filings.toolsItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open in 2025 and 2026, and the number with Chipotlanes,the number of new international partner-operated restaurants we expect to open, our anticipated comparable restaurant sales for 2025, the expected impact of tariffs on our food, beverage and packaging costs during the 2025 fourth quarter and on an ongoing basis, our expectation to generate positive cash flow for the foreseeable future, our expectations for utilization of cash flow from operations, our ability to manage prices, risks and volatility in our supply chain, our plans for continuing stock buybacks and the volume of buybacks,and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “project”, “target”, "goal" and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial and competitive information available to us as of the date of this filing and we assume no obligation to update these 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 but not limited to: increasing wage inflation, including as a result of state or local regulations mandating higher minimum wages, and the competitive labor market, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures, interruptions or outages; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification, destruction or ransom of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors and restaurant equipment; the expected costs and risks related to our international expansion, including through partner-operated restaurants in the Middle East, Asia and Mexico; increases in ingredient and other operating costs due to inflation, global conflicts, severe weather and climate change, our Food with Integrity philosophy, tariffs or trade restrictions; intermittent supply shortages relating to our Food with Integrity philosophy, rapid expansion and supply chain disruptions; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in guests' perceptions of our brand, including as a result of negative publicity or social media posts, increased consumer uncertainty and decreased consumer spending (including as a result of higher inflation, unemployment rates, fear of possible recession and higher energy prices), or the inability to increase menu prices or realize the benefits of menu price increases and the risk of guest responses; risks associated with our digital business, including risks arising from our reliance on third party delivery services and the IT infrastructure; litigation risks, including possible governmental actions and potential class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims, contract disputes or other matters; and other risk factors described from time to time in our SEC reports, including our Annual Report on Form 10-K for the year ended December 31, 2024, and in other reports filed with the SEC, all of which are available on the investor relations page of our website at ir.Chipotle.com.
As of September 30, 2025, we owned 3,822 Chipotle restaurants throughout the United States and 94 international Chipotle restaurants. Additionally, we had seven international partner-operated restaurants. We manage our U.S. operations based on 11 regions and aggregate our operations to one reportable segment.
Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we discuss the following key operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:
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Comparable restaurant sales
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Food, beverage, and packaging as a percentage of total revenue
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Labor as a percentage of total revenue
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Occupancy as a percentage of total revenue
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Other operating costs as a percentage of total revenue
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New restaurant openings
Third Quarter 2025 Financial Highlights, year-over-year:
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Total revenue increased 7.5% to $3.0 billion
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Comparable restaurant sales increased 0.3%
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Diluted earnings per share was $0.29, a 3.6% increase from $0.28
Sales Trends. Comparable restaurant sales increased 0.3% for the three months ended September 30, 2025. The increase is attributable to a 1.1% increase in average check, partially offset by lower transactions of 0.8%. Comparable restaurant sales represent the change in period-over-period total revenue for company-owned restaurants in operation for at least 13 full calendar months. Digital sales represented 36.7% of total food and beverage revenue. For full-year 2025, management is anticipating comparable restaurant sales declines in the low-single digit range.
Restaurant Development. During the three months ended September 30, 2025, we opened 84 restaurants, which included 64 restaurants with a Chipotlane. We remain on track to open approximately 315 to 345 company-owned restaurants in 2025 and expect to open approximately 350 to 370 restaurants in 2026, which includes 10 to 15 international partner-operated restaurants. We expect that at least 80% of our new company-owned restaurants will include a Chipotlane.
Partner-Operated Restaurants. During the three months ended September 30, 2025, we opened two partner-operated restaurants in the Middle East.
Restaurant Activity
The following table details company-owned restaurant unit data for the periods indicated.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Beginning of period | 3,839 | 3,530 | 3,726 | 3,437 | |||||||||||||||||||
| Chipotle openings | 84 | 86 | 202 | 185 | |||||||||||||||||||
| Chipotle permanent closures | (4) | (1) | (8) | (5) | |||||||||||||||||||
| Chipotle relocations | (3) | - | (4) | (2) | |||||||||||||||||||
| Total at end of period | 3,916 | 3,615 | 3,916 | 3,615 |
The following table details partner-operated restaurant unit data for the periods indicated.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Beginning of period | 5 | 1 | 3 | - | |||||||||||||||||||
| Partner-operated openings | 2 | 1 | 4 | 2 | |||||||||||||||||||
| Total at end of period | 7 | 2 | 7 | 2 |
Results of Operations
Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.
