Chipotle Mexican Grill (CMG) 10-K risk factor changes: FY2019 vs FY2018

The risks and uncertainties described below are those that we have identified as [removed: material,] [added: 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 [removed: conditions.][added: conditions and additional risks not currently known to us or that we presently deem immaterial may arise or become material and may negatively impact our business, reputation, financial condition, results of operations or the trading price of our common stock.]

[removed: Competition for restaurant sites in our target markets can be intense, and development] [added: Development] and leasing costs are increasing, particularly for urban locations.

In addition, any of these factors may be exacerbated by economic factors, which may result in [removed: developers and contractors seeing] [added: an] increased demand [added: for developers] and [removed: therefore driving] [added: contractors that could drive] up our construction and leasing costs.

[removed: Moreover,] [added: Also,] as we open and operate more restaurants, our rate of expansion relative to the size of our existing restaurant base will decline, making it increasingly difficult to achieve levels of sales and profitability growth that we achieved [added: in] prior [removed: to 2016.][added: years.]

Historically, [removed: many of our new restaurants have opened with an initial ramp-up period typically lasting] [added: it could take up to] 24 months [removed: or more,] [added: to ramp up a new restaurant,] during which [removed: they generate] [added: the restaurant generates] sales and income below the levels at which we expect them to normalize [removed: after the restaurant has built a customer base,] and during which costs may be higher as we train new employees and adjust our food deliveries and preparation to sales [removed: volumes and peak-hour] trends.

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

As a result of these incidents and [added: the] related [added: negative] publicity, our sales and profitability were severely impacted throughout [removed: 2016.][added: 2016 and from time to time through 2018.]

Because of consumer perceptions in the wake of these food safety incidents, any future [removed: occurrence of food-borne illness] [added: food safety incidents] associated with our restaurants—even incidents that may be considered minor at other restaurants—may have [removed: an even] [added: a] more significant negative impact on our sales and our ability to regain guests.

[removed: Although we have followed industry standard food safety protocols in the past and have endeavored to continually enhance our food safety procedures to ensure that our food is as safe as it can possibly be,] [added: In addition,] we may [removed: still] be at a higher risk for [removed: food-borne illness occurrences] [added: food safety incidents] than some competitors due to our greater use of fresh, unprocessed produce and meats, our reliance on employees cooking with traditional methods rather than automation, and our avoidance of frozen ingredients.

The risk of illnesses associated with our food [removed: might] also [added: may] increase [removed: in connection with an expansion] [added: due to the growth] of our delivery or catering [removed: businesses or other situations] [added: businesses,] in which our food is transported and/or served in [added: transportation] conditions [added: that] we cannot control.

All of these factors could have an adverse impact on our ability to attract and retain guests, which [removed: would] [added: could] in turn have a material adverse effect on our growth and profitability.

[removed: This growth rate may not be sustainable for even the short term, and if our digital business does] [added: If we do] not continue to [removed: expand] [added: grow our digital business,] it may be difficult for us to achieve our planned sales growth.

We rely on [removed: third party providers] [added: third-party delivery services] to fulfill delivery orders, and the ordering and payment platforms used by these [removed: third parties,] [added: third-parties,] or our mobile app or online ordering system, could be [removed: damaged or] interrupted by technological failures, user errors, cyber-attacks or other factors, which [removed: may] [added: could] adversely impact [removed: our] sales through these channels and [removed: could] negatively impact our [removed: brand.][added: reputation.]

Additionally, our delivery partners are responsible for order fulfillment and [removed: may make] errors or [removed: fail] [added: failures] to make timely [removed: deliveries, leading] [added: deliveries could cause guests] to [removed: customer disappointment that may negatively impact our brand.][added: stop ordering from us.]

[removed: Moreover, the third party] [added: The third-party] restaurant delivery business is intensely competitive, with a number of players competing for market share, online [removed: traffic,] [added: traffic] capital, and delivery [removed: drivers and other people resources.][added: drivers.]

[removed: The third party] [added: If the third-party] delivery services [removed: with which] [added: that] we [removed: work may struggle to compete effectively, and if they were to] [added: utilize] cease or curtail [removed: operations or fail to provide timely delivery services in a cost-effective manner,] [added: operations, increase their fees,] or [removed: if they] give greater priority [added: or promotions] on their platforms to our competitors, our delivery business [added: and our sales] may be negatively impacted.

For example, [removed: a new privacy regulation in] the European Union [added: adopted a regulation that became effective in May 2018,] called the General Data Protection [removed: Regulation, or GDPR, became effective in May 2018 and] [added: Regulation (“GDPR”), which] requires companies to meet new requirements regarding the handling of personal data, [added: including its use, protection] and [removed: failure to meet GDPR requirements could result in penalties up to 4% of our worldwide revenue of] [added: transfer and] the [removed: prior financial year.][added: ability of persons whose data is stored to correct or delete such data about themselves.]

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

[removed: Additionally, although we] [added: We] continue to believe that [removed: Chipotle can differentiate itself with] our commitment to higher-quality and [removed: responsibly-sourced ingredients,] [added: responsibly sourced ingredients gives us a competitive advantage; however, more] competitors have [removed: increasingly] made claims related to the quality of their [removed: ingredients, or distinctions between artificial] [added: ingredients] and [removed: natural] [added: lack of artificial] flavors, colors and preservatives.

The increasing use of these claims [removed: in the marketplace, even if] [added: by competitors, regardless of] the [removed: substantive basis for some] [added: accuracy] of [removed: them may be questionable,] [added: such claims,] may lessen our differentiation and make it more difficult for us to compete.

[removed: Changes] [added: Increase] in [removed: food] [added: ingredient] and [removed: supply] [added: other operating] costs could adversely affect our results of [removed: operations.][added: operations.]

We [removed: could] also [added: could] be adversely impacted by price increases specific to meats raised in accordance with our sustainability and animal welfare [removed: criteria] [added: criteria,] or other [removed: food items we buy as part of] [added: ingredients grown in accordance with] our Food With Integrity [removed: focus,] [added: specifications,] the markets for which are generally smaller and more concentrated than the markets for [removed: food products that are] conventionally raised [removed: and grown.][added: or grown ingredients.]

Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef, [removed: cheese,] [added: dairy (for cheese and sour cream),] avocados, beans, rice, tomatoes and pork, would have a particularly adverse effect on our operating results.

Alternatively, in the event [removed: of] [added: the] cost [removed: increases with respect to] [added: of] one or more [removed: of our raw ingredients,] [added: ingredients significantly increases,] we may choose to temporarily suspend serving menu items, such as guacamole or one [removed: or more] of our [removed: salsas,] [added: proteins, that use those ingredients] rather than [removed: paying] [added: pay] the increased [removed: cost for the ingredients.][added: cost.]

Any such changes to our available menu may negatively impact our restaurant traffic and [removed: comparable restaurant sales, and] could [removed: also have an adverse] [added: adversely] impact [removed: on] our [added: sales and] brand.

[removed: We may] [added: If we do] not [added: continue to] persuade consumers of the benefits of paying [removed: our] [added: higher] prices for [removed: higher-quality food.][added: our higher-quality food, our sales and results of operations could be hurt*.*]

Our success depends in large part on our ability to persuade consumers that food made with [removed: higher-quality] ingredients [added: that were raised or grown in accordance with our Food With Integrity principles] is worth [removed: the prices they will pay] [added: paying a higher price] at our restaurants relative to prices [removed: offered by] [added: of] some of our competitors, particularly [removed: those in the] quick-service restaurant [removed: segment.][added: competitors.]

[removed: As a result of these or other similar risks,] [added: If we are not able to compete successfully,] our business, [added: financial condition and] results of operations [removed: and financial condition may] [added: would] be adversely [removed: affected.][added: affected.]

[removed: Regulatory] [added: General Business] and [removed: Legal Risks][added: Regulatory Risks]

[removed: We are subject to various federal,] [added: Various federal and] state [added: employment] and [removed: local] [added: labor] laws and regulations [removed: governing] [added: govern] our [removed: relationship] [added: relationships] with [added: our employees,] and [removed: other matters pertaining] [added: similar laws and regulations apply] to our [removed: employees, including] [added: operations outside of the U.S. These laws and regulations relate to matters such as employment discrimination,] wage and hour laws, requirements to provide meal and rest periods or other benefits, family leave mandates, requirements regarding working conditions and accommodations to certain employees, citizenship or work authorization and related requirements, insurance and workers’ compensation rules, healthcare laws, scheduling notification requirements and anti-discrimination and anti-harassment laws.

Complying with these laws and regulations subjects us to substantial expense and [removed: can be cumbersome, and can also] [added: non-compliance could] expose us to [removed: liabilities from claims of non-compliance.][added: significant liabilities.]

In addition, several states and localities in which we [removed: operate] [added: operate,] and the federal government have from time to time enacted minimum wage increases, changes to eligibility for overtime pay, paid sick leave and mandatory vacation accruals, and similar [removed: requirements and these changes have increased our labor costs and may have a further negative impact on our labor costs in the future.][added: requirements.]

