | [removed: 180] | | [added: 188] | | | [added: 185] | | | | |

In 2014, the significant factors contributing to our increases in [removed: sales] [added: revenue] were comparable restaurant sales and new restaurant openings.

[removed: Restaurant sales] [added: Revenue] from restaurants not yet in the comparable [removed: restaurant] base contributed [removed: $333.9] [added: $390.4] million of the increase in [removed: sales,] [added: sales in 2015,] of which [removed: $156.6] [added: $183.6] million was attributable to restaurants opened [removed: in 2013.][added: during the year.]

[removed: _Food,] [added: Food,] Beverage and Packaging [removed: Costs_][added: Costs]

| Food, beverage and packaging | [removed: |] $ | [removed: 1,421.0 |] [added: 1,503.8] | | $ | [removed: 1,073.5 |] [added: 1,421.0] | | $ | [removed: 891.0 | | | | 32.4 | %] [added: 1,073.5] | | [added: 5.8%] | [removed: 20.5] | [removed: %] [added: 32.4%] |

We believe that these fundamental principles can be adapted to other cuisines as well.

Food-Borne Illness Incidents.

Beginning in the fourth quarter of 2015, significant publicity regarding a number of food-borne illness incidents associated with Chipotle restaurants in as many as 15 states had a severe adverse impact on our sales and profitability.

As a result of these incidents, comparable restaurant sales declined 14.6% for the fourth quarter of 2015, including a decline of 30% for the month of December, and the decline worsened to over 36% in January 2016.

We anticipate some improvement in sales trends as a result of the announcement on February 1, 2016 by the U.S. Centers for Disease Control and Prevention that it has closed its investigation into the E. coli incidents that first led to the significant decline in our comparable restaurant sales.

However, due to the uncertainties created by the food-borne illness incidents, we are unable to provide estimates of any future movements in comparable restaurant sales.

We plan to increase marketing and promotional spending considerably during the first half of 2016, including significant use of free and discounted food promotions, in an effort to attract customers back to our restaurants and reverse negative sales trends.

In addition to the impact on sales, the food-borne illness incidents resulted in non-recurring expenses in the fourth quarter of 2015 of approximately $16.0 million, which includes food waste, impairment charges for kitchen equipment that will no longer be used, insurance claim estimates, increased marketing expenses, lab analysis of food samples and environmental swabs, and retaining expert advisory services related to epidemiology and food safety.

As part of our response to the food-borne illness incidents, we are implementing enhanced food safety procedures in our supply chain and restaurants that we expect to increase our food costs as a percentage of revenue.

Some of these changes are expected to result in fewer labor hours being required in our restaurants, but we do not expect to see the benefit until free and discounted food promotions return to normal levels.

We expect the ongoing net impact of the enhanced food safety procedures on our food and labor costs as a percentage of revenue to be approximately 2% when fully implemented and after our operations are normalized.

Additionally, we expect that our restaurant operating costs as a percentage of revenue will continue to be significantly impacted due to expected lower average restaurant sales, as well as increased costs to support marketing initiatives.

As a result of the sales impact from the food-borne illness incidents and the additional costs described above, we believe that our net income will be at approximately break-even levels in the first quarter of 2016.

Sales.

Accordingly, average restaurant sales will decrease further for as long as we continue to post comparable restaurant sales declines.

Our comparable restaurant sales increases were 0.2% for the full year 2015.

Comparable restaurant sales increases in 2015 were driven primarily by the impact of menu price increases taken nationwide in the second quarter of 2014 and in selected restaurants in the second half of 2015, offset by lower average number of transactions and group size, primarily in the fourth quarter.

Restaurant Development.

Food With Integrity.

A portion of the beans we serve is organically grown and a portion is grown using conservation tillage methods that improve soil conditions, reduce erosion and help preserve the environment in which they are grown.

Further, we have achieved our goal of eliminating (as further described on our website) genetically modified organisms, or GMOs, from the ingredients in our food (not including beverages) in U.S. Chipotle restaurants, as well as ShopHouse Southeast Asian Kitchen.

During the third quarter of 2015, we began introducing carnitas from a new pork supplier in the United Kingdom, and this new pork supply allowed us to serve carnitas in all of our restaurants by the end of 2015.

Stock Repurchases.

As of December 31, 2015, $116.4 million was available for stock repurchases under the authorization announced on December 4, 2015.

We also announced authorizations by our Board of Directors of up to an additional $300 million in common stock repurchases on January 6, 2016 and up to another additional $300 million on February 2, 2016.

We have purchased $270.0 million of our common stock under these authorizations from January 1, 2016 through February 3, 2016.

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | | | | |

| | Year ended December 31, | | | | | | | | | % increase (decrease) | | % increase |

| Revenue | $ | 4,501.2 | | $ | 4,108.3 | | $ | 3,214.6 | | 9.6% | | 27.8% |

In 2015, increased revenue was primarily driven by new restaurant openings.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| | 2015 | | | 2014 | | | 2013 | | | 2015 over 2014 | | 2014 over 2013 |

| | (dollars in millions) | | | | | | | | | | | |

| As a percentage of revenue | | 33.4% | | | 34.6% | | | 33.4% | | | | |

Food, beverage and packaging costs decreased as a percentage of revenue in 2015 primarily due to the benefit of the nation-wide menu price increases taken in the second quarter of 2014 and relief in dairy and avocado costs.

The decrease was partially offset by inflation on beef costs.

| --- | --- |

_Restaurant Development_.

_Sales Growth_.

We expect 2015 comparable restaurant sales to be in the low to mid-single digits as comparisons become more difficult, particularly during the final three quarters of the year.

During 2013, we launched our catering service in Chipotle restaurants throughout the U.S, except New York City.

Catering represented approximately 1.3% of revenue for the year ended 2014.

Milk used to make much of our

##### [Table of Contents](#toc)

Further, we disclose on our website which ingredients contain genetically modified organisms, or GMOs, and we are working to replace ingredients containing GMOs in our food (not including beverages) with non-GMO ingredients.

Because we have elected to remove all affected pork from our supply chain, including our distribution centers, and—because the meat is food safe but does not meet our rigorous standards—we disposed of it, primarily through donations to local food banks.