Revenue
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Food and beverage revenue | $ | 2,989.3 | $ | 2,778.0 | 7.6 | % | $ | 8,896.8 | $ | 8,417.4 | 5.7 | % | |||||||||||||||||||||||
| Delivery service revenue | 14.2 | 15.5 | (8.7 | %) | 45.3 | 51.1 | (11.5 | %) | |||||||||||||||||||||||||||
| Total revenue | $ | 3,003.4 | $ | 2,793.6 | 7.5 | % | $ | 8,942.1 | $ | 8,468.5 | 5.6 | % | |||||||||||||||||||||||
| Average restaurant sales (1) | $ | 3.132 | $ | 3.184 | (1.6 | %) | $ | 3.132 | $ | 3.184 | (1.6 | %) | |||||||||||||||||||||||
| Comparable restaurant sales increase/(decrease) | 0.3% | 6.0% | (1.4 | %) | 8.1 | % | |||||||||||||||||||||||||||||
| Transactions | (0.8%) | 3.3% | (2.7%) | 5.8% | |||||||||||||||||||||||||||||||
| Average check | 1.1% | 2.7% | 1.3% | 2.3% | |||||||||||||||||||||||||||||||
| Menu price increase | 2.1% | 3.6% | 2.3% | 3.2% | |||||||||||||||||||||||||||||||
| Check mix | (1.0 | %) | (0.9 | %) | (1.0 | %) | (0.9 | %) |
(1)Average restaurant sales refers to the average trailing 12-month food and beverage revenue for company-owned restaurants in operation for at least 12 full calendar months.
The following is a summary of the change in restaurant sales for the period indicated:
| Three months ended | Nine months ended | ||||||||||
| (dollars in millions) | |||||||||||
| For the period ended September 30, 2024 | $ | 2,793.6 | $ | 8,468.5 | |||||||
| Change from: | |||||||||||
| Comparable restaurant sales | 8.5 | (118.9) | |||||||||
| Restaurants not yet in comparable base opened in 2025 | 99.7 | 173.4 | |||||||||
| Restaurants not yet in comparable base opened in 2024 | 99.8 | 413.9 | |||||||||
| Other | 1.8 | 5.2 | |||||||||
| For the period ended September 30, 2025 | $ | 3,003.4 | $ | 8,942.1 |
Food, Beverage and Packaging Costs
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Food, beverage and packaging | $ | 902.4 | $ | 855.5 | 5.5 | % | $ | 2,626.8 | $ | 2,508.3 | 4.7 | % | |||||||||||||||||||||||
| As a percentage of total revenue | 30.0 | % | 30.6 | % | (0.6 | %) | 29.4 | % | 29.6 | % | (0.2 | %) |
Food, beverage and packaging costs decreased 0.6% as a percentage of total revenue for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily due to a 0.6% benefit from menu price increases in the prior year and, to a lesser extent, cost of sales efficiencies. This decrease was partially offset by a 0.3% inflation, primarily in beef and chicken, and a 0.3% impact from the newly enacted tariffs.
Food, beverage and packaging costs decreased 0.2% as a percentage of total revenue for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily due to a 0.7% benefit from menu price increases in the prior year and, to a lesser extent, from cost of sales efficiencies. This decrease was partially offset by a 0.5% inflation across several ingredient costs, primarily beef and chicken, and a 0.1% impact from the newly enacted tariffs.
Due to goods imported prior to the enactment of tariffs, we anticipate about a 40 basis point increase in food, beverage and packaging costs during the fourth quarter of 2025 relating to tariffs. We estimate that the tariffs enacted since April 2025 will increase food, beverage and packaging costs by about 50 basis points on an ongoing basis. These estimates could vary based on future tariff policy changes.
