10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

Commission File Number: 1-32731

CHIPOTLE MEXICAN GRILL, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1219301
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1401 Wynkoop Street, Suite 500 Denver, CO	80202
(Address of Principal Executive Offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common stock, par value $0.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

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.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

☒  Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated  filer (do not check if a smaller reporting company) ☐ Smaller  reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No   ☒

As of June 30, 2016, the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was $6.6 billion, based on the closing price of the registrant’s common stock on such date, the last trading day of the registrant’s most recently completed second fiscal quarter. For purposes of this calculation, shares of common stock held by each executive officer and director and by holders of 5% or more of the outstanding common stock have been excluded since those persons may under certain circumstances be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of January 31, 2017, there were 28,772,830 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2017 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, 2016.  

TABLE OF CONTENTS

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	24
Item 3.	Legal Proceedings	25
Item 4.	Mine Safety Disclosures	25
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	59
Item 9A.	Controls and Procedures	59
Item 9B.	Other Information	61
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	61
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
Item 14.	Principal Accounting Fees and Services	62
PART IV
Item 15.	Exhibits, Financial Statement Schedules	63
Item 16.	Form 10-K Summary	63
	Signatures	64

PART I

Cautionary Note Regarding Forward-Looking Statements

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 and Section 21E of the Securities Exchange Act of 1934 and 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 statements regarding the effectiveness of enhanced food safety procedures we have implemented; the impact of catering and delivery offerings and technology initiatives; the expected impact of food safety enhancements on our restaurant operating costs; projections of comparable restaurant sales increases and sales trends we expect for 2017; forecasts of trends in food, beverage and packaging costs, other operating costs, general and administrative expenses and other cost items for 2017; forecasts of the number of restaurants we expect to open in 2017; expected effective tax rates for the year; statements about possible repurchases of our common stock; projections of restaurant development costs; and other statements of our expectations and plans. We have used words such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “think,” “estimate,” “seek,” “expect,” “predict,” “could,” “project,” “potential” and other similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties, risks and factors 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 other factors 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. We assume no obligation to update any forward-looking statements after the date of this report as a result of new information, future events or other developments, except as required by applicable laws and regulations.

ITEM  1.BUSINESS

General

Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (“Chipotle”, the “Company”, or “we”) operates Chipotle Mexican Grill restaurants, which serve a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients.  As of December 31, 2016, we operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and we also had 23 restaurants in operation in other non-Chipotle concepts. We focus on finding the highest quality ingredients we can to make great tasting food; on building a strong people culture that is centered on providing an excellent guest experience; on building restaurants that are operationally efficient and aesthetically pleasing; and on doing all of this with the highest regard for the safety of our customers and increasing awareness and respect for the environment. We have grown substantially over the past five years, and expect to open between 195 and 210 additional restaurants in 2017.

Throughout our history as a public company, we have pursued a mission to change the way people think about and eat fast food. The fast food landscape has changed dramatically over Chipotle’s 23-year history.  The changes in the industry suggest that we may have achieved our mission, with a number of concepts built using service and sourcing formats that closely resemble ours – with more selective sourcing, food prepared onsite, and a service model that allows customers to choose exactly what they eat. Looking at what we have accomplished, we have expanded our mission. Today, we are working to Ensure that better food, prepared from whole, unprocessed ingredients is accessible to everyone. We are also aiming to simplify our business focus, to emphasize only those things that result in an excellent guest experience in our restaurants.

We manage our operations and restaurants based on 11 regions that aggregate into one reportable segment. Financial information about our operations, including our revenues and net income for the years ended December 31, 2016, 2015, and 2014, and our total assets as of December 31, 2016 and 2015, is included in our consolidated financial statements and accompanying notes in Item 8. “Financial Statements and Supplementary Data.” Substantially all of our revenues are generated and assets are located in the U.S.  For a discussion of risks related to our international operations, see Risks Related to Our Plans to Return to Sales and

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Profitability Growth and Restore Our Economic Model – Our expansion into international markets may present increased risks due to lower customer awareness of our brand… ” in Item 1A. “Risk Factors.”

Our Focus on Safe and Delicious Food Made with Better Ingredients

A decidedly focused menu. Chipotle restaurants list only a few entree items: burritos, burrito bowls, tacos and salads. But because customers can choose from five different meats or tofu, two types of beans and a variety of extras such as salsas, guacamole, cheese and lettuce, there’s enough variety to extend our menu to provide thousands of choices. We plan to keep a simple menu, but will consider additions that we think make sense. For example, in 2014 we introduced Sofritas, a vegetarian protein option, and in 2016 we introduced chorizo, a spicy ground sausage made from chicken and pork.

In preparing our food, we use classic cooking methods.  We use stoves and grills, pots and pans, cutting knives and other kitchen utensils, walk-in refrigerators stocked with a variety of fresh ingredients, herbs and spices and dry goods such as rice. Our restaurants do not have microwaves or freezers. Ingredients we use include chicken, steak and chorizo that is grilled in our restaurants, carnitas (seasoned and braised pork), barbacoa (spicy shredded beef), Sofritas (organic braised tofu) and vegetarian pinto and black beans. We add our rice, which is tossed with lime juice, freshly chopped cilantro, and a pinch of salt, as well as freshly shredded cheese, sour cream, lettuce, peppers and onions, to our entrees depending on each customer’s request. We use various herbs, spices and seasonings to prepare our meats and vegetables. We also make a variety of extras such as guacamole, salsas and tortilla chips seasoned with fresh lime juice and salt. In addition to sodas, fruit and tea drinks and organic milk, most of our restaurants also offer a selection of beer and margaritas. Our food is prepared from scratch from whole ingredients, some of which is prepared in our restaurants and some is prepared with the same fresh ingredients in larger batches in commissaries.

Better Food. Serving high quality food while still charging reasonable prices is critical to our mission to ensure that better food is accessible to everyone. We believe that purchasing fresh ingredients and preparing them from scratch in our restaurants is not enough, so we spend time on farms and in the field to understand where our food comes from and how it is raised. Because our menu is so focused, we can concentrate on the sources of each ingredient, and this has become a cornerstone of our continuous effort to improve the food we serve. We're all about simple, fresh food without artificial flavors or fillers—just genuine raw ingredients and their individual, delectable flavors.

