Chipotle Mexican Grill (CMG) 10-K risk factor changes: FY2018 vs FY2017

The following risk factors could materially and adversely affect our business, financial condition and results of operations, and should be carefully considered in evaluating our business or making an investment decision involving our common stock.

The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties we face.

Our business is also subject to general risks and uncertainties that affect many other companies, including, but not limited to, overall economic and industry conditions.

Additional risks and uncertainties not currently known to us or that we currently believe are not material also may materially and adversely affect our business, financial condition and results of operations.

Risks Related to our Plans to Grow Our Sales and Improve Profitability

Our sales and profitability growth depends on our ability to increase comparable restaurant sales, and there are material risks to our ability to do so.

To grow our average restaurant sales, we will need to increase comparable restaurant sales, which represent the change in period-over-period sales for restaurants beginning in their 13th full calendar month of operation.

Changes in comparable restaurant sales are a critical factor affecting our profitability, because the profit margin on incremental comparable restaurant sales is generally higher due to the sales increases being applied against a partially fixed cost base.

Conversely, declines in comparable restaurant sales, as we have seen in some periods over the past three years, have a significant adverse effect on profitability due to the loss of the positive impact on profit margins associated with comparable restaurant sales increases, while we continue to incur a certain level of fixed costs.

Our ability to increase comparable restaurant sales depends on many factors, including:

| | · | | perceptions of the Chipotle brand and the safety and quality of our food, which may continue to be adversely impacted by actual or rumored food safety incidents or other adverse publicity, including as described below under “—We may continue to be negatively impacted by food safety incidents…”; |

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| | · | | competition, especially from an increasing number of competitors in the fast-casual segment of the restaurant industry and from other restaurant concepts whose strategies overlap with elements of our Food With Integrity philosophy, as well as from grocery stores, meal kit delivery services and other dining options; |

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| | · | | our ability to increase menu prices without adversely impacting transaction counts to such a degree that the impact from lower transactions equals or exceeds the benefit of the menu price increase, and without “trade down” by guests or other reductions in average check in response to such price increases; |

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

| | · | | executing our strategies effectively, including our marketing and branding strategies, our initiatives to expand the use of mobile and other digital ordering and increase sales from our delivery orders and catering options, our efforts to improve the overall quality of our guests’ experience and increase the speed at which our crews serve each guest, and our potential introduction of new menu items, each of which we may not be able to accomplish or which may not have the impact we expect; |

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| | · | | changes in consumer preferences and discretionary spending, including weaker consumer spending during periods of economic difficulty or uncertainty; |

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| | · | | initial sales performance of new restaurants, and the impact of new Chipotle restaurants in the event guests who frequent one of our restaurants begin to visit one of our new restaurants instead, as further described below under “—Our new restaurants, once opened, may not be profitable…”; |

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

| | · | | weather, natural disasters and other factors limiting access to our restaurants; and |

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| | · | | changes in government regulation that may impact consumer perceptions of our food, including initiatives regarding menu labeling and marketing claims about the origin or makeup of some of the ingredients we serve. |

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These factors, most of which are described in more detail in additional risk factors below, are beyond our control to at least some degree.

As a result, it is possible that we will not achieve our targeted or expected comparable restaurant sales in the future, or may even experience declines in comparable restaurant sales in the future.

Any declines in comparable restaurant sales or failure to meet market expectations for comparable restaurant sales increases would likely result in a significant adverse impact on the price of our common stock.

Increasing our sales and profits depends in part on our ability to open new restaurants in sites and on terms attractive to us, which is subject to many unpredictable factors, and we plan to open fewer restaurants in 2019 than we have in many prior years, which will adversely impact our sales growth rate.

We had 2,491 restaurants in operation as of December 31, 2018, and we plan to increase the number of our restaurants significantly.

In 2019 we plan to open between 140 and 155 new restaurants, which is fewer than the number of restaurants opened per

year in many prior years.

We have in the past experienced delays in opening some restaurants and that could happen again as a result of any one or more of the following factors:

| | · | | our potential inability to locate and secure new restaurant sites in locations that we believe to be attractive; |

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

| | · | | obstacles to hiring and training top performing employees in the local market; |

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| | · | | difficulty managing construction and development costs of new restaurants, particularly in competitive markets or when real estate development activity is robust; |

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

[added: See “Cautionary Note Regarding Forward-Looking Statements.”] Factors that might cause such differences include those described in Item 1A.

Comparable restaurant sales [added: and comparable restaurant transactions] represent the change in period-over-period sales [added: or paid transactions] for restaurants [removed: beginning] in [removed: their 13th] [added: operation for at least 13] full calendar [removed: month of operation.][added: months.]

Average restaurant sales were [removed: $1.940] [added: $2.004] million [removed: as of] [added: for the year ended] December 31, [removed: 2017, increasing] [added: 2018, an increase] from [removed: $1.868] [added: $1.940] million [removed: as of] [added: for the year ended] December [removed: 31, 2016.][added: 30, 2017.]

[removed: During 2017, we invested] [added: We continue to invest] in improving our digital [removed: platforms, including significant improvements to our mobile application and online ordering platform,] [added: platforms] and equipping select restaurants with an upgraded second make line dedicated to fulfilling out-of-restaurant orders.

During the full year [removed: 2017,] [added: 2018,] our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) as a [removed: percent] [added: percentage] of revenue decreased [removed: 4.1%] [added: 180 basis points to 81.3%] compared to the full year [removed: 2016.][added: 2017.]

“Risk [removed: Factors,” as well as Note 10.][added: Factors”.]

| | [removed: 2017] [added: 2018] | | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] |

| Beginning of period | [removed: 2,250] [added: 2,408] | | [removed: 2,010] [added: 2,250] | | [removed: 1,783] [added: 2,010] |

| Openings | [removed: 183] [added: 137] | | [removed: 243] [added: 183] | | [removed: 229] [added: 243] |

| [removed: Relocations/closures] [added: Chipotle closures/relocations] | [removed: (10)] [added: (48)] | | [removed: (3)] [added: (10)] | | [removed: (2)] [added: (3)] |

| ShopHouse closures | [removed: (15)] [added: \-] | | [removed: \-] [added: (15)] | | [added: \-] |

| Total restaurants at end of period | [removed: 2,408] [added: 2,491] | | [removed: 2,250] [added: 2,408] | | [removed: 2,010] [added: 2,250] |

| | Year ended December 31, | | | | | | | | | [removed: % increase] [added: Percentage Change] | | [removed: % increase/ (decrease)] |

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2017 over 2016] [added: 2018/2017] | | [removed: 2016 over 2015] [added: 2017/2016] |

| Revenue | $ | [removed: 4,476.4] [added: 4,865.0] | | $ | [removed: 3,904.4] [added: 4,476.4] | | $ | [removed: 4,501.2] [added: 3,904.4] | | [removed: 14.7%] [added: 8.7%] | | [removed: (13.3%)] [added: 14.7%] |

| Average restaurant sales | $ | [removed: 1.940] [added: 2.004] | | $ | [removed: 1.868] [added: 1.940] | | $ | [removed: 2.424] [added: 1.868] | | [removed: 3.9%] [added: 3.3%] | | [removed: (22.9%)] [added: 3.9%] |

| Comparable restaurant sales increases [removed: (decreases)] | | [removed: 6.4%] [added: 4.0%] | | | [removed: (20.4%)] [added: 6.4%] | | | [removed: 0.2%] [added: (20.4%)] | | | | |

The significant factors contributing to the increase in revenue in [removed: 2017] [added: 2018] were new restaurant openings and comparable restaurant sales increases.

[removed: Comparable restaurant sales decreased $914.7 million while revenue] [added: Revenue] from restaurants not yet in the comparable restaurant base contributed [removed: $323.9 million,] [added: $237.4 million to the revenue increase,] of which [removed: $156.2] [added: $112.1] million was attributable to restaurants opened in [removed: 2016.][added: 2018, and comparable restaurant sales increased $151.2 million.]

| | Year ended December 31, | | | | | | | | | [removed: % increase] [added: Percentage Change] | | [removed: % decrease] |

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2017 over 2016] [added: 2018/2017] | | [removed: 2016 over 2015] [added: 2017/2016] |

| Food, beverage and packaging | $ | [removed: 1,535.4] [added: 1,600.8] | | $ | [removed: 1,365.6] [added: 1,535.4] | | $ | [removed: 1,503.8] [added: 1,365.6] | | [removed: 12.4%] [added: 4.3%] | | [removed: (9.2%)] [added: 12.4%] |

| As a percentage of revenue | | [removed: 34.3%] [added: 32.9%] | | | [removed: 35.0%] [added: 34.3%] | | | [removed: 33.4%] [added: 35.0%] | | [added: (1.4%)] | | [added: (0.7%)] |

Food, beverage and packaging costs decreased as a percentage of revenue in 2017 primarily due to the benefit of [removed: the] menu price increases taken in select restaurants during the second and fourth quarters of 2017.

[removed: We expect food,] [added: Food,] beverage and packaging costs [added: decreased] as a percentage of revenue in 2018 [removed: to be lower than 2017] [added: primarily] due to the benefit of menu price [removed: increases,] [added: increases taken in select restaurants in 2017] and [removed: our expectations for stable commodity prices.][added: again at the end of 2018.]