Some of our restaurants served conventionally raised beef and chicken for periods during 2014 and we expect to serve conventionally raised beef in 2015, due to supply constraints for our Responsibly Raised meats.

Our food costs increased as a percentage of revenue in 2014 as a result of inflationary pressures on many of our ingredients, primarily beef, avocados, and dairy.

The increase was partially offset by the impact of the menu price increase in the second quarter.

We expect that food costs as a percentage of revenue in 2015 will remain consistent with the full year 2014 or will increase slightly.

As of December 31, 2014, $102.2 million was available to be repurchased under the current repurchase authorizations announced on February 5, 2013 and April 17, 2014.

On February 3, 2015 we announced that our Board of Directors authorized the expenditure of up to an additional $100 million to repurchase shares of our common stock.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Years ended December 31 | | | | | | | | | | | | % increase 2014 over 2013 | | | | % increase 2013 over 2012 | | |

| Revenue | | $ | 4,108.3 | | | $ | 3,214.6 | | | $ | 2,731.2 | | | | 27.8 | % | | | 17.7 | % |

| Comparable restaurant sales increases | | | 16.8 | % | | | 5.6 | % | | | 7.1 | % | | | | | | | | |

Comparable restaurant sales increases contributed $530.0 million of the increase in restaurant sales, due primarily to increases in customer visits, and an increase in average check price, including the benefit from menu price increases.

In 2013, the significant factors contributing to our increases in sales were new restaurant openings and comparable restaurant sales.

Comparable restaurant sales increases contributed $150.3 million of the increase in restaurant sales, due primarily to increases in customer visits.

| As a percentage of revenue | | | 34.6 | % | | | 33.4 | % | | | 32.6 | % | | | | | | | | |

Food, beverage and packaging costs increased as a percentage of revenue in 2013 due to inflation on many food items, particularly salsa ingredients, as well as dairy, cooking oils, and chicken.

| | | For the Years ended December 31 | | | | | | | | | | | | % increase 2014 over 2013 | | | | % increase 2013 over 2012 | | |

| As a percentage of revenue | | | 22.0 | % | | | 23.0 | % | | | 23.5 | % | | | | | | | | |

In 2015, we expect labor costs to increase slightly as a percentage of revenue due to the Affordable Care Act and minimum wage increases in a number of jurisdictions.

| As a percentage of revenue | | | 5.6 | % | | | 6.2 | % | | | 6.3 | % | | | | | | | | |

| As a percentage of revenue | | | 10.6 | % | | | 10.8 | % | | | 10.5 | % | | | | | | | | |

We expect marketing and promotional spend as a percentage of revenue for 2015 to remain consistent with the full year 2014 or increase slightly.

Other operating costs increased as a percentage of revenue in 2013 due primarily to higher spend on marketing and promotions.

| As a percentage of revenue | | | 6.7 | % | | | 6.3 | % | | | 6.7 | % | | | | | | | | |

The increase in general and administrative expenses in dollar terms in 2013 primarily resulted from increased payroll and benefits costs as we grew and increased legal costs, partially offset by costs from our biennial AMC held during 2012, as well as a decrease in 2013 in non-cash stock based compensation expense due to expenses in 2012 related to non-vested stock awards subject to performance conditions.

| As a percentage of revenue | | | 2.7 | % | | | 3.0 | % | | | 3.1 | % | | | | | | | | |

As a percentage of revenue, depreciation and amortization decreased in 2014 and 2013 as a result of the benefit of higher average restaurant sales on a partially fixed-cost base.

| Effective tax rate | | | 37.6 | % | | | 38.7 | % | | | 39.3 | % | | | | | | | | |

The 2013 effective tax rate decreased by 0.6% from 2012 due primarily to certain federal tax credits that were extended in 2013, for both 2013 and 2012, which benefited the rate by 1.1%.

This decrease was partially offset by non-recurring adjustments related to state income taxes.

[removed: Commodity] [added: Commodity] Price [removed: Risks][added: Risks]

We are [removed: also] exposed to commodity price risks.

[removed: Changing] [added: Changing] Interest [removed: Rates][added: Rates]

We are [added: also] exposed to interest rate risk through fluctuations of interest rates on our investments.

As of December 31, [removed: 2014,] [added: 2015,] we had [removed: $981.1] [added: $1,084.2] million in investments and interest-bearing cash accounts, including an insurance related restricted trust account classified in other assets, and [removed: $262.2] [added: $199.1] million in accounts with an earnings credit we classify as interest income, which combined earned a weighted average interest rate of [removed: 0.43%.][added: 0.62%.]

[removed: Foreign] [added: Foreign] Currency Exchange [removed: Risk][added: Risk]

| --- | --- |

##### [Table of Contents](#toc)

[removed: General][added: General]

Chipotle Mexican Grill, [removed: Inc. and] [added: Inc., a Delaware corporation, together with] its subsidiaries (“Chipotle”, the “Company”, or “we”) [removed: operate] [added: operates] Chipotle Mexican Grill restaurants, which serve a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients.

As of December 31, [removed: 2014,] [added: 2015,] we operated [removed: 1,755] [added: 1,971] Chipotle restaurants throughout the United States, as well as [removed: seven] [added: 11] in Canada, [removed: six] [added: seven] in England, [removed: three] [added: four] in France, and one in Germany.

Additionally, our restaurants [removed: include nine] [added: included 13] ShopHouse Southeast Asian Kitchen restaurants, serving Asian-inspired cuisine, and we are an investor in a consolidated entity that [removed: owns] [added: owned] and [removed: operates two] [added: operated three] Pizzeria Locale restaurants, a fast casual pizza concept, resulting in a total of [removed: 1,783] [added: 2,010] restaurants as of December 31, [removed: 2014.][added: 2015.]

We focus on [removed: trying to find] [added: finding] the highest quality ingredients we can to make great tasting food; on building a special people culture that is centered on creating a team of top performers empowered to achieve high standards; on building restaurants that are operationally efficient and aesthetically pleasing; and on doing all of this with [added: the highest regard for the safety of our customers and] increasing awareness and respect for the environment.