In all of our Chipotle restaurants, we endeavor to serve only meats that were raised in accordance with criteria we’ve established in an effort to improve sustainability and promote animal welfare, and without the use of non-therapeutic antibiotics or added hormones. We brand these meats as “Responsibly Raised ®.”  One of our primary goals is for all of our restaurants to serve meats raised to meet our standards, but we have and will continue to face challenges in doing so.  For example, some of our restaurants did not serve carnitas for a portion of 2015, and some of our restaurants periodically serve conventionally raised chicken or beef from time to time due to supply constraints for our Responsibly Raised meats. More of our restaurants may periodically serve conventionally raised meats or stop serving one or more menu items in the future due to additional supply constraints. When we become aware that one or more of our restaurants will serve conventionally raised meat, we clearly and specifically disclose this temporary change on signage in each affected restaurant so that customers can avoid those meats if they choose to do so.

We also seek to use more responsibly grown produce, by which we mean produce grown by suppliers whose practices conform to our priorities with respect to environmental considerations and employee welfare. A portion of our beans is organically grown and a portion is grown using conservation tillage methods that improve soil conditions, reduce erosion, and help preserve the environment in which the beans are grown. A portion of some of the other produce items we serve is organically grown as well. Our commitment to better ingredients also extends to the dairy products we serve. We started 2017 with all the sour cream and cheese we buy for our U.S. Chipotle restaurants made with milk that comes from cows that are 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 (not including beverages) in U.S. Chipotle restaurantscontain genetically modified organisms, or GMOs. While the meat and poultry we serve is not genetically modified, 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. 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 24 independently owned and operated regional distribution centers purchase from various suppliers we carefully select based on quality and the suppliers’ understanding of our mission.  We work closely with our suppliers and seek to develop mutually beneficial long-term relationships with them. We use a mix of forward, fixed and formula pricing protocols, and our distribution centers purchase within the pricing guidelines and protocols we have established with the suppliers. We’ve also tried to increase,

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where necessary, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility and supply shortages, and we follow industry news, trade tariffs and other issues, weather, exchange rates, foreign demand, crises and other world events that may affect our ingredient prices. Certain key ingredients (including beef, pork, chicken, beans, rice, sour cream, cheese, and tortillas) are purchased from a small number of 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 Related to our Unique Business Strategy  –Our Food With Integrity philosophy subjects us to risks” in Item 1A. “Risk Factors.”

Quality Assurance and Food Safety.Our business was severely impacted beginning in the fourth quarter of 2015 by food safety incidents that were associated with a number of our restaurants.  More discussion of these incidents can be found in “Risks Related to Our Plans to Return to Sales and Profitability Growth and Restore Our Economic Model – We may continue to be negatively impacted by food safety incidents associated with our restaurants beginning in the fourth quarter of 2015. . .  ” in Item 1A. “Risk Factors.”  In the wake of these incidents, strengthening trust among our customers and in our brand has become essential to restoring our business results and achieving our mission. This begins with our commitment to serving safe, high quality food. Quality and food safety measures are integrated throughout our supply chain, from the farms that supply our food all the way through to our front line and into our customers’ hands. We maintain a limited list of approved suppliers, many of which are among the top suppliers in the industry. Our quality assurance department establishes and monitors our quality and food safety programs, and works closely with our suppliers to ensure our high standards are met throughout the supply chain. Our training, operations, and risk management departments develop and implement operating standards for food quality, preparation, cleanliness, employee health protocols, and safety in the restaurants. Our food safety programs are also designed to ensure that we not only continue to comply with applicable federal, state and local food safety regulations, but establish Chipotle as an industry leader in food safety.

While our food safety programs have always been carefully designed and have been in conformance with applicable industry standards, over the last year our Executive Director of Food Safety, a respected expert in the industry, has led a comprehensive assessment and enhancement of our food safety programs and practices. Components of our enhanced food safety programs include:

	supplier interventions (steps to avoid food safety risks before ingredients reach Chipotle);
	advanced technology (tools that eliminate pathogens while maintaining food quality);
	farmer support and training;
	enhanced restaurant procedures (protocols for handling ingredients and sanitizing surfaces in our restaurants);
	food safety certification;
	internal and third party restaurant inspections; and
	ingredient traceability.

These and other enhancements underscore our commitment to becoming a leader in food safety while we continue to serve high quality food that our customers love. To be sure that our food safety programs continue to evolve in ways that will help maintain leadership in this important area, we have established a Food Safety Advisory Council that is comprised of some of the nation’s foremost food safety authorities. The Food Safety Advisory Council is charged with evaluating our programs, both in practice and implementation, and advising us on ways to elevate our already high standards for food safety.

Delivering an Excellent Guest Experience

There is nothing more important than treating our guests to an excellent experience every time they visit one of our restaurants. We believe that restaurants that deliver a consistently great experience attract customers more frequently and engender greater customer loyalty. Creating an excellent guest experience starts with hiring great people, training them on our high standards, and creating great teams in our restaurants. We have identified 13 characteristics of top performing employees, and use these characteristics as a guide to help us identify the very best people for our restaurants. Then, we invest in properly training each employee so that they can seamlessly deliver an excellent experience that our guests will enjoy.  Our restaurant training focuses on the guest experience by ensuring we are serving safe and delicious food quickly, in a clean and hospitable environment.

Restaurant Team. Each restaurant typically has a general manager or Restaurateur (a position we’ve characterized as the most important in the company), an apprentice manager (in a majority of our restaurants), and we aim to have two or three hourly service managers, one or two hourly kitchen managers and an average of 23 full and part-time crew members, though our busier restaurants tend to have slightly more employees. We generally have two shifts at our restaurants, which simplifies scheduling and provides stability for our employees. We also cross-train our people so that each can work a variety of stations, allowing us to work efficiently during our busiest times, while giving our people the opportunity to develop a wider array of skills. Consistent with our emphasis on

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customer service, we encourage our general managers and crew members to welcome and interact with customers throughout the day. In addition to the employees serving our customers at each restaurant, we also have a field support system that includes apprentice team leaders, team leaders or area managers, team directors, executive team directors, executive regional directors and restaurant support officers.