Additionally, while [removed: we do] [added: our employees are] not currently [removed: have] [added: covered by] any [removed: unionized employees,] [added: collective bargaining agreements,] union organizers have engaged in efforts to organize our employees and those of other restaurant companies.

If a significant portion of our employees were to become [removed: union organized,] [added: covered by collective bargaining agreements,] our labor costs could [removed: increase] [added: increase,] and [added: it could negatively impact] our [removed: efforts to maintain a] culture [removed: appealing only] [added: and reduce our flexibility] to [added: attract and retain] top performing [removed: employees could be impaired.][added: employees.]

[removed: We are subject to] [added: public accommodations and safety conditions, including] the [removed: ADA] [added: Americans with Disabilities Act] and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public [removed: accommodations] [added: accommodations,] and other [removed: areas.][added: areas;]

[removed: We are subject to federal, state and local environmental laws] [added: environmental matters, such as animal health] and [removed: regulations concerning] [added: welfare, climate change,] the [added: reduction of greenhouse gases, water consumption, the] discharge, storage, handling, [removed: release] [added: release,] and disposal of hazardous or toxic substances, [removed: as well as] [added: and] local ordinances restricting the [removed: use of straws, utensils, and the] types of packaging we can use in our [removed: restaurants.][added: restaurants;]

“Commitments and Contingencies” [removed: in] [added: to] our [removed: consolidated] financial statements [removed: included in Item 8.][added: for a description of this incident.]

In April 2017, [removed: our information security team] [added: malware was] detected [removed: unauthorized activity on the network that supports] [added: in our] payment processing [removed: for our restaurants, and the ensuing investigation detected malware] [added: network that was] designed to access payment card data from cards used at point-of-sale devices at most of our [removed: restaurants, primarily in the period from March 24, 2017 through April 18, 2017.][added: restaurants.]

We also [removed: are required to collect and] maintain [added: certain] personal information [removed: about] [added: regarding] our [removed: employees,] [added: employees] and [removed: we collect] [added: confidential] information about [removed: guests as part of some of] our [removed: marketing programs as well.][added: guests and suppliers.]

You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Conditions and Results of Operations section and the consolidated financial statements and related notes.

If any of the risks and uncertainties described below actually occur or continue to occur, our business, financial condition and results of operations, and the trading price of our common stock could be materially and adversely affected.

Risks Related to our Business and Industry

Food safety and food-borne illness concerns may have an adverse effect on our business by decreasing sales and increasing costs.

Food safety is our top priority, and we dedicate substantial resources to ensuring that our guests enjoy safe, high-quality food products.

Even with strong preventative controls and interventions, food safety incidents continue to occur in the food service industry because food safety risks cannot be completely eliminated in any restaurant, including as a result of possible failures by restaurant crew or suppliers to follow food safety policies and procedures.

Although we test and audit these activities, we cannot guarantee that all food items are safely and properly maintained during transport or distribution throughout the supply chain.

Regardless of the source or cause, any report of food-borne illnesses such as E. coli, hepatitis A, norovirus or salmonella, and other food safety issues, including food tampering or contamination, at one of our restaurants could adversely affect our reputation and have a negative impact on our sales.

Even instances of food-borne illness, food tampering or food contamination that occur solely at competitors’ restaurants could result in negative publicity about the food service industry generally and adversely impact our sales.

Social media has dramatically increased the rate at which negative publicity, including as it relates to food safety incidents, can be disseminated before there is any meaningful opportunity to respond or address an issue.

The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.

Several highly publicized food safety incidents in our restaurants and our Food With Integrity business principles may make us more susceptible than our competitors to significant adverse consequences arising from food safety incidents.

From 2015 to 2017, illnesses caused by E. coli bacteria and norovirus were connected to a number of our restaurants and, in 2018, illnesses believed to be caused by *c.

perfringens* bacteria were connected to the food in one of our restaurants.

Information technology system failures or interruptions could harm our ability to effectively operate our business and/or result in the loss of guests or employees.

We rely heavily on information technology systems, including the point-of-sale and payment processing system in our restaurants, technologies supporting our digital and delivery businesses, technologies that facilitate e-commerce, marketing programs, employee engagement and payroll processing, management of our supply chain, and various other processes and transactions.

Despite the implementation of protective measures, these technology systems and solutions could become vulnerable to damage, disability or failures due to theft, fire, power loss, telecommunications failure or other catastrophic events.

We also are in the process of implementing a new enterprise resource planning (ERP) system, which will significantly impact our financial reporting control environment.

If we fail to successfully implement the new system and effectively train our employees and update our processes, we could experience disruptions or delays in processing financial and business information.

Our increasing reliance on systems operated by third parties, including delivery aggregators and payment processors, also present the risks faced by the third-party’s business, including the operational, security and credit risks of those parties.

If those systems were to become unreliable, unavailable, compromised or otherwise fail, and we were unable to recover in a timely manner, we could experience an interruption in our operations that could have a material adverse impact on our profitability.

Cyber security breaches or other privacy or data security incidents that expose confidential guest, personal employee and other material, confidential information may adversely affect our business.

A cyber incident generally refers to any intentional attack or an unintentional event that results in unauthorized access to systems to disrupt operations, corrupt data or steal or expose confidential information or intellectual property.

A cyber incident that compromises the information of our guests or employees could result in widespread negative publicity, damage to our reputation, a loss of guests, disruption of our business and legal liabilities.

In recent years as our reliance on technology has increased, so have the scope and severity of risks posed to our systems from cyber threats.

The techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.

We continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, malware and other events that could have a security impact; however there can be no assurance that these measures will be effective.

The majority of our restaurant sales are made by credit or debit cards.

We segment our card data environment and employ a cyber security protection program that is based on proven industry frameworks.

This program includes but is not limited to cyber security techniques, tactics and procedures, including the deployment of a robust set of security controls, continuous monitoring and detection programs, network protections, vendor selection criteria, secure software development programs and ongoing employee training, awareness and incident response preparedness.

In addition, we continuously scan our environment for any vulnerabilities, perform penetration testing, engage third parties to assess effectiveness of our security measures and collaborate with members of the cyber security community.

However, there are no assurances that such programs will prevent or detect cyber security breaches.

From time to time we have been, and likely will continue to be, the target of cyber and other security threats.

We removed the malware from our systems and enhanced our security measures; however, we incurred significant costs and legal liabilities in connection with this incident.

Some of our guests also have experienced account takeover fraud, in which guests use the same log in credentials on multiple websites and, when a third party obtains those credentials, they can gain unauthorized access to their accounts and charge food orders to the credit card linked to the account (without accessing credit card data).

We may in the future become subject to other legal proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our consumers’ credit or debit card information or if consumer or employee information is obtained by unauthorized persons or used inappropriately.

Any such claim or proceeding, or any adverse publicity resulting from such an event, may have a material adverse effect on our business and the potential of incurring significant remediation costs.

Security breaches also could result in a violation of applicable U.S. and international privacy and other laws, and subject us to private consumer, business partner, or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.

The GDPR also confers a private right of action on certain individuals and associations.

Additionally, the California Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020, provides a new private right of action for data breaches and requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties.

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.

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…”; |

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

| | · | | 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; |

| | · | | 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; |

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

| | · | | 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 |

| | · | | 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. |

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; |

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

| | · | | delay or cancellation of new site development by developers and landlords, which may become increasingly common during periods of economic uncertainty, tight credit, and/or rising interest rates; |

| | · | | any shortages of construction labor or materials; |

| | · | | difficulty ramping up the growth of our international business or new restaurant concepts, including for the reasons described below under “—Our expansion into international markets has been limited, and may present increased risks …” and “—Risks Unique to our Business Strategy—Pizzeria Locale and other new restaurant concepts may not contribute to our growth”; |

| | · | | difficulty negotiating leases with acceptable terms; |

| | · | | failures or delays in securing required governmental approvals (including construction, parking and other permits); |

| | · | | lack of availability of, or inability to obtain, adequate supplies of ingredients that meet our quality standards; and |

| | · | | the impact of inclement weather, natural disasters and other calamities. |

One of our biggest challenges in opening new restaurants is staffing and training new restaurant teams.

We seek to hire only top performing employees, train them extensively in order to help ensure we provide an outstanding guest experience, and promote many general managers from our crew, all of which may make it more difficult for us to staff all the restaurants we intend to open.

Constraints on our hiring new employees are described further below under “—Risks Related to Operating in the Restaurant Industry—Our business could be adversely affected by increased labor costs…”

Another significant challenge is locating and securing an adequate supply of suitable new restaurant sites.

We expect this effect to be more pronounced through at least 2019, given our plan to decrease the number of new restaurants we open during the year as compared to the number of restaurants opened per year in many past years.

You should read the following discussion together with Item 6.