We have grown substantially over the past five years, and expect to open between [removed: 190] [added: 220] and [removed: 205] [added: 235] additional restaurants in [removed: 2015,] [added: 2016,] including a small number of [added: Chipotle restaurants outside the U.S. and] ShopHouse and Pizzeria Locale [removed: restaurants.][added: restaurants within the U.S.]

We use high-quality raw ingredients, classic cooking methods and a distinctive interior design and have friendly people [added: to take care of each customer—features that are more frequently found in the world of fine dining.]

We manage our operations and restaurants based on [removed: eight] [added: nine] regions that aggregate into one reportable segment.

Financial information about our operations, including our revenues and net income for the years ended December 31, [added: 2015,] 2014, [removed: 2013,] and [removed: 2012,] [added: 2013,] and our total assets as of December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] is included in our consolidated financial statements and accompanying notes in Item 8.

“Financial Statements and Supplementary Data.” Substantially all of our revenues are generated and assets are located in the U.S. For a discussion of risks related to our international operations, see [removed: “_Risks] [added: “Risks] Related to Our Growth Strategy and Future [removed: Expansion—Our expansion into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other factors_” in Item 1A.]

[removed: Our] [added: Our] Menu and Food [removed: Preparation][added: Preparation]

[removed: _Food With Integrity._] Serving high quality food while still charging reasonable prices is critical to our vision to change the way people think about and eat fast food.

As part of our Food With Integrity philosophy, we believe that purchasing fresh ingredients [removed: and preparing them by hand are] [added: is] not enough, so we spend time on farms and in the field to understand where our food comes from and how it is raised.

[removed: In addition,] [added: For example,] some of our restaurants [added: did not serve carnitas for a portion of 2015, and some of our restaurants] served conventionally raised [removed: beef and] chicken for periods during [removed: 2014, and we expect some to serve conventionally raised beef in] 2015, due to supply constraints for our Responsibly Raised meats.

More of our restaurants may periodically serve conventionally raised meats [added: or stop serving one or more menu items] in the future due to additional supply constraints.

Our commitment to Food With Integrity [added: also] extends to the dairy products we [removed: serve as well.][added: serve.]

Also, milk used to make much of our cheese and [removed: all our] sour cream is sourced from pasture-based dairies that provide an even higher standard of animal welfare by providing outdoor access for their cows.

[removed: Because of] [added: Due to] the prevalence of GMOs in a number of important feed crops, [removed: most] [added: the vast majority of the] grains used as animal feed in the U.S. are genetically modified.

We do [added: occasionally] face challenges associated with pursuing [added: our] Food With [removed: Integrity.][added: Integrity mission.]

[removed: _A Few Things, Thousands of Ways._] Chipotle restaurants serve only a few things: burritos, burrito bowls, tacos and salads.

But because customers can choose from four different meats or tofu, two types of beans and a variety of extras such as salsas, guacamole, cheese and lettuce, there’s enough variety to extend our menu to provide [removed: countless] [added: thousands of] choices.

In preparing our food, we use stoves and grills, pots and pans, cutting [removed: knives, wire whisks] [added: knives] and other kitchen utensils, walk-in refrigerators stocked with a variety of fresh ingredients, herbs and spices and dry goods such as rice.

We also provide a variety of extras such as guacamole, salsas and tortilla chips seasoned with fresh lime juice and [removed: kosher] salt.

Our food is prepared from scratch, with [removed: the majority] [added: some] prepared in our restaurants [removed: while] [added: and] some [removed: is] prepared with the same fresh ingredients in larger batches in commissaries.

[removed: _Food] [added: Food] Served Fast … So That Customers Can Enjoy It [removed: Slowly._ Our employees spend hours preparing our food on-site, but each customer order can be ready in seconds.][added: Slowly.]

While we think [removed: that] our customers return because of the great-tasting food, we also think [removed: that] they like getting food served fast without having a typical “fast-food” experience.

[removed: The four pillars are] [added: We do this by focusing on what we call the “four pillars” of throughput:] having a dedicated expeditor, who works just before the cashier to get drink and side orders and bag to-go orders; a dedicated linebacker, to make sure the serving line is stocked with all our ingredients so the employees on the line can focus on each customer’s order; proper [removed: _mise] [added: mise] en [removed: place_;] [added: place, or putting everything in its place before starting food preparation;] and ensuring that we have “aces in their places,” or [removed: the best] [added: well-trained] employees at each position during all of our peak periods.

When we do this [added: well,] our customers are served quickly without feeling rushed.

And we constantly strive to improve the speed of service in all of our restaurants, so that we can accommodate more [added: customers and larger orders without disrupting restaurant traffic.]

For instance, our restaurants accept orders [removed: by fax,] online or through an iPhone or Android ordering application [removed: in order] to provide a more convenient experience by allowing customers to avoid standing in line.

By emphasizing speed of service without compromising the genuine interactions between our customers and our crews, and by [removed: continually making improvements] [added: expanding ways for customers] to [removed: our restaurant operations,] [added: enjoy Chipotle,] we believe that we can provide a high quality experience to more and more customers.

[removed: _Quality Assurance and Food Safety._] We are committed to serving safe, high quality food to our customers.

Quality and food safety [added: measures] are [removed: integrated] [added: found] throughout our supply [removed: chain and everything we do;] [added: chain,] from the farms that supply our food all the way through to our front line.

Our [removed: training] [added: training, operations,] and risk management departments develop and implement operating standards for food quality, preparation, cleanliness and safety in the restaurants.

[removed: Restaurant] [added: Restaurant] Management and [removed: Operations][added: Operations]

[removed: _Culture of Top Performers._] In addition to our focus on the food we serve, we have a similarly focused people culture with an emphasis on identifying, hiring and empowering [removed: top performing] [added: top-performing] employees.

[removed: The foundation of that culture starts] with hiring the best people in our restaurants.

We provide hands on, shoulder-to-shoulder [added: training, along with career path] training [added: materials,] to develop the full potential of our restaurant employees.

We are committed to developing our people and promoting from within, with about [removed: 90%] [added: 84%] of salaried management and about [removed: 98%] [added: 97%] of hourly management coming from internal promotions.