Innovation. We are prioritizing the development of technological and other innovations, such as digital/mobile ordering platforms, and delivery and catering choices, that allow our guests to engage with Chipotle in whatever fashion is most convenient for them. By allowing our customers to order and receive their food in a variety of ways, we believe we can attract more customers and help encourage customers to choose us more frequently. In order to successfully deliver a great experience for customers, we are emphasizing the optimization of our second make-lines, which allow us to fulfill catering or online orders without disrupting throughput on our main service line.  We are also integrating technology into our applications that provides customers with more precise and earlier pick-up times, which help our restaurants fill digital orders more quickly and accurately, improving the experience for customers who use these platforms. Technological innovations also improve the experience of other guests by helping to improve throughput for those who choose to dine in our restaurants.  Additionally, we have enhanced our data capabilities to allow us to better identify individual customers and their unique frequency patterns, and to target our marketing and promotional efforts at the individual level. We believe the advancements we have made in this area will help us as we continue to target lapsed customers, and seek to build frequency among newer customers.

Marketing

A great dining experience in our restaurants has always been our most powerful marketing. But there is still a need to introduce our brand to new customers and engage with existing ones in other ways, by helping them understand what makes Chipotle different. Our advertising and promotional programs and in-store communications all help to communicate what differentiates Chipotle from typical fast food. Whether it’s engaging with Chipotle via our various social media channels, participating in our local events, or simply eating a burrito at one of our restaurants, each customer interaction affords us an important opportunity to build our brand. On the heels of the safety-related incidents, we redoubled our efforts to attract customers to our restaurants and to provide a restaurant experience that helps keep them as or convert them into loyal, repeat customers.  Generating new customers and enhancing customer frequency will be a central objective of our marketing efforts in 2017.

Our advertising has generally included print, outdoor, transit, and radio ads, but we also incorporate digital advertising into the mix, and conduct strategic promotions that demonstrate our commitment to our Food With Integrity philosophy while connecting us to like-minded individuals or organizations. Beyond these traditional channels, we continue to pioneer new avenues of branded content aimed at making consumers more curious about some of the issues that are important to us, and explaining why and how we are working to drive positive change in the nation’s food supply. We also have a dedicated team of field marketing staff that helps connect our restaurants to local communities through fundraisers, sponsorships and participation in local events.

Alongside our excellent restaurant teams, these efforts have helped us create considerable word-of-mouth publicity as our customers learn more about us and share with others. This approach allows us to build awareness and loyalty with relatively low advertising expenditures, even in a competitive category, and to differentiate Chipotle as a company that is committed to doing the right thing in every facet of our business.

Competition

The fast-casual, quick-service, and casual dining segments of the restaurant industry are highly competitive with respect to, among other things, taste, price, food quality and presentation, service, location, brand reputation, and the ambience and condition of each restaurant. Our competition includes a variety of restaurants in each of these segments, including locally-owned restaurants and national and regional chains. Many of our competitors offer dine-in, carry-out, catering, and delivery services. In recent years, competition has increased significantly from restaurant formats like ours that serve higher quality food, quickly and at a reasonable price.  We believe that this competition has made it more challenging to maintain or increase the frequency of customer visits, but continue to believe that Chipotle can differentiate itself with our mission to ensure that better food is accessible to everyone. 

Moreover, we may also compete with companies outside the fast-casual, quick-service, and casual dining segments of the restaurant industry. For example, competitive pressures can come from deli sections and in-store cafés of major grocery store chains, including those targeted at customers who seek higher-quality food, as well as from convenience stores, cafeterias, and other dining outlets. 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.

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Restaurant Site Selection

We believe restaurant site selection is critical to our success and growth strategy and thus we devote substantial time and effort to evaluating each potential restaurant location. Our site selection process is led by our internal team of real estate managers and also includes the use of external real estate brokers with expertise in specific markets, as well as support from an internal real estate strategy and research group. We study the surrounding trade area, demographic and business information within that area, and available information on competitors and other restaurants. Based on this analysis, including utilization of predictive modeling using proprietary formulas, we determine projected sales and targeted return on investment for each potential restaurant site. We have been successful in a number of different types of locations, such as in-line or end-cap locations in strip or power centers, in regional malls and downtown business districts, free-standing buildings, food courts, outlet centers, airports, military bases and train stations. 

Other Restaurant Concepts

We believe that the fundamental principles on which our restaurants are based – finding better ingredients, preparing them using classic techniques in front of the customer, and serving them in an interactive format with great teams dedicated to providing an excellent dining experience – can be adapted to cuisines other than the food served at Chipotle. Over the previous 5 years, we’ve explored this idea by creating new and innovative concepts such as Tasty Made, a burger concept we opened with a single restaurant in October, 2016, as well as investing in consolidated entities with partners that are developing additional concepts, such as Pizzeria Locale, a fast-casual pizza restaurant that now has seven restaurants in four states. Our first new restaurant concept was ShopHouse Southeast Asian Kitchen, which we opened in 2011 and grew to a total of 15 restaurants.  ShopHouse was not able to achieve a level of sales and profitability that made it attractive to us for future investment, and we announced in the fourth quarter of 2016 that we are exploring strategic alternatives for the concept.  In 2017, our focus will remain on thoughtfully growing the Chipotle brand. 

Information Systems

We use a variety of applications and systems to securely manage the flow of information within each restaurant, and within our centralized corporate infrastructure. The services available within our systems and applications include restaurant operations, supply chain, inventory, scheduling, training, human capital management, financial tools, and data protection services. The restaurant structure is based primarily on a point-of-sale system that operates locally at the restaurant and is integrated with other functions necessary to restaurant operations. It records sales transactions, receives out of store orders, and authorizes, batches, and transmits credit card transactions. The system also allows employees to enter time clock information and to produce a variety ofmanagement reports. Select information that is captured from this system at each restaurant is collected in the central corporate infrastructure, which enables management to continually monitor operating results.  Our online ordering system allows guests to place orders online or through our mobile app. Orders taken remotely are routed to the point-of-sales system based on the time of customer order pickup. We also continue to modernize and make investments in our information technology networks and infrastructure, specifically in our physical and technological security measures to anticipate cyber-attacks and prevent breaches, and to provide improved control, security and scalability. Enhancing the security of our financial data, customer information and other personal information remains a priority for us. 