“Selected Financial Data” and our consolidated financial statements and related notes included in Item 8.

“Financial Statements and Supplementary Data.” The discussion contains forward-looking statements involving risks, uncertainties and assumptions that could cause our results to differ materially from expectations.

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

“Risk Factors” and elsewhere in this report.

Overview

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.

Average restaurant sales were $2.004 million for the year ended December 31, 2018, an increase from $1.940 million for the year ended December 30, 2017.

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

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.

Comparable restaurant sales and comparable restaurant transactions represent the change in period-over-period sales or paid transactions for restaurants in operation for at least 13 full calendar months.

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

We continue to invest in improving our digital platforms and equipping select restaurants with an upgraded second make line dedicated to fulfilling out-of-restaurant orders.

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.

Restaurant Operating Costs.

During the full year 2018, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) as a percentage of revenue decreased 180 basis points to 81.3% compared to 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.

“Risk Factors”.

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”.

Restaurant Development.

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

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

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

As of December 31, [removed: 2018,] [added: 2019,] we had [removed: $650.7] [added: $824.8] million in investments and interest-bearing cash accounts, including insurance-related restricted trust accounts classified in restricted cash, and [removed: $35.3] [added: $60.7] million in accounts with an earnings credit we classify as interest and other income, which combined earned a weighted average interest rate of [removed: 2.2%.][added: 1.75%.]

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

However, a majority of the dollar value of our purchases is effectively at spot prices.

[removed: General][added: General]

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

As of December 31, [removed: 2018,] [added: 2019,] we operated [removed: 2,452] [added: 2,580] Chipotle restaurants throughout the United States, [removed: 37] [added: 39] international Chipotle restaurants, and [removed: two] [added: three] non-Chipotle restaurants.

[removed: Business Strategy][added: Business Strategy]

We are [removed: committed to] [added: passionate about providing a great guest experience and] making our food more accessible to everyone while continuing to be a brand with a demonstrated [removed: purpose of cultivating a better world.][added: purpose.]

[removed: | | · | |] [added: And] running [removed: great] [added: successful] restaurants with [added: a strong culture that provides] great [removed: hospitality] [added: food, hospitality, throughput,] and [removed: throughput; |][added: economics.]

[added: *Relevant Menu.*] Our restaurants feature a relevant menu of burritos, burrito bowls, tacos and salads.

Our proteins include chicken, steak, carnitas (seasoned and braised pork), barbacoa (spicy braised and [added: shredded beef), Sofritas (organic braised tofu) and vegetarian pinto and black beans.]

In addition to sodas, fruit and tea drinks, and organic milk, most of our restaurants also offer a [removed: selection of beer and margaritas.]

[added: *Food with Integrity.*] Serving high quality food while still charging reasonable prices is critical to [removed: our purpose so that] [added: ensuring] guests [removed: can] enjoy wholesome food [removed: every day.][added: at a great value.]

[removed: The] [added: Our] food [removed: we serve] is made from [removed: just 51] ingredients that everyone can both recognize and pronounce.

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

For example, some of our restaurants periodically serve conventionally raised chicken or beef 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.

[added: We call these beans “transitional.”] Some of the other produce items we serve are organically grown as well.

[removed: Purchasing] [added: Purchasing] and Food [removed: Safety][added: Safety]

[added: *Close Relationships with Suppliers.*] Maintaining the high levels of quality and safety we expect in our restaurants depends in part on our ability to acquire high-quality, fresh ingredients and other necessary supplies that meet our specifications from reliable suppliers.

Our [removed: 24] [added: 23] independently owned and operated regional distribution centers purchase from various suppliers we carefully select based on quality and the suppliers’ understanding [added: and adherence] of our mission.

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

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

[removed: Quality] [added: *Quality] Assurance and Food [removed: Safety.][added: Safety.* We are committed to serving safe, high quality food.]

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

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

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

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

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

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

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

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

Our food safety and quality assurance teams establish and monitor our quality and food safety programs and work closely with [removed: our] suppliers to ensure our high standards are met throughout the supply chain.

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

[removed: Guest] [added: Guest] Experience and [removed: Operations][added: Operations]

Serving [removed: great] [added: delicious] 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.

[added: *Restaurant Team.*] We believe creating an excellent guest experience starts with hiring great [removed: people] [added: leaders] and creating great teams.

Each restaurant typically has a [removed: general manager] [added: General Manager] or Restaurateur (a high-performing general manager), an [removed: apprentice manager] [added: Apprentice Manager] (in a majority of our restaurants), two or three [removed: hourly service managers,] [added: Service Managers,] one or two [removed: hourly kitchen managers] [added: Kitchen Managers] and an average of [removed: 22] [added: 26] full and part-time crew members, though our busier restaurants tend to have slightly more employees.

We are prioritizing the development of technological and other innovations, such as digital/mobile ordering platforms, digital order pick-up [removed: shelves, digital order pick-up] lanes we call “Chipotlanes”, delivery and catering, that allow our guests to engage with us in whatever fashion is most convenient for them.

[removed: Marketing][added: Marketing]

Our ultimate marketing mission is to make Chipotle not just a food [removed: brand] [added: brand,] but [added: also] a purpose driven lifestyle brand that is more visible, more engaging, and more [removed: relevant in culture.][added: relevant.]

We utilize multiple marketing channels, including national television, digital marketing, social media, fundraising, events and sponsorships to [removed: reach consumers.][added: make our brand more visible.]

[removed: Competition][added: Competition]

Our competition includes a variety of restaurants in each of these segments, including locally-owned [removed: restaurants and] [added: restaurants, as well as] national and regional chains.

We are cultivating a better world by serving responsibly sourced, classically cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives.

We are a brand with a demonstrated purpose of cultivating a better world.

Our mission is to win today while creating a bright future by focusing on five key fundamental strategies:

Making the brand more visible and loved;

Creating innovation utilizing a stage-gate process;

Leveraging our digital-make line to expand access and convenience;

Engaging with customers through our loyalty program;

selection of beer and margaritas.

In 2019, we increased the percentage of organic cilantro, rice and beans purchased as we continue our commitment to find high quality ingredients.

Our food safety and quality assurance team members hold board seats and participate in technical working groups with several associations.

This gives us the opportunity to learn and share our knowledge and expertise with other food safety professionals and regulatory agencies.

We are also focused on making progress in throughput and getting our guests quality food quickly.

*Innovation*.

During 2019, we completed the installation of mobile order pick-up shelves as well as digital make lines in almost all of our restaurants which allows us to fulfill catering or digital/mobile orders without disrupting throughput on our main service line.

Our marketing programs are designed to increase transactions and grow sales by driving culture, driving a difference, and ultimately driving purchases.

In 2019, we made our brand more visible with culturally relevant marketing campaigns and initiatives.

This included the Behind the Foil advertising campaign which showcased our real ingredients, fresh food and the culinary skills of our team members in action.

We also launched a new loyalty program, Chipotle Rewards, that currently has more than 8 million members and provides us with customer information that can be used to incent behaviors and engage with our customers on a more personal level.

Our marketing efforts this year were elevated by our stage-gate innovation process that identifies and validates new initiatives and menu items in test markets before they are rolled out more widely.

We rolled out several successful menu items including our digital only Lifestyle Bowls, which help our guests reach or maintain their health and wellness goals, and carne asada, a premium seasoned steak.

We are subject to various federal, state and local laws and regulations that govern aspects of our business operations, including:

privacy and data security, laws governing the collection, maintenance and use of information regarding employees and guests and consumer credit protection and fraud;

food safety and nutrition, including nutritional menu labeling nutrition and advertising practices;

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.

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.

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; |

| | · | | 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.

shredded beef), Sofritas (organic braised tofu) and vegetarian pinto and black beans.

Food with Integrity.

We call these beans “transitional”.

Our commitment to better ingredients also extends to the dairy products we serve.

In 2018, all of the sour cream and shredded cheese served in our U.S. Chipotle restaurants was made with milk 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 (excluding beverages) in U.S. Chipotle restaurants contain genetically modified organisms, or GMOs.

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

Due to the prevalence of GMOs in a number of important feed crops, the vast majority of the grains used as animal feed in the U.S. are genetically modified.

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

Close Relationships with Suppliers.

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 Unique to Our Business Strategy – Our Food With Integrity philosophy subjects us to risks” in Item 1A.

“Risk Factors.”

We are committed to serving safe, high quality food.

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.

Restaurant Team.

We also cross-train our team members so that each can work a variety of stations, allowing us to work efficiently during our busiest times, while giving our 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 guests throughout the day.

Innovation.

In order to successfully deliver a great experience for more guests, we are emphasizing the optimization of second make lines and the ability to pay using Apple Pay or Android Pay for digital/mobile orders.

These initiatives allow us to fulfill catering or digital/mobile orders without disrupting throughput on our main service line.

In fact, technological innovations can enhance the experience of other guests by helping to improve throughput for those who choose to dine in our restaurants.