Our best general managers, who run great restaurants and develop strong, empowered restaurant teams, [removed: are] [added: may be] promoted to Restaurateur and in that role can earn bonuses for developing people.

Expansion – Our expansion into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other factors” in Item 1A.

Quality Assurance and Food Safety.

While our food safety programs have always been carefully designed and have been in conformance with applicable industry standards, in response to food safety incidents during 2015 that impacted hundreds of customers we have recently undertaken a comprehensive assessment of our food safety programs and practices.

Using the assistance of highly respected experts we performed a review of the ingredients we use, with a goal of designing an industry-leading food safety program.

Components of the new program include DNA-based testing of many ingredients designed to ensure the quality and safety of ingredients before they are shipped to our restaurants, changes to food preparation and food handling practices, including washing and cutting some produce items (such as tomatoes and romaine lettuce) in central kitchens, blanching of some produce items (including avocados, onions, jalapenos and citrus) in our restaurants before cutting them, and new protocols for marinating meats.

We are also working to enhance our internal controls surrounding food safety by utilizing the Food and Drug Administration’s Hazard Analysis Critical Control Point (HACCP) management system.

Additionally, we are focused on internal training programs to ensure that all employees thoroughly understand our high standards for food safety and food handling, and we offer paid sick leave to employees to reduce incentives for employees to work while sick.

These and other enhancements underscore our commitment to becoming a leader in food safety while we continue to serve high quality food that our customers love.

Food With Integrity.

A portion of some of the other produce items we serve is organically grown as well.

In the spring of 2015, we announced we have reached our goal of eliminating (as further described on our website) genetically modified organisms, or GMOs, from the ingredients in our food (not including beverages) in U.S. Chipotle restaurants, as well as ShopHouse Southeast Asian Kitchen.

With respect to beverages, some of the beverages we serve are sweetened with corn-based sweeteners, which are typically made with genetically modified corn.

A Few Things, Thousands of Ways.

We plan to keep a simple menu, but we’ll consider additions that we think make sense.

Our food is made slowly and carefully, but each customer order can be ready in seconds.

However, we’ve also introduced a number of additional ways to serve our customers.

We’ve also introduced catering in all U.S. Chipotle restaurants except in New York City, and we offer delivery service through a number of third party services with whom we’ve partnered.

Culture of Top Performers.

The foundation of that culture starts

Importance of Methods and Culture.

Restaurant Team.

Close Relationships with Suppliers.

other restaurants.

As Chipotle works to reinvigorate our brand in the wake of the food safety-related incidents that affected us beginning in the fourth quarter of 2015, our marketing will have a greater emphasis than usual on programs that are specifically designed to drive traffic into our restaurants.

An element of our marketing and communications programs will also focus on supply chain transparency, as we work to help customers understand the changes we are making in an effort to establish ourselves as an industry leader in food safety.

Some of our competitors have formats that might resemble ours, and many competitors are moving towards higher quality food to compete with us.

A number of these competitors have sought to differentiate themselves with a focus that overlaps with many facets of our Food With Integrity mission.

However, we will need to re-establish customer trust in light of the food safety incidents that negatively impacted us beginning in the fourth quarter of 2015, and doing so in the competitive environment in which we operate will be one of our key challenges in 2016 and beyond.

| --- | --- |

##### [Table of Contents](#toc)

to take care of each customer—features that are more frequently found in the world of fine dining.

In January 2015, through an ongoing audit of our suppliers, we identified a pork supplier that was not meeting our standards related to the size and condition of the housing offered to some of the pigs, so we suspended our purchases from this supplier.

Without this supply, we cannot get enough pork that meets our standards for all of our restaurants and we will not be able to serve carnitas in about one-third of our U.S. restaurants until we can find additional sources which meet our standards to make up the shortfall.

A portion of some of the produce items we serve is organically grown, and/or sourced locally while in season (by which we mean grown within 350 miles of the restaurant where it is served).

Further, we disclose on our website which ingredients contain genetically modified organisms, or GMOs, and we are working to replace ingredients containing GMOs in our food (not including beverages) with non-GMO ingredients.

We plan to keep a simple menu, but we’ll consider additions that we think make sense, such as the recent introduction in all U.S. and Canadian markets of Sofritas, our vegan protein option made with braised organic tofu.

And if customers can’t find something on the menu that’s quite what they’re after, we encourage them to let us know.

If we can make it from the ingredients we have, we’ll do it.

We do this by focusing on what we call the “four pillars” of throughput.

customers and larger orders without disrupting restaurant traffic.

_Distribution Arrangements._ Ingredients and other supplies are delivered to our restaurants by our independently owned and operated regional distribution centers.

In addition, we continue to generate considerable media coverage, with scores of publications writing favorably about our food, restaurant concept and business.

Many of these newer programs allow us to tell our

Our

new restaurant development activity has broadened to incorporate trade areas or restaurant sites in which we have little or no prior experience, including smaller or more economically mixed communities, highway sites, outlet centers, and on military bases.

management reports.

In addition to processing payment card transactions and collecting and storing information about our employees, we also collect and store information about customers as part of some of our marketing programs.

We are relying increasingly on cloud computing and other technologies that result in third parties holding significant amounts of employee or customer information on our behalf.

The collection and use of such information is regulated at the federal and state levels, and the regulatory environment related to information security and privacy is increasingly demanding.

A number of retailers have experienced actual or potential security breaches in which information may have been stolen, including a number of highly publicized incidents with well-known retailers in recent years.