We will continue to invest in our applications and systems to support our continued expansion. See “General Business Risks—We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer and employee information” in Item 1A. “Risk Factors,” for a discussion of risks associated with our information systems.

Employees

As of December 31, 2016, we had about 64,570 employees, including about 4,700 salaried employees and about 59,870 hourly employees. None of our employees are unionized or covered by a collective bargaining agreement.

Seasonality

Seasonal factors influencing our business are described under the heading “Quarterly Financial Data/Seasonality” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our Intellectual Property and Trademarks

“Chipotle,” “Chipotle Mexican Grill,” “Unburritable,” “Food With Integrity,” “Fresh Is Not Enough, Anymore,” “The Gourmet Restaurant Where You Eat With Your Hands,” “Responsibly Raised,” and a number of related designs and logos are U.S. registered trademarks of Chipotle. We have filed trademark applications for a number of other marks in the U.S. In addition to our U.S. registrations, we have registered trademarks for “Chipotle” and a number of other marks in Canada, the European Union and various

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other countries, and have filed trademark applications for “Chipotle Mexican Grill,” “Chipotle” and a number of other marks in various countries as well. We also believe that the design of our restaurants is our proprietary trade dress and have registered elements of our restaurant design for trade dress protection in the U.S. as well.

From time to time we have taken action against other restaurants that we believe are misappropriating our trademarks, restaurant designs or advertising. Although our policy is to protect and defend vigorously our rights to our intellectual property, we may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.

Available Information

We maintain a website at www.chipotle.com, including an investor relations section at ir.chipotle.com in which we routinely post important information, such as webcasts of quarterly earnings calls and other investor events in which we participate or host, and any related materials.  Our Code of Conduct is also available in this section of our website.  You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as other reports relating to us that are filed with or furnished to the SEC, free of charge in the investor relations section of our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.  The public may also read and copy materials we file with the SEC at the SEC’s Public Reference Room, which is located at 100 F Street, NE, Washington, DC 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The contents of the websites mentioned above are not incorporated into and should not be considered a part of this report. The references to the URLs for these websites are intended to be inactive textual references only.

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ITEM 1A. RISK FACTORS

Risks Related to our Plans to Return to Sales and Profitability Growth and Restore our Economic Model

Our sales and profitability will continue to fall well short of our past results unless we can significantly increase comparable restaurant sales, and there are material risks to our ability to do so.

In 2016 we experienced lower sales than the preceding year for the first time in our history as a public company and our average restaurant volumes have declined from $2.532 million as of September 30, 2015 to $1.868 million as of December 31, 2016.  In order to increase our sales, one of our primary goals is to increase comparable restaurant sales. Comparable restaurant sales 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 also 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 saw throughout the majority of 2016, 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 food safety incidents described below under “—We may continue to be negatively impacted by food safety incidents associated with our restaurants…”;
	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 and other dining options;
	executing our strategies effectively, including our marketing and branding strategies, our initiatives to expand the use of online and other digital ordering and increase sales from our catering options, our efforts to improve the overall quality of our customers’ experience and increase the speed at which our crews serve each customer, 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 customers 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…”;
	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 customers or other reductions in average check in response to price increases;
	weather, road construction and other factors limiting access to our restaurants; and
	changes in government regulation that may impact customer 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 experience future declines in comparable restaurant sales or that we otherwise will not achieve our targeted or expected comparable restaurant sales.  Any future 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.  Additionally, if we fail to significantly increase comparable restaurant sales in 2017 and beyond, the price of our common stock is likely to be adversely impacted.

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We may continue to be negatively impacted by food safety incidents associated with our restaurants beginning in the fourth quarter of 2015, and further instances of food-borne or localized illnesses associated with our restaurants would result in increased negative publicity and further adverse impacts on customer perceptions of our brand, which would likely result in further declines in our sales.

During late October and early November 2015, illnesses caused by E. coli bacteria were connected to a number of our restaurants, initially in Washington and Oregon, and subsequently to small numbers of our restaurants in as many as 12 other states. During the week of December 7, 2015, an unrelated incident involving norovirus was reported at a Chipotle restaurant in Brighton, Massachusetts, which worsened the adverse financial and operating impacts we experienced from the earlier E. coli incident.  As a result of these incidents and related publicity, our sales and profitability were severely impacted throughout 2016.   The significant amount of media coverage regarding these incidents, as well as the impact of social media (which was not in existence during many past food safety incidents involving other restaurant chains), in increasing the awareness of these incidents may continue to negatively impact customer perceptions of our restaurants and brand, notwithstanding the high volume of food-borne illness cases from other sources across the country every day.  As a result, it may take longer for our sales to recover than has been the case during past food safety incidents associated with other restaurant chains, and we may not fully recover all of our lost sales.

Because of customer perceptions in the wake of these food safety incidents, any future occurrence of food-borne illness associated with our restaurants—even incidents that may be considered minor at other restaurants—would likely have an even more significant negative impact on our sales and our ability to regain customers.  Although we have followed industry standard food safety protocols in the past, and over the past year have enhanced our food safety procedures to ensure that our food is as safe as it can possibly be, we may still be at a higher risk for food-borne illness occurrences 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 avoiding frozen ingredients. Additionally, no food safety protocols can completely eliminate the risk of food-borne illness in any restaurant, so our enhanced food safety protocols may not be successful in preventing an illness incident in the future.  The risk of illnesses associated with our food might also increase in connection with an expansion of our catering business or other situations in which our food is served in conditions we cannot control.  Furthermore, we have seen instances of unsubstantiated reports linking illnesses to Chipotle, and these reports have negatively impacted us.  Even if food-borne illnesses are attributed to us erroneously or arise from conditions outside of our control, the negative impact from any such illnesses is likely to be significant.