Recent digital ordering innovations have allowed us to increase digital order volumes to the highest levels we’ve ever achieved, and we believe continued improvements in these areas will allow us to further improve these results.

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.

Our marketing program and philosophy shifted from a more promotionally driven, decentralized approach in 2017 to a more centrally driven model designed to generate higher consumer awareness and drive guests into our restaurants in 2018.

In October 2018, we launched the biggest quarterly brand campaign in our history with the “For Real” launch, reflecting our heritage and also reinforcing our differentiation of using responsibly sourced, real ingredients and real cooking techniques to make flavorful food that consumers both love and feel better about eating.

For a discussion of risks related to our marketing, see “Risks Related to our Plans to Grow Our Sales and Profitability – Our marketing and advertising strategies may not be successful, or may pose risks that could adversely impact our business” in Item 1A.

For more information, see “Risks Related to Operating in the Restaurant Industry—Competition could adversely affect us” in Item 1A.

“Risk Factors.” We also compete with other restaurants and retail establishments for site locations and restaurant employees.

For a discussion of risks related to our opening of new restaurants and expansion into new real estate types, see “Risks Related to our Plans to Grow Our Sales and Profitability – Our new restaurants, once opened, may not be profitable, and may adversely impact the sales of our existing restaurants” in Item 1A.

For a discussion of risks related to Pizzeria Locale and our possible investment in new concepts, see “Risks Unique to Our Business Strategy – Pizzeria Locale and other new restaurant concepts may not contribute to our growth” in Item 1A.

PART II

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

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

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

[removed: FORM 10-K][added: FORM 10-K]

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

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

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

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

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

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

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

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

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

| [removed: 610] [added: 610] Newport Center [removed: Drive, Suite 1300 Newport Beach, CA] [added: Drive, Suite 1300 Newport Beach, CA] | [removed: 92660] [added: 92660] |

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

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: [removed: (303) 595-4000][added: (949) 524-4000]

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

| Title of each class | [added: Trading Symbol(s) |] Name of each exchange on which registered |

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

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

Yes [removed: ☒] [added: ] No [removed: ☐][added: ]

Yes [removed: ☐] [added: ] No [removed: ☒][added: ]

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

| [removed: ☒] [added: ] Large accelerated filer | [removed: ☐] [added: ] Accelerated filer | [removed: ☐] [added: ] Non-accelerated filer | [removed: ☐] [added: ] Smaller reporting company | [removed: ☐] [added: ] Emerging growth company |

As of June 30, [removed: 2018,] [added: 2019,] the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was [removed: $8.726] [added: $14.301] billion, based on the closing price of the registrant’s common stock on June [removed: 29, 2018,] [added: 28, 2019,] the last trading day of the registrant’s most recently completed second fiscal quarter.

As of [removed: February 4, 2019,] [added: January 31, 2020,] there were [removed: 27,659,270] [added: 27,767,965] shares of the registrant’s common stock, par value of $0.01 per share outstanding.

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

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the [removed: 2019] [added: 2020] 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: 2018.][added: 2019.]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

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

| Item 1A. | [Risk Factors](#Item_1A) | [removed: 9] [added: 8] |

| Item 1B. | [Unresolved Staff Comments](#Item_1B) | [removed: 26] [added: 16] |

| Item 2. | [Properties](#Item_2) | [removed: 27] [added: 16] |

| Item 3. | [Legal Proceedings](#Item_3) | [removed: 28] [added: 16] |

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

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#Item_5) | [removed: 29] [added: 17] |

| Item 6. | [Selected Financial Data](#Item_6) | [removed: 31] [added: 19] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#Item_7) | [removed: 32] [added: 20] |

| Item 7A. | [Quantitative and Qualitative Disclosure About Market Risk](#Item_7A) | [removed: 40] [added: 27] |

| Item 8. | [Financial Statements and Supplementary Data](#Item_8) | [removed: 41] [added: 28] |

or

| | | |

Yes  No .

Yes  No 

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

| | [Index to Consolidated Financial Statements](#Index_to_Financial_Statements) | 28 |

| | [Report of Independent Registered Public Accounting Firm](#Report_of_Independent) | 29 |

These forward-looking statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties.

Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties described in this report under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” so you should not place undue reliance on forward-looking statements.* *These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including: risks of food safety and food-borne illnesses and other health concerns about our food; risks associated with our reliance on certain information technology systems and potential failures or interruptions; privacy and cyber security risks related to our acceptance of electronic payments or electronic processing of confidential customer or employee information; the impact of competition, including from sources outside the restaurant industry; the increasingly competitive labor market and our ability to attract and retain qualified employees; the impact of federal, state or local government regulations relating to our employees, restaurant design and construction, or the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the availability of suitable new restaurant sites; and* *increases in ingredient and other operating costs due to our* *Food With Integrity philosophy, tariffs or trade restrictions and supply shortages.* *We are including this Cautionary Note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements.

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

or

| --- | --- |

| | |

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

| Item 4. | [Mine Safety Disclosures](#Item_4) | 28 |

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 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that are intended to come within the safe harbor protection provided by those sections.

These statements, which involve risks and uncertainties, relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, trends, liquidity and capital resources and to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable.

Forward-looking statements include, among others, statements about the potential impact of catering and delivery offerings and technology initiatives; statements regarding the effectiveness of our food safety systems and procedures; projections of comparable restaurant sales increases and sales trends we expect for 2019; estimates of restructuring and restaurant closure costs and accelerated depreciation to be recognized in 2019; forecasts of the number of restaurants we expect to open; forecasts of trends in general and administrative expenses, restaurant development costs, and other expenses for 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.

These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to risks and uncertainties relating to our operations and business environments, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by these forward-looking statements.

Such risks and uncertainties include those listed in Item 1A.

“Risk Factors,” and elsewhere in this report.

When considering forward-looking statements in this report or that we make in other reports or statements, you should keep in mind the cautionary statements in this report and future reports we file with the SEC.

New risks and uncertainties arise from time to time, and we cannot predict when they may arise or how they may affect us.

As of December 31, [removed: 2018,] [added: 2019,] there were [removed: 2,491] [added: 2,622] restaurants operated by Chipotle and our consolidated subsidiaries, [removed: 2,489] [added: 2,619] of which were Chipotle restaurants.

Our main office is located at 610 Newport Center Drive, Suite 1300, Newport Beach, CA 92660 and our telephone number is (949) [removed: 524-4035.][added: 524-4000.]

The table below sets forth the locations (by state or country) of all restaurants in operation.

| | |

| --- | --- |

| Alabama | 14 |

| Arizona | 80 |

| Arkansas | 6 |

| California | 412 |

| Colorado | 77 |

| Connecticut | 23 |

| Delaware | 8 |

| District of Columbia | 19 |

| Florida | 160 |

| Georgia | 51 |

| Idaho | 4 |

| Illinois | 139 |

| Indiana | 36 |

| Iowa | 10 |

| Kansas | 26 |

| Kentucky | 18 |

| Louisiana | 9 |

| Maine | 5 |

| Maryland | 91 |

| Massachusetts | 56 |

| Michigan | 36 |

| Minnesota | 63 |

| Missouri | 38 |

| Mississippi | 1 |

| Montana | 3 |

| Nebraska | 9 |

| Nevada | 27 |

| New Hampshire | 8 |

| New Jersey | 64 |

| New Mexico | 8 |

| New York | 149 |

| North Carolina | 62 |

| North Dakota | 1 |

| Ohio | 180 |

| Oklahoma | 12 |

| Oregon | 31 |

| Pennsylvania | 86 |

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

The table below reflects shares of common stock we repurchased during the fourth quarter of [removed: 2018.][added: 2019.]

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

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

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

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

[removed: | | (1) | | Shares] [added: (1)Shares] were repurchased pursuant to the $100 million repurchase programs announced on [removed: October 24, 2017] [added: February 6, 2019] and [removed: April 25, 2018. |][added: July 23, 2019.]

[removed: | | (2) | | This] [added: (2)This] column does not include an additional $100 million in authorized repurchases announced on February [removed: 6, 2019. Each repurchase program has no expiration date. Authorization of repurchase programs may be modified, suspended or discontinued at any time. |][added: 4, 2020.]

[removed: Dividend Policy][added: Dividend Policy]

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

The following graph compares the cumulative annual stockholders return on our common stock from December 31, [removed: 2013] [added: 2014,] through December 31, [removed: 2018] [added: 2019,] 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: 2013.][added: 2014.]

[removed: ][added: Description automatically generated](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231x10kg001.jpg)]

*$100 invested on [removed: 12/31/13] [added: December 31, 2014] in stock or index, including reinvestment of dividends.

As of January 31, 2020, there were approximately 864 shareholders of record.