For information regarding legal proceedings, see Note [removed: 9.][added: 10.]

| --- | --- |

[removed: 10-K 1 d861905d10k.htm] FORM 10-K

[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: WASHINGTON,] D.C. [removed: 20549][added: 20549]

[removed: | x | ANNUAL] [added: ☒ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: For] [added: For] the fiscal year ended December 31, [removed: 2014][added: 2015]

[removed: | ¨ | TRANSITION] [added: ☐TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] File Number: [removed: 1-32731][added: 1-32731]

[removed: CHIPOTLE] [added: CHIPOTLE] MEXICAN GRILL, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware |] [added: Delaware] | [removed: 84-1219301] [added: 84-1219301] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization) |] [added: organization)] | [removed: (IRS Employer Identification No.)] [added: (IRS Employer Identification No.)] |

| [removed: 1401] [added: 1401] Wynkoop Street, Suite 500 Denver, [removed: CO |] [added: CO] | [removed: 80202] [added: 80202] |

| [removed: (Address] [added: (Address] of Principal Executive [removed: Offices) |] [added: Offices)] | [removed: (Zip Code)] [added: (Zip Code)] |

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: (303) [removed: 595-4000][added: 595-4000]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class |] [added: class] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: Common] [added: Common] stock, par value $0.01 per [removed: share |] [added: share] | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: x] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: x][added: ☒]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [removed: x]

| [removed: x] [added: ☒] Large accelerated filer | [removed: | ¨] [added: ☐] Accelerated filer | [removed: | ¨] [added: ☐] Non-accelerated filer (do not check if a smaller reporting company) | [removed: | ¨] [added: ☐] Smaller reporting company |

As of June 30, [removed: 2014,] [added: 2015,] the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was [removed: $11.4] [added: $11.2] billion, based on the closing price of the registrant’s common stock on such date, the last trading day of the registrant’s most recently completed second fiscal quarter.

As of January [removed: 30, 2015,] [added: 29, 2016,] there were [removed: 31,022,319] [added: 30,044,250] shares of the registrant’s common stock, par value of $0.01 per share outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the [removed: 2015] [added: 2016] annual meeting of shareholders, which will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, [removed: 2014.][added: 2015.]

| [removed: | | PART I | |] [added: PART I] | | |

| Item 1. | [removed: | [Business](#tx861905_1) | |] [added: [Business](#Item_1)] | 3 | [removed: |]

| Item 1A. | [removed: |] [Risk [removed: Factors](#tx861905_2) | |] [added: Factors](#Item_1A)] | 10 | [removed: |]

| Item 1B. | [removed: |] [Unresolved Staff [removed: Comments](#tx861905_3) | | | 26] [added: Comments](#Item_1B)] | [added: 24] |

| Item 2. | [removed: | [Properties](#tx861905_4) | | | 27] [added: [Properties](#Item_2)] | [added: 25] |

| Item 3. | [removed: |] [Legal [removed: Proceedings](#tx861905_5) | | | 28] [added: Proceedings](#Item_3)] | [added: 26] |

| Item 4. | [removed: |] [Mine Safety [removed: Disclosures](#tx861905_6) | | | 28] [added: Disclosures](#Item_4)] | [added: 26] |

| [removed: | | PART II | |] [added: PART II] | | |

| Item 5. | [removed: |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx861905_7) | | | 29] [added: Securities](#Item_5)] | [added: 27] |

| Item 6. | [removed: |] [Selected Financial [removed: Data](#tx861905_8) | | | 31] [added: Data](#Item_6)] | [added: 29] |

| Item 7. | [removed: |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx861905_9) | | | 32] [added: Operations](#Item_7)] | [added: 30] |

10-K 1 cmg-20151231x10k.htm 10-K

or

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Yes ☒ No ☐

☒ Yes ☐ No

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Yes ☐ No ☒

FORM 10-K

or

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TABLE OF CONTENTS

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##### [Table of Contents](#toc)

As of December 31, [removed: 2014,] [added: 2015,] there were [removed: 1,783] [added: 2,010] Chipotle and other concept restaurants in operation.

| Alabama | [removed: | | 9 |] [added: 11] |

| Arizona | [removed: | | 64 |] [added: 74] |

| Arkansas | [removed: | | 4 |] [added: 5] |

| Colorado | [removed: | | 74 |] [added: 76] |

| Connecticut | [removed: | | 14 |] [added: 19] |

| Delaware | [removed: | | 3 |] [added: 4] |

| District of Columbia | [removed: | | 19 |] [added: 22] |

| Florida | [removed: | | 99 |] [added: 116] |

| Georgia | [removed: | | 32 |] [added: 36] |

| Idaho | [removed: | | 3 |] [added: 4] |

| Indiana | [removed: | | 25 |] [added: 30] |

| Iowa | [removed: | | 7 |] [added: 8] |

| Kansas | [removed: | | 21 |] [added: 24] |

| Kentucky | [removed: | | 13 |] [added: 16] |

| Louisiana | [removed: | | 4 |] [added: 6] |

| Maine | [removed: | | 3 |] [added: 4] |

| Maryland | [removed: | | 65 |] [added: 70] |

| Massachusetts | [removed: | | 41 |] [added: 45] |

| Michigan | [removed: | | 19 |] [added: 24] |

| Minnesota | [removed: | | 57 |] [added: 58] |

| Missouri | [removed: | | 35 |] [added: 36] |

| Nebraska | [removed: | | 8 |] [added: 9] |

| Nevada | [removed: | | 19 |] [added: 24] |

| New Hampshire | [removed: | |] 5 | [removed: |]

| New Jersey | [removed: | | 39 |] [added: 45] |

| New Mexico | [removed: | | 3 |] [added: 4] |

| New York | [removed: | | 97 |] [added: 115] |

| North Carolina | [removed: | | 32 |] [added: 39] |

| Oklahoma | [removed: | |] 10 | [removed: |]

| Oregon | [removed: | | 17 |] [added: 20] |

| Pennsylvania | [removed: | | 52 |] [added: 61] |

| Rhode Island | [removed: | | 5 |] [added: 7] |

| South Carolina | [removed: | | 13 |] [added: 16] |

| Tennessee | [removed: | | 14 |] [added: 15] |

| Utah | [removed: | | 4 |] [added: 8] |

| Vermont | [removed: | |] 1 | [removed: |]

| Virginia | [removed: | | 74 |] [added: 84] |

| Washington | [removed: | | 23 |] [added: 30] |

| West Virginia | [removed: | | 2 |] [added: 5] |

| | |

| | |

| California | 351 |

| Illinois | 120 |

| Montana | 2 |

| North Dakota | 1 |

| Ohio | 159 |

| Texas | 149 |

| --- | --- |

| Total | 2,010 |

| | | | | |

| --- | --- | --- | --- | --- |

| California | | | 325 | |

| Illinois | | | 109 | |

| Ohio | | | 152 | |

| Texas | | | 134 | |

| Total | | | 1,783 | |

##### [Table of Contents](#toc)

[removed: PART II][added: PART II]

| --- | --- |

##### [Table of Contents](#toc)

| | [removed: | High | |] [added: High] | | [removed: Low] | [added: Low] | |

| 2014 | | | | | | [removed: | | |]

| First Quarter | [removed: |] $ | 622.90 | | [removed: |] $ | 480.87 | [removed: |]

| Second Quarter | [removed: |] $ | 602.21 | | [removed: |] $ | 472.41 | [removed: |]

| Third Quarter | [removed: |] $ | 697.93 | | [removed: |] $ | 575.92 | [removed: |]

| Fourth Quarter | [removed: |] $ | 696.56 | | [removed: |] $ | 607.55 | [removed: |]