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.

We had 2,250 restaurants in operation as of December 31, 2016. We plan to increase the number of our restaurants significantly, and plan to open between 195 and 210 new restaurants in 2017. However, 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 higher interest rates;
	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 may present increased risks …” and “—Pizzeria Locale, Tasty Made and other new restaurant concepts may not contribute to our growth”;
	difficulty negotiating leases with acceptable terms;
	any shortages of construction labor or materials;
	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. We seek to hire only top-performing employees and to promote general managers from our crew, which may make it more difficult for us to staff all the restaurants we intend to open.

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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. Competition for suitable restaurant sites in our target markets can be intense, and development and leasing costs are increasing, particularly for urban locations. These factors could negatively impact our ability to manage our occupancy costs, which may adversely impact our profitability.  In addition, any of these factors may be exacerbated by economic factors, which may result in developers and contractors seeing increased demand and therefore driving our construction and leasing costs up. 

Any decision to delay or forego a significant number of new restaurant openings, or our inability to open the number of new restaurants we plan, due to any of the reasons set forth above could materially and adversely affect our growth strategy and our expected results. Moreover, as we open and operate more restaurants, our rate of expansion relative to the size of our existing restaurant base will decline, making it increasingly difficult to achieve levels of sales and profitability growth that we achieved prior to 2016.  

Our progress in opening new restaurants from quarter to quarter may also occur at an uneven rate, which may result in quarterly sales and profit growth falling short of market expectations in some periods. Similarly, our growth strategy and the substantial investment associated with the development of each new restaurant (as well as the impact of our new restaurants on the sales of our existing restaurants) may cause our operating results to fluctuate and be unpredictable or adversely affect our profits.

Our new restaurants, once opened, may not be profitable, and may adversely impact the sales of our existing restaurants.

Historically, many of our new restaurants have opened with an initial ramp-up period typically lasting 24 months or more, during which they generate sales and income below the levels at which we expect them to normalize. This is in part due to the time it takes to build a customer base in a new area, which can result in lower initial sales volumes following a restaurant’s opening.  It may also be difficult for us to attract a customer base if we are not able to staff our restaurants with top performing employees and successfully train them to deliver excellent customer experiences. If we are unable to build the customer base that we expect for new restaurant locations or overcome the higher fixed costs associated with new restaurant locations, new restaurants may not have similar results as our existing restaurants and may not be profitable.  Our new restaurant sales volumes since the fourth quarter of 2015 have also been negatively impacted by the food safety issues described elsewhere in this report.   The negative impact has been of greater relative magnitude to the impact we have seen on comparable restaurant sales, and as a result, new restaurant sales may have an even larger adverse impact on our results than they have in the past.

Our new restaurant development activity has also broadened recently to incorporate trade areas or types of restaurant sites in which we have little or no prior experience, including smaller or more economically mixed communities, highway sites, outlet centers, and restaurants in airports, food courts, or on military sites.  The risks relating to building a customer base and managing development and operating costs may be more significant in some or all of these types of trade areas or restaurant sites, which could have an unexpected negative impact on our new restaurant operating results. In addition, in the event we are not able to contain increases in our average restaurant development costs, which could result from inflation, an increase in the proportion of higher cost locations, project mismanagement or other reasons, our new restaurant locations could also result in decreased profitability.

We have also opened restaurants in nearly all major metropolitan areas across the U.S. New restaurants opened in existing markets may adversely impact sales in previously-opened restaurants in the same market as customers who frequent our established restaurants begin to visit a newly-opened restaurant instead. This impact could worsen as we open additional restaurants, and could make it more difficult for us to increase comparable restaurant sales and profitability. Existing restaurants could also make it more difficult to build the customer base for newly-opened restaurants in the same market.

Our marketing and advertising strategies may not be successful, or may pose risks that could adversely impact our business.

In an effort to reverse the downturn in our business results that began in late 2015, we significantly increased marketing and promotional expense in 2016.  For the year ended December 31, 2016, our marketing and promotional expense was 5.1% of revenue, significantly higher than the 2.1% of revenue it had averaged over the preceding three years.  In 2017 we expect to return marketing and promotional expense to levels closer to our historical practice as a percent of revenue, and doing so may adversely impact the number of customers visiting our restaurants.  If so, we may be forced to engage in additional promotional activities, including further offers for free or discounted food, which may hamper our sales and profitability.

As part of our marketing plans for 2017, we have hired a new advertising agency and media buyer, and are also introducing a new advertising campaign and media strategies, including the possibility of television advertising, which we began testing for the first time in 2016.  If our advertising campaign and new media strategies do not resonate with customers in the manner we hope, they may

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not result in increased sales, but would still increase our expenses.  Additionally, we will also continue to invest in marketing and advertising strategies that we believe will increase customers’ connection with our brand. If these marketing and advertising investments do not drive increased restaurant sales, the expense associated with these programs will adversely impact our financial results, and we may not generate the levels of comparable restaurant sales we expect.

We also plan to continue to emphasize strategies such as remote ordering and catering options in an effort to increase overall sales. These efforts may not increase our sales to the degree we expect, or at all. Catering and other out-of-restaurant sales options also introduce new operating procedures to our restaurants and we may not successfully execute these procedures, which could adversely impact the customer experience in our restaurants and thereby harm our sales and customer perceptions of our brand.

In addition, some of our marketing has incorporated elements intended to encourage customers to question sources or production methods commonly used to produce food. These elements of our marketing could alienate food suppliers and other food industry groups and may potentially lead to an increased risk of disputes or litigation if suppliers or other constituencies believe our marketing is unfair or misleading. Increased costs in connection with any such issues, or any deterioration in our relationships with existing suppliers, could adversely impact us or our reputation. Furthermore, if these messages do not resonate with our customers or potential customers, the value of our brand may be eroded.

Our expansion into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other factors.