This does not include persons whose stock is in nominee or “street name” accounts through brokers.

| October | | | 26,811 | | $ | 792.50 | | 26,811 | | $ | 86,414,406 |

| November | | | 22,684 | | $ | 749.33 | | 22,684 | | $ | 69,416,580 |

| December | | | \- | | $ | \- | | \- | | $ | 69,416,580 |

| Total | | | 49,495 | | $ | 772.71 | | 49,495 | | | |

There is no expiration date for this program, and the authorization to repurchase shares will end when we have repurchased the maximum amount of shares authorized, or our Board of Directors have determined to discontinue such repurchases.

The values shown are neither indicative nor determinative of future performance.

![A picture containing sky, map, text, outdoor

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

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

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

| Company/Index | Dec. 31, 2014 | | | Dec. 31, 2015 | | | Dec. 30, 2016 | | | Dec. 30, 2017 | | | Dec. 30, 2018 | | | Dec. 30, 2019 | |

| Chipotle Mexican Grill, Inc. | $ | 100 | | $ | 70 | | $ | 55 | | $ | 42 | | $ | 63 | | $ | 122 |

| S&P 500 | | 100 | | | 101 | | | 112 | | | 136 | | | 129 | | | 169 |

| S&P 500 Restaurants | | 100 | | | 125 | | | 129 | | | 162 | | | 179 | | | 222 |

ITEM 6.

SELECTED FINANCIAL DATA

Our selected consolidated financial data shown below should be read together with Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and respective notes included in Item 8.

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

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

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

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

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

| | 2019 | | | 2018 | | | 2017 | | | 2016 | | | 2015 | |

| Statement of Income: | | | | | | | | | | | | | | |

| Revenue | $ | 5,586,369 | | $ | 4,864,985 | | $ | 4,476,412 | | $ | 3,904,384 | | $ | 4,501,223 |

| Food, beverage and packaging costs | | 1,847,916 | | | 1,600,760 | | | 1,535,428 | | | 1,365,580 | | | 1,503,835 |

| Labor costs | | 1,472,060 | | | 1,326,079 | | | 1,205,992 | | | 1,105,001 | | | 1,045,726 |

| Occupancy costs | | 363,072 | | | 347,123 | | | 327,132 | | | 293,636 | | | 262,412 |

| Other operating costs | | 760,831 | | | 680,031 | | | 651,644 | | | 641,953 | | | 514,963 |

| General and administrative expenses | | 451,552 | | | 375,460 | | | 296,388 | | | 276,240 | | | 250,214 |

| Depreciation and amortization | | 212,778 | | | 201,979 | | | 163,348 | | | 146,368 | | | 130,368 |

| Pre-opening costs | | 11,108 | | | 8,546 | | | 12,341 | | | 17,162 | | | 16,922 |

| Impairment, closure costs and asset disposals | | 23,094 | | | 66,639 | | | 13,345 | | | 23,877 | | | 13,194 |

| Total operating expenses | | 5,142,411 | | | 4,606,617 | | | 4,205,618 | | | 3,869,817 | | | 3,737,634 |

| Income from operations | | 443,958 | | | 258,368 | | | 270,794 | | | 34,567 | | | 763,589 |

| Interest and other income, net | | 14,327 | | | 10,068 | | | 4,949 | | | 4,172 | | | 6,278 |

| Income before income taxes | | 458,285 | | | 268,436 | | | 275,743 | | | 38,739 | | | 769,867 |

As of January 24, 2019, there were approximately 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.

Because such “DTC participants” are brokers and other institutions holding shares of our common stock on behalf of their customers, we do not know the actual number of unique shareholders represented by these record holders.

| 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 |

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

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

| [Report of Independent Registered Public Accounting Firm](#Report_of_Independent) | [removed: 42] [added: 29] |

| [Consolidated Balance [removed: Sheet] [added: Sheets] as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#Consolidated_BS)] [added: 2018](#Consolidated_BS)] | [removed: 43] [added: 32] |

| [Consolidated [removed: Statement] [added: Statements] of Income and Consolidated [removed: Statement] [added: Statements] of Comprehensive Income for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#Consolidated_IS)] [added: 2017](#Consolidated_IS)] | [removed: 44] [added: 33] |

| [Consolidated [removed: Statement] [added: Statements] of Shareholders’ Equity for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#Consolidated_SOE)] [added: 2017](#Consolidated_SOE)] | [removed: 45] [added: 34] |

| [Consolidated [removed: Statement] [added: Statements] of Cash Flows for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#Consolidated_SCF)] [added: 2017](#Consolidated_SCF)] | [removed: 46] [added: 35] |

| [Notes to Consolidated Financial Statements](#Notes_to_FS) | [removed: 47] [added: 36] |

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

To the Shareholders and [added: the] Board of Directors of Chipotle Mexican Grill, Inc.

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Chipotle Mexican Grill, Inc. (the Company) as of December 31, [removed: 2018 and 2017,] [added: 2019] and [added: 2018,] 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: 2018,] [added: 2019,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

We [removed: have] also [added: have] audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] 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 [removed: framework)] [added: framework),] and our report dated February [removed: 7, 2019] [added: 4, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: February 7, 2019][added: | | | | | | | | 2019 | |]

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

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

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

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

| | [removed: 2018] [added: 2019] | | | [removed: 2017] [added: 2018] | | [added: | 2017 | |]

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

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

| Accounts receivable | | 62,312 | | | [removed: 40,453] [added: \-] | [added: | | 62,312 |]

| Inventory | | 21,555 | | | [removed: 19,860] [added: \-] | [added: | | 21,555 |]

| Prepaid expenses and other current assets | | [removed: 54,129] [added: 57,076] | | | [removed: 50,918] [added: 54,129] |

| Income tax receivable | | [removed: \-] [added: 27,705] | | | [removed: 9,353] [added: \-] |

| Investments | | 426,845 | | | [removed: 324,382] [added: \-] | [added: | | 426,845 |]

| Total current assets | | [removed: 814,794] [added: 1,072,204] | | | [removed: 629,535] [added: 814,794] |

| Leasehold improvements, property and equipment, net | | [removed: 1,379,254] [added: 1,458,690] | | | [removed: 1,338,366] [added: 1,379,254] |

| Restricted cash | | 30,199 | | | [removed: 29,601] [added: \-] | [added: | | 30,199 |]

| Other assets | | 19,332 | | | [removed: 26,251] [added: \-] | [added: | | 19,332 |]

| Total assets | $ | [removed: 2,265,518] [added: 5,104,604] | | $ | [removed: 2,045,692] [added: 2,265,518] |

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

| Accounts payable | $ | 113,071 | | $ | [removed: 82,028] [added: \-] | [added: | $ | 113,071 |]

| Accrued payroll and benefits | | 113,467 | | | [removed: 82,541] [added: \-] | [added: | | 113,467 |]

| Accrued liabilities | | [removed: 147,849] [added: 155,843] | | | [removed: 95,679] [added: 147,849] |

| Unearned revenue | | 70,474 | | | [removed: 63,645] [added: \-] | [added: | | 70,474 |]

| Income tax payable | | [removed: 5,129] [added: \-] | | | [removed: \-] [added: 5,129] |

| Total current liabilities | | [removed: 449,990] [added: 666,593] | | | [removed: 323,893] [added: 449,990] |

| Deferred rent | | [removed: 330,985] [added: \-] | | | [removed: 316,498] [added: 330,985] |

| [Note 2 – Supplemental Balance Sheet Information](#Note_02) | 43 |

| [Note 3 – Revenue Recognition](#Note_03) | 43 |

| [Note 6 – Restaurant Closure Costs](#Note_06) | 45 |

| [Note 7 – Income Taxes](#Note_07) | 46 |

| [Note 8 – Shareholders’ Equity](#Note_08) | 48 |

| [Note 10 – Employee Benefit Plans](#Note_10) | 51 |

| [Note 11 – Leases](#Note_11) | 51 |

| [Note 12 – Earnings Per Share](#Note_12) | 53 |

| [Note 13 – Commitments and Contingencies](#Note_13) | 53 |

‎

Adoption of New Accounting Standard

As discussed in Note 11 to the consolidated financial statements, the Company changed its method for accounting for leases in 2019.