As of January [removed: 26, 2015,] [added: 29, 2016,] there were approximately [removed: 1,062] [added: 1,030] holders of our common stock, as determined by counting our record holders and the number of participants reflected in a security position listing provided to us by the Depository Trust Company.

[removed: _Purchases] [added: Purchases] of Equity Securities by the [removed: Issuer_][added: Issuer]

The table below reflects shares of common stock we repurchased during the fourth quarter of [removed: 2014.][added: 2015.]

| | | [removed: Total] [added: | Total] Number of Shares [removed: Purchased(1) | |] [added: Purchased] | | [removed: Average] [added: Average] Price Paid Per [removed: Share |] [added: Share] | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs(1) | |] [added: Programs(1)] | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that May Yet Be Purchased Under the Plans or [removed: Programs(2) |] [added: Programs(2)] | |

| [removed: _Purchased] [added: | Purchased] 10/1 through [removed: 10/31_ | | | | | |] [added: 10/31] | | | | | | | | | | |

| [removed: _Purchased] [added: | Purchased] 11/1 through [removed: 11/30_ | | | | | |] [added: 11/30] | | | | | | | | | | |

| [removed: _Purchased] [added: | Purchased] 12/1 through [removed: 12/31_ | | | | | |] [added: 12/31] | | | | | | | | | | |

[removed: _Dividend Policy_][added: Dividend Policy]

[removed: COMPARISON] [added: COMPARISON] OF CUMULATIVE TOTAL [removed: RETURN][added: RETURN]

The following graph compares the cumulative annual stockholders return on our common stock from December 31, [removed: 2009] [added: 2010] through December 31, [removed: 2014] [added: 2015] to that of the total return index for the S&P 500 and the S&P 500 Restaurants Index assuming an investment of $100 on December 31, [removed: 2009.][added: 2010.]

[removed: ][added: ]

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | | | | |

| | High | | | Low | |

| 2015 | | | | | |

| First Quarter | $ | 727.97 | | $ | 647.28 |

| Second Quarter | $ | 699.03 | | $ | 598.04 |

| Third Quarter | $ | 758.61 | | $ | 597.33 |

| Fourth Quarter | $ | 757.00 | | $ | 477.97 |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October | | | 41,301 | | $ | 665.27 | | 41,301 | | $ | 127,630,875 |

| November | | | 166,807 | | $ | 599.47 | | 166,807 | | $ | 27,635,641 |

| December | | | 401,137 | | $ | 526.61 | | 401,137 | | $ | 116,394,274 |

| Total | | | 609,245 | | $ | 555.95 | | 609,245 | | $ | 116,394,274 |

(1)Shares were repurchased pursuant to repurchase programs announced on February 3, 2015, July 21, 2015 and December 4, 2015.

(2)This column includes $300 million in authorized repurchases announced on December 4, 2015, but does not include an additional $300 million in authorized repurchases announced on January 6, 2016, and $300 million in authorized repurchases announced on February 2, 2016.

Each repurchase program has no expiration date.

Authorization of repurchase programs may be modified, suspended, or discontinued at any time.

| --- | --- |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2013 | | | | | | | | |

| First Quarter | | $ | 334.89 | | | $ | 266.02 | |

| Second Quarter | | $ | 379.15 | | | $ | 316.87 | |

| Third Quarter | | $ | 429.78 | | | $ | 362.30 | |

| Fourth Quarter | | $ | 550.28 | | | $ | 420.20 | |

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October | | | 13,250 | | | $ | 638.83 | | | | 13,250 | | | $ | 118,335,698 | |

| November | | | 14,000 | | | $ | 654.33 | | | | 14,000 | | | $ | 109,175,068 | |

| December | | | 10,566 | | | $ | 659.16 | | | | 10,566 | | | $ | 102,210,371 | |

| Total | | | 37,816 | | | $ | 650.25 | | | | 37,816 | | | $ | 102,210,371 | |

| (1) | Shares were repurchased pursuant to a repurchase program announced on February 5, 2013. Repurchases under the program were limited to $100 million in total repurchase price, and there was no expiration date. Repurchases under this program were completed in January 2015. |

| (2) | This column includes $100 million in authorized repurchases announced on April 17, 2014, but does not include an additional $100 million in authorized repurchases announced on February 3, 2015. These repurchase programs have no expiration date. Authorization of repurchase programs may be modified, suspended, or discontinued at any time. |

##### [Table of Contents](#toc)

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and respective notes included in Item [removed: 8.][added: 8 “Financial Statements and Supplementary Data.” The data shown below are not necessarily indicative of results to be expected for any future period (in thousands, except per share data).]