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

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2017 over 2016] [added: 2018/2017] | | [removed: 2016 over 2015] [added: 2017/2016] |

| Labor costs | $ | [removed: 1,206.0] [added: 1,326.1] | | $ | [removed: 1,105.0] [added: 1,206.0] | | $ | [removed: 1,045.7] [added: 1,105.0] | | [removed: 9.1%] [added: 10.0%] | | [removed: 5.7%] [added: 9.1%] |

| As a percentage of revenue | | [removed: 26.9%] [added: 27.3%] | | | [removed: 28.3%] [added: 26.9%] | | | [removed: 23.2%] [added: 28.3%] | | [added: 0.3%] | | [added: (1.4%)] |

Labor costs as a percentage of revenue decreased during [removed: the year ended December 31,] 2017 due primarily to increased crew efficiency, including the benefit of lower promotional activity during the year, improved manager deployment, and sales leverage, including the impact of menu price increases.

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

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2017 over 2016] [added: 2018/2017] | | [removed: 2016 over 2015] [added: 2017/2016] |

| Occupancy costs | $ | [removed: 327.1] [added: 347.1] | | $ | [removed: 293.6] [added: 327.1] | | $ | [removed: 262.4] [added: 293.6] | | [removed: 11.4%] [added: 6.1%] | | [removed: 11.9%] [added: 11.4%] |

| As a percentage of revenue | | [removed: 7.3%] [added: 7.1%] | | | [removed: 7.5%] [added: 7.3%] | | | [removed: 5.8%] [added: 7.5%] | | [added: (0.2%)] | | [added: (0.2%)] |

Occupancy costs as a percentage of revenue decreased in [added: 2018 and] 2017 primarily due to sales leverage on a largely fixed-cost base.

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

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2017 over 2016] [added: 2018/2017] | | [removed: 2016 over 2015] [added: 2017/2016] |

| Other operating costs | $ | [removed: 651.6] [added: 680.0] | | $ | [removed: 642.0] [added: 651.6] | | $ | [removed: 515.0] [added: 642.0] | | [removed: 1.5%] [added: 4.4%] | | [removed: 24.7%] [added: 1.5%] |

| As a percentage of revenue | | [removed: 14.6%] [added: 14.0%] | | | [removed: 16.4%] [added: 14.6%] | | | [removed: 11.4%] [added: 16.4%] | | [added: (0.6%)] | | [added: (1.9%)] |

Other operating costs include, among other items, marketing and promotional costs, bank and credit card [added: processing] fees, and restaurant utilities and maintenance costs.

As of December 31, 2018, we operated 2,452 Chipotle restaurants throughout the United States, 37 international Chipotle restaurants, and two non-Chipotle restaurants.

We are committed to making our food more accessible to everyone while continuing to be a brand with a demonstrated purpose.

2018 Financial and Operational Highlights

Sales Trends.

Comparable restaurant sales increased 4.0% for the full year 2018 and increased 6.1%, which included a 2% increase in comparable restaurant transactions, for the three months ended December 31, 2018.

We expect our full year 2019 comparable restaurant sales increases to be in the mid-single digit range.

Sales from out-of-restaurant orders, including delivery orders, increased 260 basis points to 10.9% of revenue for the full year 2018, an increase from 8.3% of revenue for the full year 2017.

The decrease was primarily due to comparable restaurant sales increases combined with lower marketing and promotional expenses, partially offset by wage inflation at the crew level.

Corporate Restructuring.

During 2018, we opened a new headquarters office in Newport Beach, California, consolidated certain corporate administrative functions into our existing office in Columbus, Ohio, closed a corporate office in New York, New York, and commenced the closure of our previous headquarters office in Denver, Colorado.

All affected employees were either offered an opportunity to continue in the new organization or were offered a severance package.

We expect to incur total corporate restructuring costs, including costs already incurred, aggregating approximately $48 million to $58 million including (i) employee severance and other employee transition costs of approximately $8 million to $10 million; (ii) recruitment and relocation costs of approximately $12 million to $14 million; (iii) lease termination and other office closure costs of approximately $17 million to $22 million; and (iv) third-party and other costs of approximately $11 million to $12 million.

We recognized a total of $42.6 million of the foregoing costs during 2018, and expect to incur additional corporate restructuring costs into 2019 aggregating approximately $5 million to $15 million.

For additional information, please see Note 5.

“Corporate Restructuring Costs” in the notes to the consolidated financial statements included in Item 8.

“Financial Statements and Supplementary Data” as well as “Risks Unique to Our Business Strategy — Our restructuring activities will increase our expenses, may not be successful, and may adversely impact employee hiring and retention” in Item 1A.

Restaurant Closures.

In June 2018, we announced planned restaurant closures of approximately 55 to 65 restaurants beginning in the second quarter of 2018 and continuing over the next several quarters.

During the twelve months ended December 31, 2018, we closed or relocated 45 Chipotle restaurants and five Pizzeria Locale restaurants in connection with this initiative.

We expect to incur total restaurant exit costs, inclusive of costs already incurred, aggregating approximately $37 million to $43 million.

We recognized restaurant exit costs of approximately $35.8 million during 2018, and expect to incur additional restaurant exit costs into 2019 aggregating approximately $1 million to $7 million.

For additional information, please see Note 6.

“Restaurant Closure Costs and Impairment of Long-Lived Assets” in the notes to the consolidated financial statements included in Item 8.

“Financial Statements and Supplementary Data”, as well as “Risks Unique to Our Business Strategy — Our restructuring activities will increase our expenses, may not be successful, and may adversely impact employee hiring and retention” in Item 1A.

“Risk Factors”.

For the full year 2018, we opened 137 new restaurants.

We expect 2019 openings will be approximately 140 to 155 with a heavier weighting of openings towards the second half of the year.

Management Enhancements.

Brian Niccol joined us as Chief Executive Officer and as a member of the Board in March 2018; added a new Chief Marketing Officer, Chris Brandt and our first Chief People Officer, Marissa Andrada, in April 2018; added our first Chief Legal Officer and General Counsel, Roger Theodoredis, in October 2018; and added a new Chief Development Officer, Tabassum Zalotrawala in December 2018.

| TastyMade closures | (1) | | \- | | \- |

| Pizzeria Locale closures | (5) | | \- | | \- |

The increase in comparable restaurant sales was attributable to an increase in average check, including a 4.0% benefit from menu price increases, partially offset by 0.8% fewer comparable restaurant transactions.

The significant factors contributing to the increase in revenue in 2017 were comparable restaurant sales increases and new restaurant openings.

Food, beverage and packaging costs also benefitted from favorable avocado prices.

These decreases were partially offset by increased freight costs, and to a lesser extent increased costs for tortillas and rice.

Labor costs increased as a percentage of revenue in 2018 primarily due to an increase in wage inflation.

The increase was partially offset by sales leverage as our revenues increased 8.7% in 2018, which included the benefit of menu price increases.

Other operating costs decreased as a percentage of revenue in 2018 due primarily to sales leverage, including the benefit of menu price increases, and to a lesser extent marketing and promotional spend decreasing from 3.5% of revenue in 2017 to 2.9% of revenue in 2018.

This is partially offset by increased costs associated with store repairs and maintenance, and delivery.

General and administrative expenses increased in dollar terms in 2018, due to $32.1 million related to the corporate restructuring and other unusual charges, $21.4 million related to higher costs associated with our annual incentive cash bonus program and retention bonuses, $10.9 million associated with the biennial All Managers’ Conference that was held in September 2018, $3.8 million in higher stock compensation expense, and the remaining increase primarily relates to general and administrative growth to support our restaurant growth and digitizing our restaurant experience.

Steve Ells, our founder, Chairman and CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience.

Today, we continue to offer a focused menu of burritos, tacos, burrito bowls, and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in an interactive style allowing people to get what they want.

We seek out extraordinary ingredients that are not only fresh, but that are raised responsibly, with respect for the animals, land, and people who produce them.

We prepare our food using real, wholesome ingredients and without the use of artificial colors or flavors typically found in fast food.

Chipotle opened with a single restaurant in Denver in 1993 and as of December 31, 2017, we operated 2,408 restaurants.

Sales.

Our sales and profitability improved during 2017 as compared to 2016.

Comparable restaurant sales increased 6.4% as a result of an increase in the average check, including a 1.2% benefit from menu price increases implemented in about 500 restaurants during the second quarter of 2017 and 900 restaurants during the fourth quarter of 2017.

We expect comparable restaurant sales increases in the low single digits for the full year 2018, including the benefit from extending menu price increases to almost 950 additional restaurants in January 2018.

Sales growth from new restaurant openings, however, will be lower in 2018 than in the past due to our planned decrease in new restaurant openings during the year, as discussed below under “Restaurant Development.”

Sales from out-of-restaurant orders represented 8.3% of our revenue during the year ended December 31, 2017, up from 6.4% of revenue during the year ended December 31, 2016.

Additionally, in September 2017 we introduced an all-natural queso, which was ordered in approximately 10% of our transactions in January 2018.

The decrease was attributable to sales leverage, including the benefit of the menu price increases, lower marketing and promotional spend as a percent of revenue, and labor efficiencies, partially offset by higher wages paid to crew and managers.

As of December 31, 2017, we had 2,408 restaurants in operation, including 2,363 Chipotle restaurants throughout the United States, with an additional 37 international Chipotle restaurants and eight non-Chipotle restaurants that were consolidated into our financial results.