As explained below, auditing the Company’s valuation and accounting for leases was a critical audit matter.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

| | | Valuation and accounting for leases |

| *Description of the Matter* | | As described above and in Notes 1 and 11 to the consolidated financial statements, the Company adopted Accounting Standards Update (“ASU”) 2016-02, “*Leases* (Topic 842)” (“ASC 842”) on January 1, 2019. In conjunction with the adoption of ASC 842, the Company evaluated the overall accounting implications, including review of contracts and vendor agreements to determine whether such agreements contained a lease. The Company determined its material operating leases consist of approximately 2,500 restaurant locations and office space. On the adoption date, the Company recorded $2.4 billion in operating lease assets and $2.7 billion in current and long-term operating lease liabilities on its consolidated balance sheet for existing operating leases. The calculation of the Company’s operating lease assets and liabilities include an estimate of the present value of future lease payments. Management estimated the Company’s incremental borrowing rates used in its present value calculation which required subjectivity. The incremental borrowing rate is the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Auditing management’s contract evaluation performed in conjunction with the adoption of ASC 842 was complex and required judgment to analyze the terms within the contracts and vendor agreements to determine whether we concurred with management’s evaluation. Additionally, during the inspection of contracts and vendor agreements and analysis of contractual terms, inquiries and discussions were held outside of the accounting department to support the evaluation. Further, auditing management’s assessment of its incremental borrowing rate is especially subjective and judgmental as the Company has no outstanding debt nor committed credit facilities, secured or otherwise that would have comparable collateral or similar terms as their underlying restaurant locations and office space. |

| *How We Addressed the Matter in Our Audit* | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over the implementation of the ASC 842 process, including the Company’s controls with regards to the contract evaluation, and review of the methodology, inputs, and assumptions used to determine the incremental borrowing rate. Our substantive audit procedures included, among others, involving specialists to assist in evaluating management’s methodology and assumptions used to determine the Company’s incremental borrowing rate at the date of adoption of ASC 842. The considerations to determine the appropriateness of the Company’s incremental borrowing rate included the Company’s credit rating, current market environment for recent debt transactions, and market data available to support the adjustment required to reflect a collateralized borrowing rate. In addition, we obtained and inspected a sample of individual leases to test the completeness and accuracy of the lease inputs and terms used in the Company’s calculation and tested the computational accuracy. We additionally performed procedures to determine the completeness of the lease population used in the Company’s analysis. We tested a sample of contracts and vendor agreements to determine whether management appropriately evaluated whether such agreements contained a lease. These procedures included, among others, inspecting contracts and vendor agreements, analyzing contractual terms and performing inquiries within the organization outside of the accounting department. Additionally, our procedures included reviewing management’s lease questionnaires sent to relevant employees and cash disbursement listings to test that contracts which could contain lease provisions were considered in the lease population used in the Company’s analysis. We also evaluated the Company’s lease disclosures included in Notes 1 and 11 in relation to these matters. |

| | | Valuation and accounting for stock-based compensation |

| *Description of the Matter* | | The Company incurred $92.1 million in stock-based compensation expense during the year ended December 31, 2019. Approximately 227,000 of the Company’s non-vested stock awards were subject to service and performance conditions during the year ended December 31, 2019. As described in Notes 1 and 9 to the consolidated financial statements, the Company estimates the grant date fair value of the stock awards and expenses the fair value of stock awards subject to service conditions over the respective vesting period. Stock-based compensation expense of stock awards subject to performance conditions is based on the estimated probability of achieving levels of performance associated with particular levels of payout. Additionally, at each reporting period, the Company evaluates the probable outcome of the performance conditions including consideration of significant assumptions and as applicable, recognizes the cumulative effect of the change in estimate in the period of the change. Auditing the grant date fair value and the appropriateness of the accounting treatment of the Company’s stock awards was complex and judgmental. In particular, the fair value estimate for stock awards subject to performance conditions is sensitive to significant assumptions including management’s internal estimates of the Company’s future performance. |

| *How We Addressed the Matter in Our Audit* | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over stock-based compensation. We tested controls over management’s review of the valuation model methodology and assumptions used with regards to the service and performance conditions. We also tested management's controls to validate that data used in the valuation model was complete and accurate. Our substantive audit procedures included, among others, testing the significant assumptions underlying the performance conditions (e.g., certain targets related to growth in comparable restaurant sales and average restaurant margin) and testing the completeness and accuracy of the underlying data. We evaluated management’s significant assumptions by comparing the assumptions to current market and economic trends, historical results of the Company’s business, and to other relevant factors. We additionally performed a sensitivity analysis of the significant assumptions to evaluate the change in the fair value of the stock awards subject to performance conditions resulting from changes in the assumptions. We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 1 and 9 in relation to these matters. |

February 4, 2020

| Cash and cash equivalents | $ | 480,626 | | $ | 249,953 |

| Accounts receivable, net | | 80,545 | | | 62,312 |

| Inventory | | 26,096 | | | 21,555 |

| Investments | | 400,156 | | | 426,845 |

| Restricted cash | | 27,855 | | | 30,199 |

| Operating lease assets | | 2,505,466 | | | \- |

| Other assets | | 18,450 | | | 19,332 |

| Accounts payable | $ | 115,816 | | $ | 113,071 |

| Unearned revenue | | 95,195 | | | 70,474 |

| Current operating lease liabilities | | 173,139 | | | \- |

| Long-term operating lease liabilities | | 2,678,374 | | | \- |

| Other liabilities | | 38,797 | | | 31,638 |

| Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2019 and 2018, respectively | | \- | | | \- |

| Common stock, $0.01 par value, 230,000 shares authorized, 36,323 and 35,973 shares issued as of December 31, 2019 and 2018, respectively | | 363 | | | 360 |

| Additional paid-in capital | | 1,465,697 | | | 1,374,154 |

| Treasury stock, at cost, 8,568 and 8,276 common shares as of December 31, 2019 and 2018, respectively | | (2,699,119) | | | (2,500,556) |

| Accumulated other comprehensive loss | | (5,363) | | | (6,236) |

| | | | | | | | | |

| Tax benefit (expense) | | (132) | | | 88 | | | (849) |

| Balance, December 31, 2015 | 35,790 | | $ | 358 | | $ | 1,172,628 | | 5,206 | | $ | (1,234,612) | | $ | 2,197,873 | | $ | (1,522) | | $ | (6,751) | | $ | 2,127,974 |

| Acquisition of treasury stock | | | | | | | | | 1,813 | | | (814,777) | | | | | | | | | | | | (814,777) |

| Other comprehensive income (loss), net of income tax | | | | | | | | | | | | | | | | | | 1,402 | | | (1,291) | | | 111 |

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

| Proceeds from sale of investments | | \- | | | \- | | | 540,648 |

| Increase (decrease) in acquisition of treasury stock accrued in accrued liabilities | $ | 200 | | $ | (900) | | $ | (22,778) |

| | (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” |

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

1.

We recognize a liability for offers of free food by estimating the cost to satisfy the offer based on company-specific historical redemption patterns for similar promotions.

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

In addition, we also recognize revenue when we determine the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) and there is not a legal obligation to remit the unredeemed gift cards to the relevant jurisdiction.

Gift card breakage is recognized in revenue as the gift cards are used on a pro rata basis over an eight\-month period beginning at the date of the gift card sale and is included in revenue on the consolidated statement of income.

We have determined that 4% of gift card sales will not be redeemed and will be retained by us.

Effective October 2018, we launched a loyalty program, Chipotle Rewards, in three test markets.

opportunity to earn bonus points or free food.

Advertising and marketing costs are included in other operating costs on the consolidated statement of income.

Rent

The lease term begins when we have the right to control the use of the property, which is typically before rent payments are due under the lease.

The difference between the rent expense and rent paid is recorded as deferred rent on the consolidated balance sheet.

Pre-opening rent is included in pre-opening costs on the consolidated statement of income.

Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions of rent expense over the term of the lease.

Additionally, certain operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified target amounts.

Contingent rent expense is recognized provided the achievement of that target is considered probable.

We record a liability for lease termination costs at the date we cease using a property, consisting of the net present value of remaining lease obligations, net of estimated sublease rentals that could be reasonably obtained, and measure fair value using Level 3 inputs (unobservable inputs) based on a discounted cash flow method.

Any subsequent adjustments to that liability as a result of lease termination or changes in estimates of sublease income are recorded in the period incurred.

ASU 2018-15 is effective for us in the first quarter of fiscal 2020, and early adoption is permitted.

In February 2016, FASB issued ASU 2016-02, “Leases (Topic 842),” and issued additional clarifications and improvements throughout 2018.

We have adopted the requirements of the new lease standard effective January 1, 2019.

At the beginning of the period of adoption, we will recognize a cumulative-effect adjustment in retained earnings due to impairment of certain right-of-use assets at the effective date.

We will elect the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs.

Further, we will elect a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets.

We are finalizing the impact of the standard to our accounting policies, processes, disclosures, and internal control over financial reporting and have implemented necessary upgrades to our existing lease system.

The adoption of ASU 2016-02 will have a significant impact on our consolidated balance sheet as we will record material assets and obligations primarily related to approximately 2,500 restaurant operating leases and corporate office leases.

We expect to record operating lease liabilities of approximately $2.7 billion based on the present value of the remaining minimum rental payments using discount rates as of the effective date.

We expect to record corresponding right-of-use assets of approximately $2.4 billion, based upon the operating lease liabilities adjusted for prepaid and deferred rent, unamortized initial direct costs, liabilities associated with lease

termination costs and impairment of right-of-use assets recognized in retained earnings as of January 1, 2019.

We do not expect a material impact on our consolidated statement of income or our consolidated statement of cash flows.