Labor Costs
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Labor costs | $ | 756.7 | $ | 696.8 | 8.6 | % | $ | 2,231.2 | $ | 2,072.9 | 7.6 | % | |||||||||||||||||||||||
| As a percentage of total revenue | 25.2 | % | 24.9 | % | 0.3 | % | 25.0 | % | 24.5 | % | 0.5 | % |
Labor costs increased 0.3% as a percentage of total revenue for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Labor increased primarily due to a 0.5% impact of lower sales volumes and 0.2% from restaurant wage inflation. These increases were partially offset by a 0.5% benefit from menu price increases in the prior year.
Labor costs increased 0.5% as a percentage of total revenue for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. The increase was primarily due to a 0.7% impact of lower sales volumes and 0.4% from restaurant wage inflation, including minimum wage increases for our restaurants in California. This increase is partially offset by a 0.6% benefit from menu price increases in the prior year.
Occupancy Costs
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Occupancy costs | $ | 158.3 | $ | 142.6 | 11.0 | % | $ | 462.4 | $ | 416.9 | 10.9 | % | |||||||||||||||||||||||
| As a percentage of total revenue | 5.3 | % | 5.1 | % | 0.2 | % | 5.2 | % | 4.9 | % | 0.3 | % |
Occupancy costs increased 0.2% as a percentage of total revenue for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was due to the impact from lower sales volumes, as a 0.1% benefit from menu price increases in the prior year was offset by expenses associated with new restaurants.
Occupancy costs increased 0.3% as a percentage of total revenue for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was due to the impact from lower sales volumes, as a 0.1% benefit from menu price increases in the prior year was offset by expenses associated with new restaurants.
Other Operating Costs
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Other operating costs | $ | 450.4 | $ | 386.5 | 16.6 | % | $ | 1,294.3 | $ | 1,157.0 | 11.9 | % | |||||||||||||||||||||||
| As a percentage of total revenue | 15.0 | % | 13.8 | % | 1.2 | % | 14.5 | % | 13.7 | % | 0.8 | % |
Other operating costs increased 1.2% as a percentage of total revenue for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was due to the impact from several items, primarily 0.9% of higher marketing and promotional activities and 0.2% of lower sales volumes. This increase was partially offset by a 0.2% from the benefit of menu price increases in the prior year.
Other operating costs increased 0.8% as a percentage of total revenue for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was due to the impact from several items, primarily 0.6% of higher marketing and promotional activities and 0.2% of lower sales volumes. This increase was partially offset by a 0.2% from the benefit of menu price increases in the prior year.
General and Administrative Expenses
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| General and administrative expenses | $ | 146.7 | $ | 126.6 | 15.9 | % | $ | 491.7 | $ | 506.3 | (2.9 | %) | |||||||||||||||||||||||
| As a percentage of total revenue | 4.9 | % | 4.5 | % | 0.4 | % | 5.5 | % | 6.0 | % | (0.5 | %) |
The following is a summary of the change in general and administrative expense for the period indicated:
| Three months ended | Nine months ended | ||||||||||
| (dollars in millions) | |||||||||||
| For the period ended September 30, 2024 | $ | 126.6 | $ | 506.3 | |||||||
| Change from: | |||||||||||
| Stock-based compensation, net of August 2024 retention awards | 11.1 | (20.7) | |||||||||
| Performance bonuses | (2.3) | (18.9) | |||||||||
| Conferences, primarily the biennial All Managers’ Conference | 0.3 | (15.7) | |||||||||
| Legal contingencies | 2.2 | (13.5) | |||||||||
| Legal services | 0.2 | 3.0 | |||||||||
| Outside services related to corporate initiatives | 0.1 | 7.6 | |||||||||
| Wages | 4.6 | 12.3 | |||||||||
| Stock-based compensation, August 2024 retention awards | 2.9 | 27.0 | |||||||||
| Other | 1.0 | 4.3 | |||||||||
| For the period ended September 30, 2025 | $ | 146.7 | $ | 491.7 |
Impairment, Closure Costs, and Asset Disposals
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Impairment, closure costs, and asset disposals | $ | 7.4 | $ | 15.2 | (51.2 | %) | $ | 19.0 | $ | 26.4 | (27.9 | %) | |||||||||||||||||||||||
| As a percentage of total revenue | 0.2 | % | 0.5 | % | (0.3) | % | 0.2 | % | 0.3 | % | (0.1 | %) |
Impairment, closure costs, and asset disposals decreased in dollar terms for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, primarily due to property and equipment impairment charges related to a software asset in the prior year.