We opened 183 restaurants in 2017, including two relocations, and closed 23 additional restaurants (including 15 ShopHouse Southeast Asian Kitchen restaurants).

We intend to open between 130 and 150 restaurants for the full year 2018, as we focus our resources on improving our operations and delivering an outstanding experience to every one of our guests.

Most of our 2018 restaurant openings are planned in markets that already have a Chipotle presence established.

Tax Law Changes.

In December 2017, the Tax Cuts and Jobs Act was signed into law, and among other changes, the Act lowered the U.S. corporate income tax rate from 35% to 21% beginning in 2018.

As a result, we recognized a $6.0 million benefit in our provision for income taxes related to the remeasurement of our deferred tax position at the lower rate.

We expect our 2018 annual effective tax rate to be in the range of 30% to 31%, which includes an underlying effective tax rate of 27% to 28%, and around 3% to 4% related to stock awards.

As discussed in Note 1.

“Description of Business and Summary of Significant Accounting Policies” included in Item 8.

“Financial Statements and Supplementary Data,” the adoption of ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718)” will subject our tax rate to quarterly volatility from the effect of stock award exercise and vesting activities.

Additionally, we have deferred tax assets related to outstanding non-vested stock awards that contain market conditions.

If market conditions are not achieved, then we may not realize the benefit of these deferred tax assets, which would result in a higher effective tax rate in future periods.

We believe the stock awards granted in 2015 and 2016 that contain market conditions will increase our tax rate in the first and fourth quarters of 2018, respectively.

During 2018, we expect to use a portion of the savings from the lower federal corporate income tax rate to provide enhanced benefits to our employees, including by making all restaurant managers and crew eligible for a one-time cash bonus, awarding one-time stock bonuses to a broad group of staff employees, and enhancing a number of other benefits such as parental leave and short-term disability.

Additionally, we will use a portion of the savings by investing in our existing restaurants.

We expect these initiatives to increase labor, other operating, and general and administrative expenses, and to result in higher capital expenditures than we have typically incurred.

Management and Governance.

During the second quarter of 2017, we announced that we hired Scott Boatwright as Chief Restaurant Officer, and Scott has assumed oversight of operations for all North American Chipotle restaurants.

In the fourth quarter of 2017, we announced that Steve Ells, our Chairman and CEO, will become Executive Chairman following the completion of a search to identify a new CEO.

For risks associated with our planned installation of a new CEO, see “Risks Related to our Unique Business Strategy – Our success may depend on the continued service and availability of key personnel, and upcoming changes in our management team may not provide the benefits we expect” in Item 1A.

“Risk Factors.”

Data Security Incident.

In April 2017, we detected malware on the network that supports payment processing for our restaurants, and subsequently determined that the malware searched for track data, which may include cardholder name, card number, expiration date, and internal verification codes.

We removed the malware from our systems and continue to evaluate ways to enhance our security measures.

See “General Business Risks—We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer and employee information” in Item 1A.

“Commitments and Contingencies” in Item 8.

Generally, our pricing protocols with suppliers can remain in effect for periods ranging from one to [removed: 24] [added: 36] months, depending on the outlook for prices of the particular ingredient.

As of December 31, [removed: 2017,] [added: 2018,] we had [removed: $362.1] [added: $650.7] million in investments and interest-bearing cash accounts, including insurance-related restricted trust accounts classified in [removed: other assets,] [added: restricted cash,] and [removed: $129.3] [added: $35.3] million in accounts with an earnings credit we classify as interest [added: and other] income, which combined earned a weighted average interest rate of [removed: 0.97%.][added: 2.2%.]

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

As of December 31, [removed: 2017,] [added: 2018,] we operated [removed: 2,363] [added: 2,452] Chipotle restaurants throughout the United States, [removed: as well as] 37 international Chipotle restaurants, and [removed: we also had eight] [added: two] non-Chipotle restaurants.

[removed: Chipotle] [added: Our] restaurants feature [removed: only] a [removed: few entrée items:] [added: relevant menu of] burritos, burrito bowls, tacos and salads.

[removed: Ingredients we use include chicken, steak, carnitas (seasoned and braised pork), barbacoa (spicy braised and] shredded beef), Sofritas (organic braised tofu) and vegetarian pinto and black beans.

We add our rice, which is tossed with lime juice, freshly chopped cilantro, and a pinch of salt, as well as freshly shredded cheese, sour cream, lettuce, [added: and sautéed] peppers and onions, to our entrees depending on each [removed: customer’s] [added: guest’s] request.

We also serve tortilla chips [added: that are fried twice a day in each restaurant and] seasoned with fresh lime juice and salt, with sides of [added: hand mashed] guacamole, salsas, or queso.

We [added: respect our environment and] insist on preparing, cooking, and serving nutritious food made from natural ingredients and animals that are raised or grown with [removed: care and with respect for the environment.][added: care.]

[removed: Because our menu is so focused, we can] [added: We] concentrate on the [removed: sources] [added: sourcing] of each ingredient, and this has become a cornerstone of our continuous effort to improve the food we serve.

We're all about simple, fresh food without the use of artificial colors or flavors typically found in fast food—just genuine [removed: raw] [added: real] ingredients and their individual, delectable flavors.

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

We brand these meats as “Responsibly Raised ®.” One of our primary goals is for all of our restaurants to serve meats raised to meet our standards, but we have and [removed: will] [added: expect to] continue to face challenges in doing so.

For example, some of our restaurants periodically serve conventionally raised chicken or beef [removed: from time to time] due to supply constraints for our Responsibly Raised brand [removed: meats.][added: meats, or stop serving one or more menu items due to additional supply constraints.]

When we become aware [removed: that one or more] of [removed: our restaurants will serve conventionally raised meat,] [added: such an issue,] we clearly and specifically disclose this temporary change on signage in each affected restaurant so that [removed: customers] [added: guests] can [removed: avoid those meats] [added: adjust their orders] if they choose to do so.

We also seek to use [removed: more] responsibly grown produce, by which we mean produce grown by suppliers whose practices conform to our priorities with respect to environmental considerations and employee welfare.

[removed: Most] [added: Some] of the beans we serve are organically grown or grown using conservation tillage methods that improve soil conditions, reduce erosion, and help preserve the environment in which the beans are grown.

[removed: A portion of some] [added: Some] of the other produce items we serve [removed: is] [added: are] organically grown as well.

In [removed: 2017,] [added: 2018,] all of the sour cream and shredded cheese served in our U.S. Chipotle restaurants was made with milk [removed: that comes] from cows not given rBGH (recombinant bovine growth hormone) and sourced from pasture-based dairies that provide an even higher standard of animal welfare by providing outdoor access for their cows.

In addition, none of the ingredients in our food [removed: (not including] [added: (excluding] beverages) in U.S. Chipotle restaurants contain genetically modified organisms, or GMOs.

While the meat and poultry we serve is not genetically modified, [added: many of] the animals are likely fed a diet of grains containing GMOs.

We use a mix of forward, fixed and formula pricing protocols, and our distribution centers purchase within the pricing guidelines and protocols we have established with [removed: the] suppliers.

We’ve also [removed: tried] [added: sought] to increase, where practical, the number of suppliers for our [removed: ingredients, which we believe can] [added: ingredients to] help mitigate pricing volatility and supply [removed: shortages, and we follow industry news, trade tariffs and other issues, weather, exchange rates, foreign demand, crises and other world][added: shortages.]

For a discussion of risks related to our supply chain, see “Risks Related to Operating in the Restaurant Industry – Failure to receive frequent deliveries of higher-quality food ingredients and other supplies meeting our specifications could harm our operations” and “Risks [removed: Related to our] Unique [added: to Our] Business Strategy – Our Food With Integrity philosophy subjects us to risks” in Item 1A.

| [removed: ] | [added: · | |] supplier interventions (steps to avoid food safety risks before ingredients reach Chipotle); |

| [removed: ] | [added: · | |] advanced [removed: technology] [added: technologies] (tools that eliminate pathogens while maintaining food quality); |

| [removed: ] | [removed: farmer] [added: · | | small grower] support and training; |

| [removed: ] | [added: · | |] enhanced restaurant procedures (protocols for handling ingredients and sanitizing surfaces in our restaurants); |

| [removed: ] | [added: · | |] food safety [removed: certification;] [added: certifications;] |

| [removed: ] | [added: · | |] internal and [removed: third party] [added: third-party] restaurant inspections; and |

| [removed: ] | [added: · | |] ingredient traceability. |

These and other food safety practices underscore our commitment to [removed: becoming] [added: being] a leader in food safety while [removed: we continue] [added: continuing] to serve high quality food that our [removed: customers] [added: guests] love.

Our [removed: Executive Director of Food Safety directs a] [added: food safety and] quality assurance [removed: department that establishes] [added: teams establish] and [removed: monitors] [added: monitor] our quality and food safety [removed: programs,] [added: programs] and [removed: works] [added: work] closely with our suppliers to ensure our high standards are met throughout the supply chain.

We maintain a limited list of approved suppliers, many of [removed: which] [added: whom] are among the top suppliers in the industry.

In addition, [added: we have a team approach where] our training, operations, [added: legal] and risk management departments develop and implement operating standards for food quality, preparation, cleanliness, employee health protocols, and safety in the restaurants.

Our food safety programs are also intended to ensure that we not only continue to comply with applicable federal, state and local food safety regulations, but [added: also] establish Chipotle as an industry leader in food safety.