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

As of December 31, [removed: 2018,] [added: 2019,] 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.

[removed: Changes] [added: Changes] in Internal Control over Financial [removed: Reporting][added: Reporting]

There were no changes during the fiscal quarter ended December 31, [removed: 2018] [added: 2019,] 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 [removed: reporting.][added: reporting.]

[removed: Management’s] [added: Management’s] Annual Report on Internal Control over Financial [removed: Reporting][added: Reporting]

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] 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: 2018.][added: 2019.]

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

To the Shareholders and [added: the] Board of Directors of Chipotle Mexican Grill, Inc.

[removed: Opinion] [added: Opinion] on Internal Control [removed: over] [added: Over] Financial [removed: Reporting][added: Reporting]

We have audited Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] 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: 2018 and 2017,] [added: 2019] and [added: 2018,] 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: 2018,] [added: 2019,] and the related notes and our report dated February [removed: 7, 2019] [added: 4, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

‎

February 4, 2020

February 7, 2019

[removed: PART III][added: PART III]

Incorporated by reference from the definitive proxy statement for our [removed: 2019] [added: 2020] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

Incorporated by reference from the definitive proxy statement for our [removed: 2019] [added: 2020] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

[removed: Securities] [added: Securities] Authorized for Issuance Under Equity Compensation [removed: Plans][added: Plans]

The following table presents information regarding options and rights outstanding under our equity compensation plans as of December 31, [removed: 2018.][added: 2019.]

| | [removed: (a) Number] [added: (a)‎Number] of [removed: Securities to] [added: Securities‎to] be Issued [removed: Upon Exercise] [added: Upon‎Exercise] of [removed: Outstanding Options] [added: Outstanding‎Options] and [removed: Rights(1)] [added: Rights(1)‎] | | | [removed: (b) Weighted-Average Exercise] [added: (b)‎Weighted-Average‎Exercise] Price [removed: of Outstanding] [added: of‎Outstanding] Options [removed: and Rights(1)] [added: and‎Rights(1)‎] | | [removed: (c) Number] [added: (c)‎Number] of [removed: Securities Remaining] [added: Securities‎Remaining] Available [removed: for Future] [added: for‎Future] Issuance [removed: Under Equity] [added: Under‎Equity] Compensation [removed: Plans (excluding securities reflected] [added: Plans‎(excluding securities‎reflected] in column [removed: (a))(2)] [added: (a))(2)‎] |

| [removed: Equity] [added: Equity] Compensation Plans [added: Not] Approved by Security [removed: Holders] [added: Holders] | [removed: 2,374,955] [added: None] | | [removed: $] | [removed: 474.51] [added: N/A] | | [removed: 2,871,440] [added: None] |

| [removed: Equity] [added: Equity] Compensation Plans [removed: Not] Approved by Security [removed: Holders] [added: Holders] | [removed: None] [added: 1,356,553] | | [added: $] | [removed: N/A] [added: 457.14] | | [removed: None] [added: 2,566,656] |

[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. [removed: The weighted-average exercise price in column (b) includes the weighted-average exercise price of SOSARs only. |]

[removed: | | (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: 2018,] [added: 2019,] 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. [removed: 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: 2019] [added: 2020] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

| Total | 1,356,553 | | $ | 457.14 | | 2,566,656 |

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

(2)Includes 2,320,929 shares remaining available under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and 245,727 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.

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

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

Incorporated by reference from the definitive proxy statement for our [removed: 2019] [added: 2020] annual meeting of shareholders, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated by reference from the definitive proxy statement for our 2020 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2019.

PART IV

All Financial [removed: statements][added: statements]

Financial statement [removed: schedules][added: schedules]

[removed: Exhibits][added: Exhibits]

| | | [removed: Description] [added: Description] of Exhibit Incorporated Herein by [removed: Reference] [added: Reference] | | | | |

| [removed: Exhibit Number] [added: Exhibit Number] | [removed: Exhibit Description] [added: Exhibit Description] | [removed: Form] [added: Form] | [removed: File No.] [added: File No.] | [removed: Filing Date] [added: Filing Date] | [removed: Exhibit Number] [added: Exhibit Number] | [removed: Filed Herewith] [added: Filed Herewith] |

| [removed: 10.1.1†] [added: 10.9†] | [Form of [removed: 2011] Stock Appreciation Rights [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312511039010/dex10210.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312512170975/d329098dex101.htm)] | [removed: 10-K] [added: 10-Q] | 001-32731 | [removed: February 17, 2011] [added: April 20, 2012] | [removed: 10.2.10] [added: 10.1] | |

| [removed: 10.1.2†] [added: 10.11†] | [Form of [removed: 2011] [added: 2014] Performance-Based Stock Appreciation Rights [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312511039010/dex10211.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000009/cmg-20161231xex10_25.htm)] | 10-K | 001-32731 | February [removed: 17, 2011] [added: 7, 2017] | [removed: 10.2.11] [added: 10.2.5] | |

| [removed: 10.1.3] [added: 10.2†] | [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 | |

| [removed: 10.2†] [added: 10.7†] | [Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312518173614/d578721dex101.htm) | 8-K | 001-32731 | May 24, 2018 | 10.1 | |

| [removed: 10.2.1†] [added: 10.8†] | [Form of Board Restricted Stock Units Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312514274455/d760141dex101.htm) | 10-Q | 001-32731 | July 22, 2014 | 10.1 | |

| [removed: 10.2.2†] [added: 10.12†] | [Form of [added: 2016] Stock Appreciation Rights [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312512170975/d329098dex101.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809016000069/cmg-20160331xex10_1.htm)] | 10-Q | 001-32731 | April [removed: 20, 2012] [added: 27, 2016] | 10.1 | |

| [removed: 10.2.3†] [added: 10.32†] | [Form of [removed: Performance-Based] [added: 2018] Stock Appreciation Rights [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312512170975/d329098dex102.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_14.htm)] | 10-Q | 001-32731 | April [removed: 20, 2012] [added: 26, 2018] | [removed: 10.2] [added: 10.14] | |

| [removed: 10.2.4†] [added: 10.10†] | [Form of 2014 Stock Appreciation Rights Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000009/cmg-20161231xex10_24.htm) | 10-K | 001-32731 | February 7, 2017 | 10.2.4 | |

| [removed: 10.2.5†] [added: 10.13†] | [Form of [removed: 2014 Performance-Based Stock Appreciation Rights Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000009/cmg-20161231xex10_25.htm)] [added: 2017 Performance Share Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000033/cmg-20170630xex10_2.htm)] | [removed: 10-K] [added: 10-Q] | 001-32731 | [removed: February 7,] [added: July 26,] 2017 | [removed: 10.2.5] [added: 10.2] | |

| [removed: 10.2.6†] [added: 10.4†] | [Form of [removed: 2015] [added: 2019 Transformation] Performance Share [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809015000012/cmg-20150331ex10244a0ea.htm)] [added: Unit Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000015/cmg-20190331xex10_2.htm) (1)] | 10-Q | 001-32731 | April [removed: 22, 2015] [added: 25, 2019] | 10.2 | |

| [removed: 10.2.7†] [added: 10.3†] | [Form of [removed: 2016 Stock Appreciation Rights Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809016000069/cmg-20160331xex10_1.htm)] [added: 2019 Performance Share Unit Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000015/cmg-20190331xex10_1.htm)] | 10-Q | 001-32731 | April [removed: 27, 2016] [added: 25, 2019] | 10.1 | |

| [removed: 10.2.8†] [added: 10.27†] | [Form of [removed: 2016 Performance Share Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312517104111/d365751dex101.htm)] [added: 2018 CEO SOSARs Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex102.htm)] | [removed: 10-Q] [added: 8-K/A] | 001-32731 | April [removed: 27, 2016] [added: 3, 2018] | 10.2 | |

| [removed: 10.2.11†] [added: 10.6†] | [Form of [removed: 2017 Performance Share Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000033/cmg-20170630xex10_2.htm)] [added: Participation Agreement for Change in Control Severance Plan](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000029/cmg-20190630xex10_2.htm)] | 10-Q | 001-32731 | July [removed: 26, 2017] [added: 24, 2019] | 10.2 | |

| [removed: 10.2.13] [added: 10.14†] | [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 | |

| [removed: 10.3] [added: 10.15†] | [Amended and Restated Registration Rights Agreement dated January 31, 2006 among Chipotle Mexican Grill, Inc., McDonald’s Corporation and certain shareholders](http://www.sec.gov/Archives/edgar/data/1058090/000104746906003640/a2168474zex-10_6.htm) | 10-K | 001-32731 | March 17, 2006 | 10.6 | |

| [removed: 10.3.1] [added: 10.17†] | [Retention Agreement, dated January 9, 2018, between [removed: Mark Crumpacker] [added: Scott Boatwright] and Chipotle Mexican Grill, [removed: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000004/cmg-20180112xex10_2.htm)] [added: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_4.htm)] | [removed: 8-K] [added: 10-Q] | 001-32731 | [removed: January 12,] [added: April 26,] 2018 | [removed: 10.2] [added: 10.4] | |