As of December 31, 2016, 29 of our restaurants were located outside of the U.S., with 17 in Canada, 6 in the United Kingdom, 5 in France and 1 in Frankfurt, Germany. As a result of our small number of restaurants outside the U.S. and the relatively short time we have been operating those restaurants, we have lower brand awareness and less operating experience in these markets, and our average restaurant sales and/or transaction counts may be lower in these markets than in the U.S. The markets in which we’ve opened restaurants outside the U.S., and any additional new markets we enter outside the U.S. in the future, have different competitive conditions, consumer tastes and discretionary spending patterns than our U.S. markets. As a result, new restaurants outside the U.S. may be less successful than restaurants in our existing markets. Specifically, due to lower consumer familiarity with the Chipotle brand, differences in customer tastes or spending patterns, or for other reasons, sales at restaurants opened outside the U.S. may take longer to ramp up and reach expected sales and profit levels, and may never do so, thereby affecting our overall growth and profitability. We have also seen some deterioration in sales trends at our international locations since late 2015, which we believe may be attributable to expanding awareness of the food-borne illness incidents described elsewhere in this report, and those trends may make it more difficult to attract customers to our restaurants in international markets.  To build brand awareness in international markets, we may need to make greater investments in advertising and promotional activity than we originally planned, which could negatively impact the profitability of our operations in those markets.  

We may also find it more difficult in international markets to hire, train and keep top performing employees who can successfully deliver excellent customer experiences, and labor costs may be higher in international markets due to increased regulation, higher employment taxes or social benefit costs or local market conditions. In addition, restaurants outside the U.S. have had higher construction, occupancy and food costs than restaurants in existing markets, and we may have difficulty finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of ingredients meeting our quality standards. Additional costs or difficulties from any of the foregoing factors may adversely impact the operating results of our international markets. Markets outside the U.S. may also have regulatory differences with the U.S. with which we are not familiar, or that subject us to significant additional expense or to which we are not able to successfully adapt, which may have a particularly adverse impact on our sales or profitability in those markets and could adversely impact our overall results. Our overall results may also be negatively affected by currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar.

Pizzeria Locale, Tasty Made and other new restaurant concepts may not contribute to our growth.

We believe that the fundamental principles on which our restaurants are based – finding better ingredients, preparing them using classic techniques in front of the customer, and serving them in an interactive format with great teams dedicated to providing an excellent dining experience – can be adapted to cuisines other than the food served at Chipotle. In order to see how our model works when we use different ingredients and a different style of food, we opened a number of ShopHouse Southeast Asian Kitchen restaurants beginning in 2011, and one Tasty Made burger restaurant in Ohio in 2016. We also have a majority ownership interest in a company operating 7 fast casual Pizzeria Locale restaurants in Denver, Colorado, Kansas City, Missouri and Cincinnati, Ohio, and we plan to assist with the further expansion of Pizzeria Locale in the future. ShopHouse was not able to achieve a level of sales and profitability that made it attractive to us for future investment, and we announced in the fourth quarter of 2016 that we are exploring strategic alternatives for the concept. We recognized a $14.5 million non-cash impairment charge, representing substantially all of the value of long-lived assets of ShopHouse during the year ended December 31, 2016. Furthermore, Pizzeria Locale and Tasty Made are

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new brands and have lower brand awareness, lower sales and less operating experience than most Chipotle restaurants, and may also not achieve restaurant economics that make them attractive for further investment in the future.  Notwithstanding our growth plans for Tasty Made, our investment in Pizzeria Locale, and exploration of other restaurant brand opportunities, our immediate focus will remain on thoughtfully growing the Chipotle brand. As a result, we do not expect Pizzeria Locale, Tasty Made or other concepts to contribute to our growth in a meaningful way for at least the next several years.  We may also determine not to move forward with any further expansion of Tasty Made or Pizzeria Locale. These decisions would each limit our overall growth over the long term as well. Additionally, the exploration of strategic alternatives for ShopHouse, the expansion of Tasty Made or Pizzeria Locale, or investments in other restaurant concepts each might distract our management, which could have an adverse impact on our core Chipotle business.

Our failure to manage our restaurant growth effectively could harm our business and operating results.

As described elsewhere in this report, our plans call for a significant number of new restaurants. Our existing restaurant management systems, financial and management controls, information systems and personnel may be inadequate to support our expansion, and managing our growth effectively will require us to continue to enhance these systems, procedures and controls, as well as to hire, train and retain general managers, crew and corporate staff. We also are continuing to attempt to improve our field management in an effort to develop additional top-performing general managers more quickly. We may not respond quickly enough to the changing demands that our restaurant growth imposes on management, crew and existing infrastructure, and changes to our operating structure may result in increased costs or inefficiencies that we cannot currently anticipate. We have also historically placed a great deal of importance on restaurant cultures, which we believe needs to be redirected to focus more on effective training of our team to deliver excellent customer experiences. As we grow our number of restaurants, additional shifts in our cultural or operational focus may harm morale in our restaurants or prove distracting to our restaurant employees, which could adversely impact our business and operating results.

Risks Related to Operating in the Restaurant Industry

Competition could adversely affect us.

The fast-casual, quick-service and casual dining segments of the restaurant industry are highly competitive with respect to, among other things, taste, price, food quality and presentation, service, location, brand reputation, and the ambience and condition of each restaurant. Our competition includes a variety of restaurants in each of these segments, including locally owned restaurants and national and regional chains. Many of our competitors offer dine-in, carry-out and delivery services. In recent years, competition has increased significantly from restaurant formats like ours that serve higher quality food, quickly at a reasonable price.  We believe that this competition has made it more challenging to maintain or increase the frequency of customer visits. Additionally, although we continue to believe that Chipotle can differentiate itself with our mission to ensure that better food is accessible to everyone,  competitors have increasingly made claims related to the quality of their ingredients, or distinctions between artificial and natural flavors, colors and preservatives.  The increasing use of these claims in the marketplace, even if the substantive basis for some of them may be questionable, may lessen our differentiation. 