To [removed: be sure that our food safety programs continue to evolve in ways that will] help [removed: maintain leadership in] [added: achieve] this [removed: important area,] [added: goal,] we have a Food Safety Advisory Council comprised of some of the nation’s foremost food safety authorities.

[removed: Creating] [added: We believe creating] an excellent guest experience starts with hiring great [removed: people,] [added: people and] creating great [removed: teams, and training them on our high standards.][added: teams.]

Each restaurant typically has a general manager or Restaurateur (a high-performing general manager), an apprentice manager (in a majority of our restaurants), [removed: and we aim to have] two or three hourly service managers, one or two hourly kitchen managers and an average of 22 full and part-time crew members, though our busier restaurants tend to have slightly more employees.

We also cross-train our [removed: people] [added: team members] so that each can work a variety of stations, allowing us to work efficiently during our busiest times, while giving our [removed: people] [added: employees] the opportunity to develop a wider array of skills.

Consistent with our emphasis on customer service, we encourage our general managers and crew members to welcome and interact with [removed: customers] [added: guests] throughout the day.

In addition to the employees serving our [removed: customers] [added: guests] at each restaurant, we also have a field support system that includes field leaders and team directors, as well as executive team directors who report to our Chief Restaurant Officer.

We are passionate about serving great food and providing a great guest experience, and we are a longtime leader and innovator in the food industry.

When Steve Ells, founder and Executive Chairman, first opened Chipotle starting with a single restaurant in Denver, Colorado in 1993, the idea was simple: show that food served fast didn't have to be a typical “fast-food” experience.

Using high-quality real ingredients, classic cooking techniques, and distinctive interior design, we brought features from the realm of fine dining to the world of quick-service restaurants.

Over 25 years later, our devotion to seeking out the very best ingredients, raised with respect for animals, farmers, and the environment, remains at the core of our commitment to Food With Integrity.

Business Strategy

We are committed to making our food more accessible to everyone while continuing to be a brand with a demonstrated purpose of cultivating a better world.

Our strategy is to win today and cultivate the future by focusing on five key pillars which include:

| | · | | becoming a more culturally relevant and engaging brand that builds love and loyalty; |

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

| | · | | digitizing and modernizing our restaurant experience to create a more convenient and enjoyable guest experience; |

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

| | · | | running great restaurants with great hospitality and throughput; |

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

| | · | | being disciplined and focused to enhance our powerful economic model; and |

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

| | · | | building a great culture that can innovate and execute across digital, access, menu and the restaurant experience. |

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

Relevant Menu.

Our proteins include chicken, steak, carnitas (seasoned and braised pork), barbacoa (spicy braised and

Food with Integrity.

The food we serve is made from just 51 ingredients that everyone can both recognize and pronounce.

We call these beans “transitional”.

Purchasing and Food Safety

In addition, we closely monitor industry news, trade tariffs and other issues, weather, exchange rates, foreign demand, crises and other world events that may affect our ingredient prices.

Our food safety and quality assurance teams work to ensure compliance with our food safety programs and practices, components of which include:

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

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

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

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

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

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

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

Guest Experience and Operations

Serving great food, with great service in a safe, quick, clean and happy environment is always our highest priority, and we take pride in making the Chipotle experience exceptional.

We invest in training to consistently deliver an outstanding guest experience, and in our facilities to improve the appearance of our restaurants and modernize tools.

These investments enable faster throughput, better efficiency and a better team member experience in our restaurants.

In 2018, we hired a Chief People Officer to support our approximately 73,000 team members.

We believe the advancements we have made in this area will help us as we seek to make it as convenient as possible for our guests to enjoy Chipotle when and how they like it.

We are also testing new menu items.

We have built a stage-gate process around innovation where we test, learn and iterate, so that when we roll out a new initiative, we are highly confident in the probability of success.

We focus on finding fresh, high-quality raw ingredients to make great tasting food prepared using classic cooking methods; on building strong restaurant teams that are centered on providing an excellent guest experience; on building restaurants that are operationally efficient and aesthetically pleasing; and on doing all of this with the highest regard for the safety of our customers and with a continuing awareness of and respect for the environment.

We have grown substantially over the past five years, and expect to open between 130 and 150 new restaurants in 2018, representing a slight reduction in our rate of new openings as we focus our resources on improving our operations and delivering an outstanding experience to every one of our guests.

Throughout our history, we have pursued a mission to change the way people think about and eat fast food.

The fast food landscape has changed dramatically over Chipotle’s 24-year history suggesting that we may have achieved this mission, with a number of concepts built using service and sourcing formats that closely resemble ours – with more selective sourcing, food prepared on-site, and a service model that allows customers to choose exactly what they eat.

Looking at what we have accomplished, we have reenvisioned our purpose, and are working to Cultivate nourished communities where wholesome food is enjoyed every day.

We are also aiming to simplify our business focus, to emphasize only those things that result in an excellent guest experience in our restaurants.

We transitioned the management of our restaurants from eleven to nine regions during the fourth quarter of 2017 and we aggregate our operations into one reportable segment.

Financial information about our operations, including our revenues and net income for the years ended December 31, 2017, 2016, and 2015, and our total assets as of December 31, 2017 and 2016, 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 “Risks Related to Our Plans to Improve Our Sales and Profitability and Restore Our Economic Model – Our expansion into international markets has been limited, and may present increased risks due to lower customer awareness of our brand… ” in Item 1A.

Our Focus on Safe and Delicious Food Made with Better Ingredients

Focused Menu.

But because customers can choose from four different meats, tofu, two types of beans, and a variety of extras such as salsas, guacamole, queso, shredded cheese, and lettuce, there is enough variety to extend our menu to provide thousands of choices.

Wholesome Food.

In the future, more of our restaurants may periodically serve conventionally raised meats or stop serving one or more menu items due to additional supply constraints.

events that may affect our ingredient prices.

Our Executive Director of Food Safety, a respected expert in the industry, oversees our food safety programs and practices, components of which include:

| | |

| --- | --- |

Delivering an Excellent Guest Experience

We believe there is nothing more important than treating our guests to an excellent experience every time they visit one of our restaurants, and expect that doing so will help us attract customers more frequently and engender greater customer loyalty.

We have also renewed our commitment to focusing on our restaurant operations and training to elevate the experience we are providing, and ensuring greater consistency throughout all of our restaurants.

We have re-tooled our restaurant compensation systems to place greater emphasis on the strength of operations and the guest experience, and revamped our training programs to better support these priorities.

In order to successfully deliver a great experience for more customers, we are

We believe the advancements we have made in this area will help us as we continue to target lapsed customers, and seek to build frequency among newer customers.

Our marketing program is divided into three categories: top-of-mind advertising, brand advertising and local marketing.

Each of these serves a different purpose, but together they are intended to differentiate us from the competition.

Top-of-mind advertising is intended to keep current and new customers coming into our restaurants; brand advertising is directed at existing customers and seeks to build deeper connections to our brand; and local advertising aims to help connect our restaurants to local communities and the customers who live there.

Our top-of-mind advertising has generally included print, outdoor, social, digital and radio advertising, but we have also incorporated some national television advertising.

Beyond these traditional channels, we continue to pioneer new avenues of brand advertising aimed at making consumers more curious about some of the issues that are important to us, and explaining why and how we are working to drive positive change in the nation’s food supply.

We also have a dedicated team of field marketing staff that helps connect our restaurants to local communities through fundraisers, sponsorships and participation in local events.

Alongside our restaurant teams, these efforts have helped us create considerable word-of-mouth publicity as our customers learn more about us and share with others.

This approach allows us to build awareness and loyalty with relatively low advertising expenditures, even in a competitive category, and to differentiate Chipotle as a company that is committed to doing the right thing in every facet of our business.

Among our main competitors are a number of multi-unit, multi-market Mexican food or burrito restaurant concepts, some of which are expanding nationally.

Meal kit delivery companies and other eat-at-home options also present some degree of competition for our restaurants.

available information on competitors and other restaurants.

Over the previous six years, we’ve explored this idea by investing in innovative concepts such as Pizzeria Locale, a fast-casual pizza restaurant that now has seven restaurants in four states, and Tasty Made, a burger restaurant we opened in Lancaster, Ohio.

We also previously operated ShopHouse Southeast Asian Kitchen restaurants, but closed all of the ShopHouse locations in early 2017.

In 2018, our focus will remain on thoughtfully growing the Chipotle brand.

The services available within our systems and applications include restaurant operations, supply chain, inventory, scheduling, training, human capital management, financial tools, and data protection services.

For information regarding legal proceedings, see Note [removed: 10.][added: 13.]

For the fiscal year ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

[removed: ☒] Yes [removed: ☐] [added: ☒] No [added: ☐.]

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

As of June 30, [removed: 2017,] [added: 2018,] the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was [removed: $7.075] [added: $8.726] billion, based on the closing price of the registrant’s common stock on [removed: such date,] [added: June 29, 2018,] the last trading day of the registrant’s most recently completed second fiscal quarter.

As of February [removed: 6, 2018,] [added: 4, 2019,] there were [removed: 27,930,272] [added: 27,659,270] shares of the registrant’s common stock, par value of $0.01 per share outstanding.