| | [removed: 2014 | | | | 2013 | |] [added: 2015] | | [removed: 2012] | [added: 2014] | | | [removed: 2011] [added: 2013] | | | [added: 2012] | [removed: 2010] | | [added: 2011] | |

| [removed: Statement] [added: Statement] of [removed: Income: | | | | | |] [added: Income:] | | | | | | | | | | | | | | |

| Revenue | [added: $] | [added: 4,501,223 | |] $ | 4,108,269 | | [removed: |] $ | 3,214,591 | | [removed: |] $ | 2,731,224 | | [removed: |] $ | 2,269,548 | [removed: | | $ | 1,835,922 | |]

| Food, beverage and packaging costs | | [added: 1,503,835] | [removed: 1,420,994] | | [added: 1,420,994] | | [removed: 1,073,514] | [added: 1,073,514] | | | 891,003 | | | [removed: |] 738,720 | [removed: | | | 561,107 | |]

| Labor costs | | [added: 1,045,726] | [removed: 904,407] | | [added: 904,407] | | [removed: 739,800] | [added: 739,800] | | | 641,836 | | | [removed: |] 543,119 | [removed: | | | 453,573 | |]

| Occupancy costs | | [added: 262,412] | [removed: 230,868] | | [added: 230,868] | | [removed: 199,107] | [added: 199,107] | | | 171,435 | | | [removed: |] 147,274 | [removed: | | | 128,933 | |]

| Other operating costs | | [added: 514,963] | [removed: 434,244] | | [added: 434,244] | | [removed: 347,401] | [added: 347,401] | | | 286,610 | | | [removed: |] 251,208 | [removed: | | | 202,904 | |]

| General and administrative expenses | | [added: 250,214] | [removed: 273,897] | | [added: 273,897] | | [removed: 203,733] | [added: 203,733] | | | 183,409 | | | [removed: |] 149,426 | [removed: | | | 118,590 | |]

| Depreciation and amortization | | [added: 130,368] | [removed: 110,474] | | [added: 110,474] | | [removed: 96,054] | [added: 96,054] | | | 84,130 | | | [removed: |] 74,938 | [removed: | | | 68,921 | |]

| Pre-opening costs | | [added: 16,922] | [removed: 15,609] | | [added: 15,609] | | [removed: 15,511] | [added: 15,511] | | | 11,909 | | | [removed: |] 8,495 | [removed: | | | 7,767 | |]

| Loss on disposal of assets | | [added: 13,194] | [removed: 6,976] | | [added: 6,976] | | [removed: 6,751] | [added: 6,751] | | | 5,027 | | | [removed: |] 5,806 | [removed: | | | 6,296 | |]

| Total operating expenses | | [added: 3,737,634] | [removed: 3,397,469] | | [added: 3,397,469] | | [removed: 2,681,871] | [added: 2,681,871] | | | 2,275,359 | | | [removed: |] 1,918,986 | [removed: | | | 1,548,091 | |]

| Income from operations | | [added: 763,589] | [removed: 710,800] | | [added: 710,800] | | [removed: 532,720] | [added: 532,720] | | | 455,865 | | | [removed: |] 350,562 | [removed: | | | 287,831 | |]

| Interest and other income (expense), net | | [added: 6,278] | [removed: 3,503] | | [added: 3,503] | | [removed: 1,751] | [added: 1,751] | | | 1,820 | | | [removed: | (857 | ) | | | 1,230 |] [added: (857)] |

| Income before income taxes | | [added: 769,867] | [removed: 714,303] | | [added: 714,303] | | [removed: 534,471] | [added: 534,471] | | | 457,685 | | | [removed: |] 349,705 | [removed: | | | 289,061 | |]

| Provision for income taxes | | [removed: | (268,929 | ) | | | (207,033 | )] [added: (294,265)] | | | [removed: (179,685] [added: (268,929)] | [removed: )] | | [added: (207,033)] | [removed: (134,760] | [removed: )] | [added: (179,685)] | | [removed: (110,080] | [removed: )] [added: (134,760)] |

| Net income | [added: $] | [added: 475,602 | |] $ | 445,374 | | [removed: |] $ | 327,438 | | [removed: |] $ | 278,000 | | [removed: |] $ | 214,945 | [removed: | | $ | 178,981 | |]

| Earnings per share | | | | | | | | | | | | | | | [removed: | | | | | |]

| Basic | [added: $] | [added: 15.30 | |] $ | 14.35 | | [removed: |] $ | 10.58 | | [removed: |] $ | 8.82 | | [removed: |] $ | 6.89 | [removed: | | $ | 5.73 | |]

| Diluted | [added: $] | [added: 15.10 | |] $ | 14.13 | | [removed: |] $ | 10.47 | | [removed: |] $ | 8.75 | | [removed: |] $ | 6.76 | [removed: | | $ | 5.64 | |]

| Weighted average common shares outstanding | | | | | | | | | | | | | | | [removed: | | | | | |]

| Basic | | [added: 31,092] | [removed: 31,038] | | [added: 31,038] | | [removed: 30,957] | [added: 30,957] | | | 31,513 | | | [removed: |] 31,217 | [removed: | | | 31,234 | |]

| Diluted | | [added: 31,494] | [removed: 31,512] | | [added: 31,512] | | [removed: 31,281] | [added: 31,281] | | | 31,783 | | | [removed: |] 31,775 | [removed: | | | 31,735 | |]

| | | [removed: As of] December [removed: 31 | | | | | |] [added: 31,] | | | | | | | | | | | | |

| [removed: Balance] [added: Balance] Sheet [removed: Data: | | | | | |] [added: Data:] | | | | | | | | | | | | | | |

| Total current liabilities | [added: $] | [added: 279,942 | |] $ | 245,710 | | [removed: |] $ | 199,228 | | [removed: |] $ | 186,852 | | [removed: |] $ | 157,453 | [removed: | | $ | 123,054 | |]

| Total shareholders’ equity | [added: $] | [added: 2,127,974 | |] $ | 2,012,369 | | [removed: |] $ | 1,538,288 | | [removed: |] $ | 1,245,926 | | [removed: |] $ | 1,044,226 | [removed: | | $ | 810,873 | |]

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | |

| | | Year ended December 31, | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| | 2015 | | | 2014 (1) | | | 2013 (1) | | | 2012 (1) | | | 2011 (1) | |

| Total current assets | $ | 814,647 | | $ | 859,511 | | $ | 653,095 | | $ | 537,745 | | $ | 494,954 |

| Total assets | $ | 2,725,066 | | $ | 2,527,317 | | $ | 1,996,068 | | $ | 1,659,805 | | $ | 1,419,070 |

| Total liabilities | $ | 597,092 | | $ | 514,948 | | $ | 457,780 | | $ | 413,879 | | $ | 374,844 |

(1) Balances were adjusted because we adopted Financial Accounting Standards Board Accounting Standards Update No. 2015-17, “Income Taxes” which requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet, as discussed in further detail in Note 1.