Many of our competitors have existed longer than we have and may have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. Among our main competitors are a number of multi-unit, multi-market Mexican food or burrito restaurant concepts, some of which are expanding nationally. Some of these competitors and other fast casual concepts have sought to duplicate various elements of our business operations, and more chains may copy us to varying degrees in the future. Additionally, our newer concepts, Tasty Made and Pizzeria Locale, operate in markets in which there are numerous competitors, including a number of large and well-known brands. A number of other companies or individuals in the restaurant industry have recently opened or invested in fast-casual pizza concepts or so-called “better burger” restaurants. In addition, our strategy includes opening additional restaurants in existing markets, and as we do so sales may decline in our previously-opened restaurants as customers who frequent our established restaurants begin to visit a newly-opened restaurant instead.

Several of our competitors compete by offering menu items that are specifically identified as low in carbohydrates, better for customers or otherwise targeted at particular consumer preferences. Many of our competitors in the fast-casual and quick-service segments of the restaurant industry also emphasize lower-cost, “value meal” menu options, a strategy we do not currently pursue. Our sales may be adversely affected by these and other competing products, or by price competition more generally.

Moreover, we may also compete with companies outside the fast casual and quick service and casual dining segments of the restaurant industry. For example, competitive pressures can come from deli sections and in-store cafés of several major grocery store chains, including those targeted at customers who want higher-quality food, as well as from convenience stores and other dining outlets. These competitors may have, among other things, a more diverse menu, lower operating costs and prices, better locations, better facilities, better management, more effective marketing and more efficient operations than we have.

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Any of these competitive factors may adversely affect us and reduce our sales and profits.

Our business could be adversely affected by increased labor costs or difficulties in finding and retaining top-performing employees.

Labor is a primary component of our operating costs, and we believe good managers and crew are a key part of our success. We devote significant resources to recruiting and training our general managers and crew. Increased labor costs due to factors such as competition for workers and labor market pressures, increased minimum wage requirements, paid sick leave or vacation accrual mandates, or changes in our restaurant staffing structure have, and may continue to adversely impact our operating costs. Additional taxes or requirements to incur additional employee benefits costs, including the requirements of the Patient Protection and Affordable Care Act, or the Affordable Care Act, (discussed further under “Regulatory and Legal Risks—The effect of recent changes to U.S. healthcare laws may increase our healthcare costs…”), could also adversely impact our labor costs. Moreover, if our managers do not schedule our restaurant crews efficiently, our restaurants may be overstaffed at some times, which adversely impacts our labor costs as a percentage of revenue, decreasing our operating margins.  Efficient staffing may continue to be a challenge in 2017 due to continued volatility and uncertainty in our sales trends.

In addition, our success in delivering excellent customer experiences depends substantially on the energy and skills of our employees and our ability to hire, motivate and keep qualified employees, especially general managers and crew members. Turnover among our restaurant crews and managers has been frequent, and we aim to reduce turnover in an effort to keep top performing employees and better realize our investment in training new employees. Failure to do so will adversely impact our operating results by increasing training costs and making it more difficult to deliver outstanding customer experiences. Our failure to find and keep enough high-caliber employees could also delay planned restaurant openings, which would slow our growth.

We use the “E-Verify” program, an Internet-based, free program run by the U.S. government, to verify employment eligibility for all employees throughout our company. However, use of E-Verify does not guarantee that we will successfully identify all applicants who are ineligible for employment. Although we use E-Verify and require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. Unauthorized workers may subject us to fines or penalties, and if we are found to be employing unauthorized workers, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. For example, following an audit by the Department of Homeland Security of the work authorization documents of our restaurant employees in Minnesota during 2010, we lost approximately 450 employees, resulting in a temporary increase in labor costs and disruption of our operations, including slower throughput, as we trained new employees, as well as some degree of negative publicity. The resulting broad-based civil and criminal investigations by the U.S. Attorney for the District of Columbia and U.S. Securities and Exchange Commission of our compliance with work authorization requirements and related disclosures and statements resulted in significant legal costs. Termination of a significant number of employees in specific markets or across our company due to work authorization or other regulatory issues would disrupt our operations including slowing our throughput, and could also cause additional adverse publicity and temporary increases in our labor costs as we train new employees. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. Our reputation and financial performance may be materially harmed as a result of any of these factors.  Furthermore, immigration laws have been an area of considerable political focus in recent years, and the U.S. Congress and Department of Homeland Security from time to time consider or implement changes to Federal immigration laws, regulations or enforcement programs. Further changes in immigration or work authorization laws may increase our obligations for compliance and oversight, which could subject us to additional costs and potential liability and make our hiring process more cumbersome, or reduce the availability of potential employees.

Because we do not franchise, risks associated with hiring and maintaining a large workforce, including increases in wage rates or the cost of employee benefits, compliance with laws and regulations related to the hiring, payment and termination of employees, and employee-related litigation, may be more pronounced for us than for restaurant companies at which some or all of these risks are borne by franchisees or other operating contractors.

Changes in food and supply costs could adversely affect our results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Like all restaurant companies, we are susceptible to increases in food costs as a result of factors beyond our control, such as general economic conditions, seasonal fluctuations, weather conditions, global demand, food safety concerns, generalized infectious diseases, fluctuations of the U.S. dollar, product recalls and government regulations. The cost of many basic foods for humans and animals, including corn, wheat, rice and cooking oils, has increased markedly in some years, resulting in upward pricing pressures on almost all of our raw ingredients including chicken, beef, tortillas and rice. In 2016, a significant spike in avocado prices from September to November adversely impacted our food costs for the third and fourth quarters, and there could be similar or greater pricing pressure on key ingredients

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during 2017.  Costs have increased from the enhanced food safety procedures described elsewhere in this report. Additionally, a substantial volume of produce items are grown in Mexico and other countries, and some of our meats and restaurant supplies are sourced from outside the U.S. as well.  Any new or increased import duties, tariffs or taxes, or other changes in U.S. trade or tax policy, could result in higher food and supply costs that would adversely impact our financial results.