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the [removed: 2018] [added: 2019] 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: 2017.][added: 2018.]

| Item 1B. | [Unresolved Staff Comments](#Item_1B) | [removed: 25] [added: 26] |

| Item 2. | [Properties](#Item_2) | [removed: 26] [added: 27] |

| Item 3. | [Legal Proceedings](#Item_3) | [removed: 27] [added: 28] |

| Item 4. | [Mine Safety Disclosures](#Item_4) | [removed: 27] [added: 28] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#Item_5) | [removed: 28] [added: 29] |

| Item 6. | [Selected Financial Data](#Item_6) | [removed: 30] [added: 31] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#Item_7) | [removed: 31] [added: 32] |

| Item 7A. | [Quantitative and Qualitative [removed: Disclosures] [added: Disclosure] About Market Risk](#Item_7A) | [removed: 39] [added: 40] |

| Item 8. | [Financial Statements and Supplementary Data](#Item_8) | [removed: 40] [added: 41] |

| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#Item_9) | [removed: 62] [added: 66] |

| Item 9A. | [Controls and Procedures](#Item_9A) | [removed: 62] [added: 66] |

| Item 9B. | [Other Information](#Item_9B) | [removed: 64] [added: 68] |

| Item 10. | [Directors, Executive Officers and Corporate Governance](#Item_10) | [removed: 64] [added: 68] |

| Item 11. | [Executive Compensation](#Item_11) | [removed: 64] [added: 68] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#Item_12) | [removed: 64] [added: 68] |

| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#Item_13) | [removed: 64] [added: 68] |

| Item 14. | [Principal Accounting Fees and Services](#Item_14) | [removed: 65] [added: 68] |

| Item 15. | [Exhibits, Financial Statement Schedules](#Item_15) | [removed: 66] [added: 69] |

| Item 16. | [Form 10-K Summary](#Item_16) | [removed: 67] [added: 71] |

| | [Signatures](#Signatures) | [removed: 68] [added: 72] |

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of [removed: 1933] [added: 1933, as amended (the “Securities Act”),] and Section 21E of the Securities Exchange Act of 1934, [added: as amended (the “Exchange Act”),] and that are intended to come within the safe harbor protection provided by those sections.

Forward-looking statements include, among others, [removed: forecasts of the number of restaurants we expect to open in 2018;] statements [removed: regarding the effectiveness of our food safety systems and procedures; statements] about the potential impact of catering and delivery offerings and technology initiatives; [added: statements regarding the effectiveness of our food safety systems and procedures;] projections of comparable restaurant sales increases and sales trends we expect for [removed: 2018;] [added: 2019; estimates of restructuring and restaurant closure costs and accelerated depreciation to be recognized in 2019;] forecasts of [added: the number of restaurants we expect to open; forecasts of] trends in general and administrative expenses, restaurant development costs, and other expenses for [removed: 2018;] [added: 2019;] estimates of expected effective tax rates for the year; statements about possible repurchases of our common stock; projections of planned capital expenditures; and other statements of our expectations and plans.

10-K 1 cmg-20181231x10k.htm 10-K

| 610 Newport Center Drive, Suite 1300 Newport Beach, CA | 92660 |

10-K 1 cmg-20171231x10k.htm 10-K

| | |

| 1401 Wynkoop Street, Suite 500 Denver, CO | 80202 |

| | | | | |

As of December 31, [removed: 2017,] [added: 2018,] there were [removed: 2,408] [added: 2,491] restaurants operated by Chipotle and our consolidated subsidiaries, [removed: 2,400] [added: 2,489] of which were Chipotle restaurants.

| Arizona | [removed: 79] [added: 80] |

| Colorado | [removed: 76] [added: 77] |

| Connecticut | [removed: 24] [added: 23] |

| Delaware | [removed: 6] [added: 8] |

| District of Columbia | [removed: 20] [added: 19] |

| Georgia | [removed: 47] [added: 51] |

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

| Iowa | [removed: 12] [added: 10] |

| Louisiana | [removed: 10] [added: 9] |

| Maryland | [removed: 84] [added: 91] |

| Massachusetts | [removed: 53] [added: 56] |

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

| Minnesota | [removed: 62] [added: 63] |

| New Hampshire | [removed: 7] [added: 8] |

| New Jersey | [removed: 57] [added: 64] |

| New Mexico | [removed: 7] [added: 8] |

| New York | [removed: 138] [added: 149] |

| North Carolina | [removed: 54] [added: 62] |

| Oregon | [removed: 30] [added: 31] |

| Pennsylvania | [removed: 82] [added: 86] |

| Rhode Island | [removed: 7] [added: 8] |

| South Carolina | [removed: 22] [added: 20] |

| Tennessee | [removed: 20] [added: 22] |

| Utah | [removed: 12] [added: 11] |

| Virginia | [removed: 97] [added: 101] |

| Wyoming | [removed: 2] [added: 1] |

| Canada | [removed: 24] [added: 23] |

| United Kingdom | [removed: 6] [added: 7] |

Of our restaurants in operation as of December 31, [removed: 2017,] [added: 2018,] we had [removed: 1,523] [added: 1,605] end-cap locations, [removed: 391] [added: 398] free-standing units, [removed: 356] [added: 348] in-line locations, and [removed: 138] [added: 140] other locations.

For additional information regarding the lease terms and provisions, see Note [removed: 8.][added: 11.]

| California | 412 |

| Florida | 160 |

| Illinois | 139 |

| Ohio | 180 |

| Texas | 205 |

| Total | 2,491 |

Our main office is located at 610 Newport Center Drive, Suite 1300, Newport Beach, CA 92660 and our telephone number is (949) 524-4035.

| California | 408 |

| Florida | 149 |

| Illinois | 134 |

| Ohio | 174 |

| Texas | 195 |

| Total | 2,408 |

Our main office is located at 1401 Wynkoop Street, Suite 500, Denver, Colorado, 80202 and our telephone number is (303) 595-4000.

Our common stock trades on the [removed: NYSE] [added: New York Stock Exchange] under the symbol “CMG.”

As of [removed: February 1, 2018,] [added: January 24, 2019,] there were approximately [removed: 948] [added: 914] 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.

The table below reflects shares of common stock we repurchased during the fourth quarter of [removed: 2017.][added: 2018.]

[removed: (1)Shares] [added: | | (1) | | Shares] were repurchased pursuant to [removed: a] [added: the] $100 million repurchase [removed: program] [added: programs] announced on [removed: May 23, 2017.][added: October 24, 2017 and April 25, 2018. |]

The following graph compares the cumulative annual stockholders return on our common stock from December 31, [removed: 2012] [added: 2013] through December 31, [removed: 2017] [added: 2018] 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: 2012.][added: 2013.]

This graph is not “soliciting material,” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act [removed: of 1933, as amended,] or the [removed: Securities] Exchange [removed: Act of 1934, as amended,] [added: Act,] whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

| October | | | 8,705 | | $ | 446.07 | | 8,705 | | $ | 99,100,835 |

| November | | | 37,178 | | $ | 475.95 | | 37,178 | | $ | 81,405,932 |

| December | | | 54,715 | | $ | 435.98 | | 54,715 | | $ | 57,551,285 |

| Total | | | 100,598 | | $ | 451.62 | | 100,598 | | $ | 57,551,285 |

__________________

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

| | (2) | | This column does not include an additional $100 million in authorized repurchases announced on February 6, 2019. Each repurchase program has no expiration date. Authorization of repurchase programs may be modified, suspended or discontinued at any time. |

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


*$100 invested on 12/31/13 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

Source data: S&P Capital IQ

The following table describes the per share range of high and low sales prices for shares of our common stock for the quarterly periods indicated, as reported by the New York Stock Exchange (“NYSE”).

| | | | | | |

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

| | | | | | |

| | High | | | Low | |

| 2016 | | | | | |

| First Quarter | $ | 542.50 | | $ | 399.14 |

| Second Quarter | $ | 473.17 | | $ | 384.77 |

| Third Quarter | $ | 444.13 | | $ | 386.10 |

| Fourth Quarter | $ | 440.00 | | $ | 352.96 |

| | | | | | |

| | High | | | Low | |

| 2017 | | | | | |

| First Quarter | $ | 453.08 | | $ | 372.87 |

| Second Quarter | $ | 499.00 | | $ | 410.98 |

| Third Quarter | $ | 419.73 | | $ | 295.11 |

| Fourth Quarter | $ | 333.33 | | $ | 263.00 |

| October | | | 81,953 | | $ | 303.31 | | 81,953 | | $ | 170,567,974 |

| November | | | 91,427 | | $ | 279.97 | | 91,427 | | $ | 144,971,147 |

| December | | | 86,775 | | $ | 307.66 | | 86,775 | | $ | 118,274,235 |

| Total | | | 260,155 | | $ | 296.56 | | 260,155 | | $ | 118,274,235 |

(2)This column includes $100 million in additional authorized repurchases announced on October 24, 2017.

Our authorized repurchase programs have no expiration date, but may be modified, suspended, or discontinued at any time.