| [removed: 10.4†] [added: 10.16] | [Board Pay [removed: Policies](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000033/cmg-20170630xex10_1.htm)] [added: Policies effective May 22, 2018](http://www.sec.gov/Archives/edgar/data/1058090/000119312518173614/d578721dex102.htm)] | [removed: 10-Q] [added: 8-K] | 001-32731 | [removed: July 26, 2017] [added: May 24, 2018] | [removed: 10.1] [added: 10.2] | |

| [removed: 10.4.3] [added: 10.19†] | [Retention Agreement, dated January 9, 2018, between [removed: Scott Boatwright] [added: Curt Garner] and Chipotle Mexican Grill, [removed: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_4.htm)] [added: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_5.htm)] | 10-Q | 001-32731 | April 26, 2018 | [removed: 10.4] [added: 10.5] | |

| [removed: 10.5†] [added: 10.22†] | [Chipotle Mexican Grill, Inc. [removed: Supplemental Deferred Investment Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312507038325/dex1011.htm)] [added: Employee Stock Purchase Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312512052969/d280751dex1011.htm)] | 10-K | 001-32731 | February [removed: 23, 2007] [added: 10, 2012] | 10.11 | |

| [removed: 10.5.1†] [added: 10.18†] | [Supplemental Deferred Investment Plan](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000047/cmg-20180630xex10_3.htm) | 10-Q | 001-32731 | July 27, 2018 | 10.3 | |

| [removed: 10.5.2] [added: 10.31†] | [removed: [Retention Agreement,] [added: [Offer Letter,] dated [removed: January] [added: March] 9, 2018, between [removed: Curt Garner] [added: Christopher Brandt] and Chipotle Mexican Grill, [removed: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_5.htm)] [added: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_13.htm)] | 10-Q | 001-32731 | April 26, 2018 | [removed: 10.5] [added: 10.13] | |

| [removed: 10.6†] [added: 10.20†] | [Form of Director and Officer Indemnification Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312507060643/dex101.htm) | 8-K | 001-32731 | March 21, 2007 | 10.1 | |

| [removed: 10.6.1] [added: 10.21†] | [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 | |

| [removed: 10.7.1] [added: 10.23†] | [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 | |

| [removed: 10.8.1] [added: 10.24†] | [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 | |

| [removed: 10.9] [added: 10.28†] | [removed: [Separation Agreement,] [added: [Executive Agreement] dated [removed: March 13, 2018,] [added: May 29, 2017] between [removed: Mark Crumpacker and] Chipotle Mexican Grill, [removed: Inc.](http://www.sec.gov/Archives/edgar/data/1058090/000119312518081634/d546370dex101.htm)] [added: Inc. and Scott Boatwright](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000037/cmg-20170915xex10_1.htm)] | 8-K | 001-32731 | [removed: March 14, 2018] [added: September 15, 2017] | 10.1 | |

| [removed: 10.10] [added: 10.25] | [Investor Agreement dated December 14, 2016 between Chipotle Mexican Grill, Inc. and Pershing Square Capital Management, L.P.](http://www.sec.gov/Archives/edgar/data/1058090/000105809016000091/cmg-20161219xex10_1.htm) | 8-K | 001-32731 | December 19, 2016 | 10.1 | |

| [removed: 10.11] [added: 10.26] | [Registration Rights Agreement dated February 3, 2017, between Chipotle Mexican Grill, Inc. and Pershing Square Capital Management, L.P.](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000009/cmg-20161231xex10_11.htm) | 10-K | 001-32731 | February 7, 2017 | 10.11 | |

| [removed: 10.11.1] [added: 10.29†] | [Form of 2018 [removed: CEO] [added: Premium-priced] SOSARs [removed: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex102.htm)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex103.htm)] | 8-K/A | 001-32731 | April 3, 2018 | [removed: 10.2] [added: 10.3] | |

| [removed: 10.12] [added: 10.30†] | [Executive [added: Chairman] Agreement dated [removed: May 29,] [added: November 28,] 2017 between Chipotle Mexican Grill, Inc. and [removed: Scott Boatwright](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000037/cmg-20170915xex10_1.htm)] [added: Steve Ells](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000047/cmg-20171201xex10_1.htm)] | 8-K | 001-32731 | [removed: September 15,] [added: December 1,] 2017 | 10.1 | |

| [removed: 10.12.1] [added: 10.33†] | [Form of 2018 [removed: Premium-priced SOSARs Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000119312518108713/d755493dex103.htm)] [added: Restricted Stock Units Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_15.htm)] | [removed: 8-K/A] [added: 10-Q] | 001-32731 | April [removed: 3,] [added: 26,] 2018 | [removed: 10.3] [added: 10.15] | |

| 21.1 | [Subsidiaries of Chipotle Mexican Grill, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000007/cmg-20181231xex21_1.htm)] [added: Inc.](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex21_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/1058090/000105809019000007/cmg-20181231xex23_1.htm)] [added: Inc.)](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex23_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/1058090/000105809019000007/cmg-20181231xex31_1.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex31_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/1058090/000105809019000007/cmg-20181231xex31_2.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex31_2.htm)] | \- | \- | \- | \- | X |

1.

2.

3.

| 4.2 | [Description of Chipotle Securities](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex4_2.htm) | \- | \- | \- | \- | X |

| 10.5† | [Change in Control Severance Plan, effective June 1, 2019](https://www.sec.gov/Archives/edgar/data/1058090/000105809019000029/cmg-20190630xex10_1.htm) | 10-Q | 001-32731 | July 24, 2019 | 10.1 | |

| 10.34 | [Form of 2019 Director Restricted Stock Unit Agreement](https://www.sec.gov/Archives/edgar/data/1058090/000105809020000010/cmg-20191231xex10_34.htm) | \- | \- | \- | \- | X |

| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | \- | \- | \- | \- | X |

| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | \- | \- | \- | \- | X |

| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | \- | \- | \- | \- | X |

| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | \- | \- | \- | \- | X |

| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | \- | \- | \- | \- | X |

| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | \- | \- | \- | \- | X |

| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | \- | \- | \- | \- | X |

| | | | |

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

| | | | (1) Portions of this exhibit have been omitted as permitted by applicable regulations. †- Management contracts and compensatory plans or arrangements required to be filed as exhibits. |

1.

2.

3.

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

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

| 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 | |

| 10.7† | [Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312512052969/d280751dex1011.htm) | 10-K | 001-32731 | February 10, 2012 | 10.11 | |

| 10.8† | [Chipotle Mexican Grill, Inc. 2014 Cash Incentive Plan](http://www.sec.gov/Archives/edgar/data/1058090/000119312513294535/d540633dex101.htm) | 10-Q | 001-32731 | July 19, 2013 | 10.1 | |

| 10.13 | [Executive Chairman Agreement dated November 28, 2017 between Chipotle Mexican Grill, Inc. and Steve Ells](http://www.sec.gov/Archives/edgar/data/1058090/000105809017000047/cmg-20171201xex10_1.htm) | 8-K | 001-32731 | December 1, 2017 | 10.1 | |

| 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 | |

| 10.14 | [Form of 2018 Stock Appreciation Rights Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_14.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.14 | |

| 10.15 | [Form of 2018 Restricted Stock Units Agreement](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_15.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.15 | |

| 10.16 | [Form of 2018 Restricted Stock Units Agreement - 12 month](http://www.sec.gov/Archives/edgar/data/1058090/000105809018000042/cmg-20180331xex10_16.htm) | 10-Q | 001-32731 | April 26, 2018 | 10.16 | |

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

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

| [removed: Title:] [added: Title:] | [removed: Chief] [added: Chief] Financial [removed: Officer] [added: Officer] |

Date: February [removed: 7, 2019][added: 4, 2020]

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

| /s/ BRIAN NICCOL | | February [removed: 7, 2019] [added: 4, 2020] | | Chief Executive Officer (principal executive officer) |

| [removed: Brian Niccol] [added: Brian Niccol] | | | | |

| /s/ JOHN R. HARTUNG | | February [removed: 7, 2019] [added: 4, 2020] | | Chief Financial Officer (principal financial and accounting officer) |

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

| /s/ STEVE ELLS | | February [removed: 7, 2019] [added: 4, 2020] | | Chairman of the Board of Directors |

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

| /s/ ALBERT S. BALDOCCHI | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

| /s/ PAUL CAPPUCCIO | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

| /s/ NEIL W. FLANZRAICH | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

| /s/ ROBIN S. HICKENLOOPER | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

| /s/ ALI NAMVAR | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

| /s/ MATTHEW PAULL | | February [removed: 7, 2019] [added: 4, 2020] | | Director |

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

SIGNATURES

POWER OF ATTORNEY

| /s/ PATRICIA FILI-KRUSHEL | | February 4, 2020 | | Director |