“Description of the Business and Summary of Significant Accounting Policies” in our consolidated financial statements included in Item 8.

“Financial Statements and Supplementary Data.”

| --- | --- |

“Financial Statements and Supplementary Data.” The data shown below are not necessarily indicative of results to be expected for any future period (in thousands, except per share data).

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | For the years ended December 31 | | | | | | | | | | | | | | | | | | |

| Total current assets | | $ | 878,479 | | | $ | 666,307 | | | $ | 546,607 | | | $ | 501,192 | | | $ | 406,221 | |

| Total assets | | $ | 2,546,285 | | | $ | 2,009,280 | | | $ | 1,668,667 | | | $ | 1,425,308 | | | $ | 1,121,605 | |

| Total liabilities | | $ | 533,916 | | | $ | 470,992 | | | $ | 422,741 | | | $ | 381,082 | | | $ | 310,732 | |

##### [Table of Contents](#toc)

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

| [Report of Independent Registered Public Accounting [removed: Firm](#tx861905_50) | | | 42] [added: Firm](#Report_of_Independent)] | [added: 40] |

| [Consolidated Balance Sheet as of December 31, [removed: 2014] [added: 2015] and [removed: 2013](#tx861905_51) | | | 43] [added: 2014](#Consolidated_BS)] | [added: 41] |

| [Consolidated Statement of Income and Comprehensive Income for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012](#tx861905_52) | | | 44] [added: 2013](#Consolidated_IS)] | [added: 42] |

| [Consolidated Statement of Shareholders’ Equity for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012](#tx861905_53) | | | 45] [added: 2013](#Consolidated_SOE)] | [added: 43] |

| [Consolidated Statement of Cash Flows for the years ended December 31, [removed: 2014, 2013] [added: 2015, 2014] and [removed: 2012](#tx861905_54) | | | 46] [added: 2013](#Consolidated_SCF)] | [added: 44] |

| [Notes to Consolidated Financial [removed: Statements](#tx861905_55) | | | 47] [added: Statements](#Notes_to_FS)] | [added: 45] |

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: The] [added: The] Board of Directors and Shareholders [removed: of][added: of]

[removed: Chipotle] [added: Chipotle] Mexican Grill, [removed: Inc.][added: Inc.]

We have audited the accompanying consolidated balance sheets of Chipotle Mexican Grill, Inc. (the “Company”) as of December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2014.][added: 2015.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chipotle Mexican Grill, Inc. at December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2014,] [added: 2015,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, [removed: 2014,] [added: 2015,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 4, [removed: 2015] [added: 2016] expressed an unqualified opinion thereon.

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEET][added: SHEET]

[removed: (in] [added: (in] thousands, except per share [removed: data)][added: data)]

| | [removed: | December 31 | |] [added: December 31,] | | | | |

| | [added: 2015] | [removed: 2014] | | [added: 2014] | | [removed: 2013] | [added: 2013] | |

| [removed: Assets | | |] [added: Assets] | | | | | |

| Current assets: | | | | | | [removed: | | |]

| Cash and cash equivalents [removed: |] [added: at beginning of year] | [removed: $] | 419,465 | | | [removed: $ |] 323,203 | | [added: | 322,553 |]

| Accounts receivable, net of allowance for doubtful accounts of [removed: $1,199] [added: $1,176] and [removed: $1,190] [added: $1,199] as of December 31, [removed: 2014] [added: 2015] and December 31, [removed: 2013,] [added: 2014,] respectively | | [removed: | 34,839 | |] [added: 38,283] | | [removed: 24,016] | [added: 34,839] |

| Inventory | | [removed: | 15,332 | |] [added: 15,043] | | [removed: 13,044] | [added: 15,332] |

| Prepaid expenses and other current assets | | [removed: | 34,795 | |] [added: 39,965] | | [removed: 34,204] | [added: 34,795] |

| Income tax receivable | | [removed: | 16,488 | |] [added: 58,152] | | [removed: 3,657] | [added: 16,488] |

| Investments | | [removed: | 338,592 | |] [added: 415,199] | | [removed: 254,971] | [added: 338,592] |

| Leasehold improvements, property and equipment, net | | [removed: | 1,106,984 | |] [added: 1,217,220] | | [removed: 963,238] | [added: 1,106,984] |

| Long term investments | | [removed: | 496,106 | |] [added: 622,939] | | [removed: 313,863] | [added: 496,106] |

| Other assets | | [removed: | 42,777 | |] [added: 48,321] | | [removed: 43,933] | [added: 42,777] |

| Goodwill | | [removed: |] 21,939 | | | [removed: |] 21,939 | [removed: |]

| [removed: Liabilities] [added: Liabilities] and [removed: shareholders’ equity | | |] [added: shareholders' equity] | | | | | |

| Current liabilities: | | | | | | [removed: | | |]

| Accounts payable | [removed: |] $ | [removed: 69,613 |] [added: 85,709] | | $ | [removed: 59,022 |] [added: 69,613] |

| Accrued payroll and benefits | | [removed: | 73,894 | |] [added: 64,958] | | [removed: 67,195] | [added: 73,894] |

| Accrued liabilities | | [removed: | 102,203 | |] [added: 129,275] | | [removed: 73,011] | [added: 102,203] |

| Total current liabilities | | [removed: | 245,710 | |] [added: 279,942] | | [removed: 199,228] | [added: 245,710] |

| Deferred rent | | [removed: | 219,414 | |] [added: 251,962] | | [removed: 192,739] | [added: 219,414] |

| Deferred income tax liability | | [removed: | 40,529 | |] [added: 32,305] | | [removed: 55,434] | [added: 21,561] |

| Other liabilities | | [removed: | 28,263 | |] [added: 32,883] | | [removed: 23,591] | [added: 28,263] |

| [removed: Shareholders’] [added: Shareholders'] equity: | | | | | | [removed: | | |]

| Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, [removed: 2014] [added: 2015] and December 31, [removed: 2013,] [added: 2014,] respectively | | [removed: | — | |] [added: \-] | | [removed: —] | [added: \-] |