![A close up of a map

Description generated with very high confidence](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231x10kg001.gif)

| | [added: 2018 | | |] 2017 | | | 2016 | | | 2015 | | | 2014 | | [removed: | 2013 | |]

| Revenue | $ | [removed: 4,476,412] [added: 4,864,985] | | $ | [removed: 3,904,384] [added: 4,476,412] | | $ | [removed: 4,501,223] [added: 3,904,384] | | $ | [removed: 4,108,269] [added: 4,501,223] | | $ | [removed: 3,214,591] [added: 4,108,269] |

| Food, beverage and packaging costs | | [added: 1,600,760 | | |] 1,535,428 | | | 1,365,580 | | | 1,503,835 | | | 1,420,994 | [removed: | | 1,073,514 |]

| Labor costs | | [added: 1,326,079 | | |] 1,205,992 | | | 1,105,001 | | | 1,045,726 | | | 904,407 | [removed: | | 739,800 |]

| Occupancy costs | | [added: 347,123 | | |] 327,132 | | | 293,636 | | | 262,412 | | | 230,868 | [removed: | | 199,107 |]

| Other operating costs | | [added: 680,031 | | |] 651,644 | | | 641,953 | | | 514,963 | | | 434,244 | [removed: | | 347,401 |]

| General and administrative expenses | | [added: 375,460 | | |] 296,388 | | | 276,240 | | | 250,214 | | | 273,897 | [removed: | | 203,733 |]

| Depreciation and amortization | | [added: 201,979 | | |] 163,348 | | | 146,368 | | | 130,368 | | | 110,474 | [removed: | | 96,054 |]

| Pre-opening costs | | [added: 8,546 | | |] 12,341 | | | 17,162 | | | 16,922 | | | 15,609 | [removed: | | 15,511 |]

| Loss on disposal of assets | | [added: 66,639 | | |] 13,345 | | | 23,877 | | | 13,194 | | | 6,976 | [removed: | | 6,751 |]

| Total operating expenses | | [added: 4,606,617 | | |] 4,205,618 | | | 3,869,817 | | | 3,737,634 | | | 3,397,469 | [removed: | | 2,681,871 |]

| Income from operations | | [added: 258,368 | | |] 270,794 | | | 34,567 | | | 763,589 | | | 710,800 | [removed: | | 532,720 |]

| Interest and other income, net | | [added: 10,068 | | |] 4,949 | | | 4,172 | | | 6,278 | | | 3,503 | [removed: | | 1,751 |]

| Income before income taxes | | [added: 268,436 | | |] 275,743 | | | 38,739 | | | 769,867 | | | 714,303 | [removed: | | 534,471 |]

| Provision for income taxes | | [added: (91,883) | | |] (99,490) | | | (15,801) | | | (294,265) | | | (268,929) | [removed: | | (207,033) |]

| Net income | $ | [removed: 176,253] [added: 176,553] | | $ | [removed: 22,938] [added: 176,253] | | $ | [removed: 475,602] [added: 22,938] | | $ | [removed: 445,374] [added: 475,602] | | $ | [removed: 327,438] [added: 445,374] |

| Basic | $ | [removed: 6.19] [added: 6.35] | | $ | [removed: 0.78] [added: 6.19] | | $ | [removed: 15.30] [added: 0.78] | | $ | [removed: 14.35] [added: 15.30] | | $ | [removed: 10.58] [added: 14.35] |

| Diluted | $ | [removed: 6.17] [added: 6.31] | | $ | [removed: 0.77] [added: 6.17] | | $ | [removed: 15.10] [added: 0.77] | | $ | [removed: 14.13] [added: 15.10] | | $ | [removed: 10.47] [added: 14.13] |

| Basic | | [added: 27,823 | | |] 28,491 | | | 29,265 | | | 31,092 | | | 31,038 | [removed: | | 30,957 |]

| Diluted | | [added: 27,962 | | |] 28,561 | | | 29,770 | | | 31,494 | | | 31,512 | [removed: | | 31,281 |]

| | [added: 2018 | | |] 2017 | | | 2016 | | | 2015 | | | 2014 | | [removed: | 2013 | |]

| Total current assets | $ | [removed: 629,535] [added: 814,794] | | $ | [removed: 522,374] [added: 629,535] | | $ | [removed: 814,647] [added: 522,374] | | $ | [removed: 859,511] [added: 814,647] | | $ | [removed: 653,095] [added: 859,511] |

| Total assets | $ | [removed: 2,045,692] [added: 2,265,518] | | $ | [removed: 2,026,103] [added: 2,045,692] | | $ | [removed: 2,725,066] [added: 2,026,103] | | $ | [removed: 2,527,317] [added: 2,725,066] | | $ | [removed: 1,996,068] [added: 2,527,317] |

| Total current liabilities | $ | [removed: 323,893] [added: 449,990] | | $ | [removed: 281,793] [added: 323,893] | | $ | [removed: 279,942] [added: 281,793] | | $ | [removed: 245,710] [added: 279,942] | | $ | [removed: 199,228] [added: 245,710] |

| Total liabilities | $ | [removed: 681,247] [added: 824,179] | | $ | [removed: 623,610] [added: 681,247] | | $ | [removed: 597,092] [added: 623,610] | | $ | [removed: 514,948] [added: 597,092] | | $ | [removed: 457,780] [added: 514,948] |

| Total shareholders’ equity | $ | [removed: 1,364,445] [added: 1,441,339] | | $ | [removed: 1,402,493] [added: 1,364,445] | | $ | [removed: 2,127,974] [added: 1,402,493] | | $ | [removed: 2,012,369] [added: 2,127,974] | | $ | [removed: 1,538,288] [added: 2,012,369] |

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

| [Consolidated Balance Sheet as of December 31, [removed: 2017] [added: 2018] and [removed: 2016](#Consolidated_BS)] [added: 2017](#Consolidated_BS)] | [removed: 42] [added: 43] |

| [Consolidated Statement of Income and Consolidated Statement of Comprehensive Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#Consolidated_IS)] [added: 2016](#Consolidated_IS)] | [removed: 43] [added: 44] |

| [Consolidated Statement of Shareholders’ Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#Consolidated_SOE)] [added: 2016](#Consolidated_SOE)] | [removed: 44] [added: 45] |

| [Consolidated Statement of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#Consolidated_SCF)] [added: 2016](#Consolidated_SCF)] | [removed: 45] [added: 46] |

| [Notes to Consolidated Financial Statements](#Notes_to_FS) | [removed: 46] [added: 47] |

We have audited the accompanying consolidated balance [removed: sheet] [added: sheets] of Chipotle Mexican Grill, Inc. (the [removed: Company),] [added: Company)] as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively referred to as the [removed: “financial] [added: “consolidated financial] statements”).

In our opinion, the [added: consolidated] financial statements present fairly, in all material respects, the [removed: consolidated] financial position of the Company at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the [removed: consolidated] results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: Stated)] [added: States)] (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal [removed: Control-Integrated] [added: Control Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 8, 2018] [added: 7, 2019] expressed an unqualified opinion thereon.

[removed: February 8,] [added: | |] 2018 [added: | |]

| | [added: 2018 | | |] 2017 | | | 2016 | |

| Cash and cash equivalents | $ | [removed: 184,569] [added: 249,953] | | $ | [removed: 87,880] [added: 184,569] |

| Inventory | | [removed: 19,860] [added: 21,555] | | | [removed: 15,019] [added: 19,860] |

| Prepaid expenses and other current assets | | [removed: 50,918] [added: 54,129] | | | [removed: 44,080] [added: 50,918] |

| Income tax receivable | | [removed: 9,353] [added: \-] | | | [removed: 5,108] [added: 9,353] |

| Investments | | [removed: 324,382] [added: 426,845] | | | [removed: 329,836] [added: 324,382] |

| Total current assets | | [removed: 629,535] [added: 814,794] | | | [removed: 522,374] [added: 629,535] |

| Leasehold improvements, property and equipment, net | | [removed: 1,338,366] [added: 1,379,254] | | | [removed: 1,303,558] [added: 1,338,366] |

| Total assets | $ | [removed: 2,045,692] [added: 2,265,518] | | $ | [removed: 2,026,103] [added: 2,045,692] |

| Accounts payable | $ | [removed: 82,028] [added: 113,071] | | $ | [removed: 78,363] [added: 82,028] |

| Accrued payroll and benefits | | [removed: 82,541] [added: 113,467] | | | [removed: 76,301] [added: 82,541] |

| Total current liabilities | | [removed: 323,893] [added: 449,990] | | | [removed: 281,793] [added: 323,893] |

| Deferred rent | | [removed: 316,498] [added: 330,985] | | | [removed: 288,927] [added: 316,498] |

| Deferred income tax liability | | [removed: 814] [added: 11,566] | | | [removed: 18,944] [added: 814] |

| Other liabilities | | [removed: 40,042] [added: 31,638] | | | [removed: 33,946] [added: 40,042] |

| Total liabilities | | [removed: 681,247] [added: 824,179] | | | [removed: 623,610] [added: 681,247] |

| Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | | \- | | | \- |

| Common [removed: stock] [added: stock,] $0.01 par value, 230,000 shares authorized, [added: 35,973] and 35,852 [removed: and 35,833] shares issued as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | | [removed: 359] [added: 360] | | | [removed: 358] [added: 359] |

| Additional paid-in capital | | [removed: 1,305,090] [added: 1,374,154] | | | [removed: 1,238,875] [added: 1,305,090] |

| Treasury stock, at cost, [removed: 7,826] [added: 8,276] and [removed: 7,019] [added: 7,826] common shares at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | | [removed: (2,334,409)] [added: (2,500,556)] | | | [removed: (2,049,389)] [added: (2,334,409)] |

| Accumulated other comprehensive income (loss) | | [removed: (3,659)] [added: (6,236)] | | | [removed: (8,162)] [added: (3,659)] |

| Retained earnings | | [removed: 2,397,064] [added: 2,573,617] | | | [removed: 2,220,811] [added: 2,397,064] |

| Total shareholders' equity | | [removed: 1,364,445] [added: 1,441,339] | | | [removed: 1,402,493] [added: 1,364,445] |

| Total liabilities and shareholders' equity | $ | [removed: 2,045,692] [added: 2,265,518] | | $ | [removed: 2,026,103] [added: 2,045,692] |