Provision for Income Taxes
| Three months ended September 30, | Percentage | Nine months ended September 30, | Percentage | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | change | 2025 | 2024 | change | ||||||||||||||||||||||||||||||
| (dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 114.9 | $ | 115.2 | (0.3 | %) | $ | 371.0 | $ | 368.8 | 0.6 | % | |||||||||||||||||||||||
| Effective income tax rate | 23.1 | % | 22.9 | % | 0.2 | % | 23.5 | % | 23.5 | % | - | % |
The effective income tax rate increased 0.2% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily driven by a 0.6% reduction in tax benefits related to option exercises and equity vesting, partially offset by 0.8% in lower non-deductible expenses. Additionally, for the three months ended September 30, 2024, we released certain income tax reserves, which did not similarly recur during the current period impacting the rate by 0.4%.
The effective income tax rate remained flat for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The nine months ended September 30, 2025 had a 0.6% decrease in non-deductible expenses, offset mostly by a 0.5% reduction in tax benefits related to option exercises and equity vesting.
Seasonality
Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales and net income are lower in the first and fourth quarters due, in part, to the holiday season and because fewer people eat out during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For example, restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way, disease outbreak, epidemic or endemic, the impact of inflation and consumer sentiment on consumer spending, fluctuations in food or packaging costs, the timing of holidays, or the timing of menu price increases or promotional activities and other marketing initiatives. The number of trading days in a quarter can also affect our results, although, on an overall annual basis, changes in trading days do not have a significant impact.
Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based compensation expense and related tax rate impacts, litigation, settlement costs and related legal expenses, impairment charges and non-operating costs, timing of marketing or promotional expenses, the number and timing of new restaurants opened in a quarter, and closure of restaurants. New restaurants typically have higher operating costs following opening because of the expenses associated with their opening and operating inefficiencies in the months immediately following opening. Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.
Liquidity and Capital Resources
Cash and Investments
As of September 30, 2025, we had a cash and marketable investments balance of $1.7 billion, non-marketable investments of $90.0 million, and $30.9 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of September 30, 2025, $652.3 million remained available for repurchases of shares of our common stock, which includes the $500.0 million additional authorization approved by our Board of Directors on September 3, 2025. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
Borrowing Capacity
As of September 30, 2025, we had $500.0 million of undrawn borrowing capacity under a line of credit facility.
Use of Cash
We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future. Assuming no significant declines in comparable restaurant sales, we expect we will generate positive cash flow for the foreseeable future.
We have not required significant working capital because guests generally pay using cash or credit and debit cards and because our operations do not require significant receivables or significant inventories, partly due to our use of various fresh ingredients. In addition, we generally have the right to pay for the purchase of food, beverages and supplies sometime after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support our growth.
Cash Flows
Cash provided by operating activities was $1.7 billion for the nine months ended September 30, 2025, compared to $1.6 billion for the nine months ended September 30, 2024. The increase was primarily due to timing of tax-related payments, including the impacts of H.R.1 - One Big Beautiful Bill Act, partially offset by other changes in non-tax operating assets and liabilities.
Cash used in investing activities was $7.3 million for the nine months ended September 30, 2025, compared to $701.5 million for the nine months ended September 30, 2024. The change was primarily associated with a $742.3 million decrease in investment purchases net of investment maturities. This was partially offset by increased capital expenditures of $48.2 million, primarily related to costs associated with new restaurant development.
Cash used in financing activities was $1.7 billion for the nine months ended September 30, 2025, compared to $735.0 million for the nine months ended September 30, 2024. The change was primarily due to increased repurchases of common stock of $1.0 billion.
Critical Accounting Estimates
Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or factors. We had no significant changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2024.
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