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Revenue | $ | [removed: 4,476,412] [added: 4,864,985] | | $ | [removed: 3,904,384] [added: 4,476,412] | | $ | [removed: 4,501,223] [added: 3,904,384] |

| Food, beverage and packaging | | [removed: 1,535,428] [added: 1,600,760] | | | [removed: 1,365,580] [added: 1,535,428] | | | [removed: 1,503,835] [added: 1,365,580] |

| Labor | | [removed: 1,205,992] [added: 1,326,079] | | | [removed: 1,105,001] [added: 1,205,992] | | | [removed: 1,045,726] [added: 1,105,001] |

| Occupancy | | [removed: 327,132] [added: 347,123] | | | [removed: 293,636] [added: 327,132] | | | [removed: 262,412] [added: 293,636] |

| Other operating costs | | [removed: 651,644] [added: 680,031] | | | [removed: 641,953] [added: 651,644] | | | [removed: 514,963] [added: 641,953] |

Irvine, California

February 7, 2019

| | 2018 | | | 2017 | |

| Accounts receivable | | 62,312 | | | 40,453 |

| Restricted cash | | 30,199 | | | 29,601 |

| Other assets | | 19,332 | | | 26,251 |

| Accrued liabilities | | 147,849 | | | 95,679 |

| Unearned revenue | | 70,474 | | | 63,645 |

| Income tax payable | | 5,129 | | | \- |

| Commitments and contingencies (Note 13) | | | | | |

| Impairment, closure costs, and asset disposals | | 66,639 | | | 13,345 | | | 23,877 |

| Acquisition of treasury stock | | | | | | | | | 450 | | | (166,147) | | | | | | | | | | | | (166,147) |

| Net income | | | | | | | | | | | | | | | 176,553 | | | | | | | | | 176,553 |

| Balance, December 31, 2018 | 35,973 | | $ | 360 | | $ | 1,374,154 | | 8,276 | | $ | (2,500,556) | | $ | 2,573,617 | | $ | (147) | | $ | (6,089) | | $ | 1,441,339 |

| | | | | (as adjusted)(1) | | | | (as adjusted)(1) |

| Impairment, closure costs, and asset disposals | | 61,987 | | | 13,345 | | | 23,877 |

| Other | | (2,918) | | | (218) | | | (1,924) |

| Other assets | | (2,005) | | | (1,476) | | | 1,063 |

| Accrued payroll and benefits | | 29,568 | | | 6,188 | | | 11,416 |

| Accrued liabilities | | 14,831 | | | 28,179 | | | 13,692 |

| Unearned revenue | | 6,829 | | | 4,207 | | | 8,383 |

| Net cash provided by operating activities | | 621,552 | | | 468,216 | | | 355,160 |

| Acquisition of treasury stock | | (160,937) | | | (285,218) | | | (836,760) |

| Tax withholding on share-based compensation awards | | (5,411) | | | (702) | | | (895) |

| Net change in cash, cash equivalents, and restricted cash | | 65,982 | | | 97,800 | | | (154,207) |

| Cash, cash equivalents, and restricted cash at beginning of period | | 214,170 | | | 116,370 | | | 270,577 |

| Cash, cash equivalents, and restricted cash at end of period | $ | 280,152 | | $ | 214,170 | | $ | 116,370 |

| | (1) | | Balances were adjusted due to the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” as discussed in further detail in Note 1. “Description of Business and Summary of Significant Accounting Policies Recent Accounting Standards” |

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

We manage our operations and restaurants based on eight regions that aggregate into one reportable segment.

Delivery

We offer our customers delivery in certain geographic regions.

Delivery services are fulfilled by third-party service providers.

In some cases, we make delivery sales through Chipotle.com or the Chipotle App (“White Label Sales”).

In other cases, we make delivery sales through a non-Chipotle owned channel, such as the delivery partner’s website or app (“Marketplace Sales”).

With respect to White Label Sales, we control the delivery services and generally recognize revenue, including delivery fees, when the delivery partner transfers food to the customer.

For these sales, we receive payment directly from the customer at the time of sale.

With respect to Marketplace Sales, we generally recognize revenue, excluding delivery fees, when control of the food is transferred to the delivery partner and we receive payment subsequent to the transfer of food.

The payment terms with respect to Marketplace Sales are short-term in nature.

Gift Cards

Denver, Colorado

| Accounts receivable, net of allowance for doubtful accounts of $0 and $259 as of December 31, 2017 and 2016, respectively | | 40,453 | | | 40,451 |

| Long term investments | | \- | | | 125,055 |

| Other assets | | 55,852 | | | 53,177 |

| Accrued liabilities | | 159,324 | | | 127,129 |

| | | | | | | | | |

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

| | | | | | | | | |

| Loss on disposal and impairment of assets | | 13,345 | | | 23,877 | | | 13,194 |

| Balance, December 31, 2014 | 35,394 | | $ | 354 | | $ | 1,038,932 | | 4,367 | | $ | (748,759) | | $ | 1,722,271 | | $ | \- | | $ | (429) | | $ | 2,012,369 |

| Acquisition of treasury stock | | | | | | | | | 839 | | | (485,853) | | | | | | | | | | | | (485,853) |

| Net income | | | | | | | | | | | | | | | 475,602 | | | | | | | | | 475,602 |

| Loss on disposal and impairment of assets | | 13,345 | | | 23,877 | | | 13,194 |

| Excess tax benefit on stock-based compensation | | \- | | | (1,320) | | | (74,442) |

| Other | | (218) | | | (604) | | | 582 |

| Other assets | | (2,587) | | | (4,855) | | | (5,619) |

| Accrued liabilities | | 38,574 | | | 33,491 | | | (7,440) |

| Net cash provided by operating activities | | 467,105 | | | 349,242 | | | 683,316 |

| Acquisition of treasury stock | | (285,920) | | | (837,655) | | | (460,675) |

| Excess tax benefit on stock-based compensation | | \- | | | 1,320 | | | 74,442 |

| Net change in cash and cash equivalents | | 96,689 | | | (160,125) | | | (171,460) |

| Cash and cash equivalents at beginning of year | | 87,880 | | | 248,005 | | | 419,465 |

| Cash and cash equivalents at end of year | $ | 184,569 | | $ | 87,880 | | $ | 248,005 |

We transitioned the management of our operations from 11 to nine regions during 2017 and have aggregated our operations to one reportable segment.

All intercompany balances and transactions have been eliminated.

The determination of the gift card breakage rate is based upon company-specific historical redemption patterns.

During the quarter ended December 31, 2017, we revised the period over which we recognize gift card breakage from six months to eight months from the date of the gift card sale in the consolidated statement of income.

Breakage recognized during the years ended December 31, 2017, 2016 and 2015 was $3,590, $3,624 and $4,226, respectively.

During the year ended December 31, 2016, we offered a limited-time frequency program that awarded free food or merchandise to customers based on frequency of monthly visits.

Rewards expire according to the loyalty awards terms and conditions.

Deferred revenue related to the frequency program was $0 and $5,489 as of December 31, 2017 and December 31, 2016, respectively, and the entire amount that was deferred as of December 31, 2016 was recognized during 2017.

We have not experienced any losses related to these balances and believe the risk to be minimal.

Investments

Goodwill represents the excess of cost over fair value of net assets of the business acquired.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

During the years ended December 31, 2017, 2016 and 2015, an aggregate impairment charge of $3,291, $17,394 and $6,675, respectively, was recognized in loss on disposal and impairment of assets in the consolidated statement of income.

During the year ended December 31, 2017, the impairment charges resulted primarily from the closure of a small number of underperforming Chipotle restaurants.

Impairment charges recognized during the year ended December 31, 2016 resulted primarily from the impairment of ShopHouse Southeast Asian Kitchen restaurants which were closed during 2017.

During the year ended December 31, 2015, the impairment charges resulted from an internally developed software program we chose not to implement and the related hardware, the discontinued use of certain kitchen equipment from our restaurants, as well as restaurant relocations.

As of December 31, [removed: 2017,] [added: 2018,] we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

There were no changes during the fiscal quarter ended December 31, [removed: 2017] [added: 2018] in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (the “2013 framework”).

Based on that assessment, management concluded that, as of December 31, [removed: 2017,] [added: 2018,] our internal control over financial reporting was effective based on the criteria established in the 2013 framework.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

We have audited Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal [removed: Control-Integrated] [added: Control Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Chipotle Mexican Grill, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related [removed: notes, of the Company] [added: notes] and our report dated February [removed: 8, 2018] [added: 7, 2019] expressed an unqualified opinion thereon.

Irvine, California

February 7, 2019

Denver, Colorado

February 8, 2018

Incorporated by reference from the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2017.][added: 2018.]

The following table presents information regarding options and rights outstanding under our equity compensation plans as of December 31, [removed: 2017.][added: 2018.]

[removed: (1)Includes] [added: | | (1) | | Includes] shares issuable in connection with awards with performance and market conditions, which will be issued based on achievement of performance criteria associated with the awards, with the number of shares issuable dependent on our level of performance. [added: The weighted-average exercise price in column (b) includes the weighted-average exercise price of SOSARs only. |]

[added: | | (2) | | Includes 2,625,516 shares remaining available under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and 245,924 shares remaining available under the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan.] In addition to being available for future issuance upon exercise of SOSARs or stock options that may be granted after December 31, [removed: 2017,] [added: 2018,] all of the shares available for grant under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan may instead be issued in the form of restricted stock, restricted stock units, performance shares or other equity-based awards. [added: Each share underlying a full value award such as restricted stock, restricted stock units or performance shares counts as two shares used against the total number of securities authorized under the plan. |]

Additional information for this item is incorporated by reference from the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2017.][added: 2018.]

| Equity Compensation Plans Approved by Security Holders | 2,374,955 | | $ | 474.51 | | 2,871,440 |

| Total | 2,374,955 | | $ | 474.51 | | 2,871,440 |

__________________

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

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

| Equity Compensation Plans Approved by Security Holders | 2,211,600 | | $ | 480.09 | | 2,032,484 |

| Total | 2,211,600 | | $ | 480.09 | | 2,032,484 |

The weighted-average exercise price in column (b) includes the weighted-average exercise price of SOSARs only.

(2)Includes 1,786,198 shares remaining available under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and 246,286 shares remaining available under the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan.

Each share underlying a full value award such as restricted stock, restricted stock units or performance shares counts as two shares used against the total number of securities authorized under the plan.

Incorporated by reference from the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2017.][added: 2018.]

| 10.2† | [Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive [removed: Plan](http://www.sec.gov/Archives/edgar/data/1058090/000105809016000088/cmg-20160930xex10_1.htm)] [added: Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312518173614/d578721dex101.htm)] | [removed: 10-Q] [added: 8-K] | 001-32731 | [removed: October 26, 2016] [added: May 24, 2018] | 10.1 | |

| 10.2.8.1† | [Amendment to 2016 Performance Share [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312517104111/d365751d8k.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312517104111/d365751dex101.htm)] | 8-K | 001-32731 | March 30, 2017 | 10.1 | |

| [removed: 10.2.9†] [added: 10.14] | [Form of [removed: 2017] [added: 2018] Stock Appreciation Rights [removed: Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex10_29.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_14.htm)] | [removed: \-] [added: 10-Q] | [removed: \-] [added: 001-32731] | [removed: \-] [added: April 26, 2018] | [removed: \-] [added: 10.14] | [removed: X] |

| [removed: 10.2.10†] [added: 10.15] | [Form of [removed: 2017] [added: 2018] Restricted Stock Units [removed: Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex10_210.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_15.htm)] | [removed: \-] [added: 10-Q] | [removed: \-] [added: 001-32731] | [removed: \-] [added: April 26, 2018] | [removed: \-] [added: 10.15] | [removed: X] |

| [removed: 10.2.12†] [added: 10.16] | [Form of [removed: Staff] [added: 2018] Restricted Stock Units [removed: Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex10_212.htm)] [added: Agreement - 12 month](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_16.htm)] | [removed: \-] [added: 10-Q] | [removed: \-] [added: 001-32731] | [removed: \-] [added: April 26, 2018] | [removed: \-] [added: 10.16] | [removed: X] |

| 10.5.1† | [removed: [Amendment No. 1 to Chipotle Mexican Grill, Inc. Supplemental] [added: [Supplemental] Deferred Investment [removed: Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312507166908/dex101.htm)] [added: Plan](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000047/cmg-20180630xex10_3.htm)] | 10-Q | 001-32731 | [removed: August 1, 2007] [added: July 27, 2018] | [removed: 10.1] [added: 10.3] | |

| 21.1 | [Subsidiaries of Chipotle Mexican Grill, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex21_1.htm)] [added: Inc.](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex21_1.htm)] | \- | \- | \- | \- | X |

| 23.1 | [Consent of Ernst & Young LLP (as the independent registered public accounting firm of Chipotle Mexican Grill, [removed: Inc.)](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex23_1.htm)] [added: Inc.)](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex23_1.htm)] | \- | \- | \- | \- | X |

| 31.1 | [Certification of Chief Executive Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex31_1.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex31_1.htm)] | \- | \- | \- | \- | X |

| 31.2 | [Certification of Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex31_2.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex31_2.htm)] | \- | \- | \- | \- | X |

| 32.1 | [Certification of Chief Executive Officer and Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809018000018/cmg-20171231xex32_1.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex32_1.htm)] | \- | \- | \- | \- | X |

| 101 | The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheet as of December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016,] [added: 2017,] (ii) Consolidated Statement of Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] (iii) Consolidated Statement of Comprehensive Income for the years ended December [removed: 31 2017, 2016] [added: 31, 2018, 2017] and [removed: 2015,] [added: 2016,] (iv) Consolidated Statement of Shareholders’ Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] (v) Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015;] [added: 2016;] and (vi) Notes to the Consolidated Financial Statements | \- | \- | \- | \- | X |

| 10.1.3 | [Stock Appreciation Rights Agreement between Steve Ells and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_1.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.1 | |

| 10.2.13 | [Retention Agreement, dated January 9, 2018, between Jack Hartung and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000004/cmg-20180112xex10_1.htm) | 8-K | 001-32731 | January 12, 2018 | 10.1 | |

| 10.3.1 | [Retention Agreement, dated January 9, 2018, between Mark Crumpacker and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000004/cmg-20180112xex10_2.htm) | 8-K | 001-32731 | January 12, 2018 | 10.2 | |

| 10.4.2 | [Board Pay Policies effective May 22, 2018](http://www.sec.gov/Archives/edgar/data/1058090/000119312518173614/d578721dex102.htm) | 8-K | 001-32731 | May 24, 2018 | 10.2 | |

| 10.4.3 | [Retention Agreement, dated January 9, 2018, between Scott Boatwright and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_4.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.4 | |

| 10.5.2 | [Retention Agreement, dated January 9, 2018, between Curt Garner and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_5.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.5 | |

| 10.6.1 | [Offer Letter, dated February 11, 2018, between Brian R. Niccol and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000022/cmg-20180214xex10_1.htm) | 8-K | 001-32731 | February 15, 2018 | 10.1 | |

| 10.7.1 | [Non-Plan Inducement SOSARs Agreement between Brian R. Niccol and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000027/cmg-20180306xex4_3.htm) | S-8 | 33-223467 | March 6, 2018 | 4.3 | |

| 10.8.1 | [Non-Plan Inducement RSUs Agreement between Brian R. Niccol and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000027/cmg-20180306xex4_4.htm) | S-8 | 33-223467 | March 6, 2018 | 4.4 | |

| 10.9 | [Separation Agreement, dated March 13, 2018, between Mark Crumpacker and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000119312518081634/d546370dex101.htm) | 8-K | 001-32731 | March 14, 2018 | 10.1 | |

| 10.11.1 | [Form of 2018 CEO SOSARs Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex102.htm) | 8-K/A | 001-32731 | April 3, 2018 | 10.2 | |

| 10.12.1 | [Form of 2018 Premium-priced SOSARs Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex103.htm) | 8-K/A | 001-32731 | April 3, 2018 | 10.3 | |

| 10.13.1 | [Offer Letter, dated March 9, 2018, between Christopher Brandt and Chipotle Mexican Grill, Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_13.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.13 | |

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

| | | | | | | |

| 10.5.2† | [Amendment No. 2 to Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312507231213/dex101.htm) | 10-Q | 001-32731 | October 31, 2007 | 10.1 | |

Date: February [removed: 8, 2018][added: 7, 2019]

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints [removed: Steve Ells] [added: Brian Niccol] and John Hartung, and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

| Signature | | Date | | Title | [removed: |]

| /s/ STEVE ELLS | | February [removed: 8, 2018] [added: 7, 2019] | | [removed: Chief Executive Officer and] Chairman of the Board of Directors [removed: (principal executive officer)] | [removed: |]

| Steve Ells | | | | | [removed: |]

| /s/ JOHN R. HARTUNG | | February [removed: 8, 2018] [added: 7, 2019] | | Chief Financial Officer (principal financial and accounting officer) | [removed: |]

| John R. Hartung | | | | | [removed: |]

| /s/ ALBERT S. BALDOCCHI | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Albert S. Baldocchi | | | | | [removed: |]

| /s/ PAUL CAPPUCCIO | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Paul Cappuccio | | | | | [removed: |]

| /s/ NEIL W. FLANZRAICH | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Neil W. Flanzraich | | | | | [removed: |]

| /s/ ROBIN S. HICKENLOOPER | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Robin S. Hickenlooper | | | | | [removed: |]

| /s/ KIMBAL MUSK | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Kimbal Musk | | | | | [removed: |]

| /s/ ALI NAMVAR | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Ali Namvar | | | | | [removed: |]

| /s/ MATTHEW PAULL | | February [removed: 8, 2018] [added: 7, 2019] | | Director | [removed: |]

| Matthew Paull | | | | | [removed: |]

| | | | | |

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

| | | | | |

| /s/ BRIAN NICCOL | | February 7, 2019 | | Chief Executive Officer (principal executive officer) |

| Brian Niccol | | | | |

| | |

| | | | | | |

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