We could also be adversely impacted by price increases specific to meats raised in accordance with our sustainability and animal welfare criteria or other food items we buy as part of our Food With Integrity focus, the markets for which are generally smaller and more concentrated than the markets for food products that are conventionally raised and grown. Weather related issues, such as freezes or drought, may also lead to temporary spikes in the prices of some ingredients such as produce or meats. For instance, drought conditions in parts of the U.S. resulted in significant increases in beef prices during 2014 and 2015. Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price or availability of some of our ingredients. Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef, cheese, avocados, beans, rice, tomatoes and pork, would adversely affect our operating results. Alternatively, in the event of cost increases with respect to one or more of our raw ingredients, we may choose to temporarily suspend serving menu items, such as guacamole or one or more of our salsas, rather than paying the increased cost for the ingredients. Any such changes to our available menu may negatively impact our restaurant traffic and comparable restaurant sales, and could also have an adverse impact on our brand.

Food scares could adversely affect customer perceptions of, or the price or availability of, ingredients we use to prepare our food, which may adversely impact our sales.

Past reports linking nationwide or regional incidents of food-borne illnesses such as salmonella, E. coli, hepatitis A, listeria or norovirus to certain produce items have caused us to temporarily suspend serving some ingredients in our foods or to otherwise alter our menu, and have resulted in consumers avoiding certain products for a period of time. Similarly, outbreaks of avian flu, incidents of “mad cow” disease, or similar concerns have also caused consumers to avoid any products that are, or are suspected of being, affected. These problems, and injuries caused by food tampering have had in the past, and could have in the future, an adverse effect on the price and availability of affected ingredients. A decrease in customer traffic as a result of these health concerns or negative publicity, or as a result of a change in our menu or dining experience or a temporary closure of any of our restaurants due to the types of food scares described above, would further adversely impact our restaurant sales and profitability. In addition, if we react to these problems by changing our menu or other key aspects of the Chipotle experience, we may lose customers who do not accept those changes, and may not be able to attract enough new customers to generate sufficient revenue to make our restaurants profitable. Customers may also shift away from us if we choose to pass along to consumers any higher ingredient or operating costs resulting from supply problems or operational changes associated with incidents of food-borne illnesses, which would also have a negative impact on our sales and profitability.

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

As a result of the food safety incidents described elsewhere in this report, we have implemented a number of enhancements to our food safety protocols to ensure that our food is as safe as it can be.  Many of our enhanced procedures, which go beyond the industry-standard food safety practices that we were previously following, increase the cost of some ingredients or the amount of labor required to prepare and serve our food.  If we aren’t able to sufficiently increase sales to offset the increased costs resulting from these changes, our margins will fall well short of levels we have historically achieved.  Even if we were to restore sales to levels we were achieving prior to the fourth quarter of 2015, the increased costs from these changes are likely to result in lower margins than we were able to achieve in the past.

Additionally, some of the enhanced food safety procedures we have introduced or may introduce in the future rely on increased use of centralized food preparation, additional in-restaurant preparation steps, or new ingredients, some or all of which may be inconsistent with previous customer perceptions of our restaurant operations.  To the extent customers perceive any of these developments as a move away from our Food With Integrity strategy and/or towards a more traditional fast food experience, our ability to win back customers may be adversely impacted and our sales may decline or recover more slowly than they otherwise would have.

Failure to receive frequent deliveries of higher-quality food ingredients and other supplies meeting our specifications could harm our operations.

Our ability to maintain our menu depends in part on our ability to acquire ingredients that meet our specifications from reliable suppliers. Shortages or interruptions in the supply of ingredients caused by unanticipated demand, problems in production or distribution, food contamination (which we may detect more frequently under the microbiological testing protocols we’ve recently

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introduced), inclement weather, a supplier ceasing operations or deciding not to follow our required protocols, or other conditions could adversely affect the availability, quality and cost of our ingredients, which could harm our operations. In particular, shortages of one or more of our menu items could force our restaurants to remove items from their menus, which may result in customers choosing to eat elsewhere.  If that happens, our affected restaurants could experience significant reductions in sales during the menu item shortage, and potentially thereafter if customers do not return to us after the shortage is resolved. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe to us than at other restaurants.

For many of our food ingredients and other supplies we do not have long-term contracts with suppliers, and we have relied largely on a third party distribution network with a limited number of distribution partners. If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are disrupted for any reason, the risk of ingredient shortages may increase and our business, financial condition, results of operations or cash flows could be adversely affected. We currently depend on a limited number of suppliers for some of our key ingredients, including beef, pork, chicken, tofu, beans, rice, sour cream, cheese, and tortillas. Due to the unique nature of the products we receive from our Food With Integrity suppliers and as described in more detail below under “Risks Related to Our Unique Business Strategy—Our Food With Integrity philosophy subjects us to risks,” these suppliers could be more difficult to replace if we were no longer able to rely on them. If we have to seek new suppliers and service providers, we may be subject to pricing or other terms less favorable than those we currently enjoy. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu.  If that were to happen and customers change their dining habits as a result, affected restaurants could experience significant reductions in sales during the shortage or thereafter.  Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe.

In the first quarter of 2015, through our ongoing auditing of suppliers, we identified a pork supplier that was not meeting our standards and suspended purchases of pork from this supplier. Without this supply, we did not have enough pork meeting our specifications for all of our restaurants and a large number of our restaurants were not serving carnitas for a number of months during 2015.  We believe our comparable restaurant sales were adversely impacted as a result, as customers chose to eat elsewhere rather than substituting a different one of our menu items for carnitas.

Changes in customer tastes and preferences, spending patterns and demographic trends could cause sales to decline.

Changes in customer preferences, general economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing restaurants affect the restaurant industry. Our sales could be impacted by changes in consumer preferences in response to dietary concerns, including preferences regarding items such as calories, sodium, carbohydrates or fat. These changes could result in consumers avoiding our menu items in favor of other foods, and our focus on a limited menu could make the consequences of a change in consumer preferences more severe than our competitors may face. Some customers could also avoid freshly-prepared foods like those we serve, based on concerns regarding food safety.  This may be more likely to impact us as a result of the widely-publicized food safety incidents we experienced in 2015.

Our success also depends to a significant extent on consumer confidence, which is influenced by general economic conditions and discretionary income levels. Our average restaurant sales may decline during economic downturns or periods of uncertainty, which can be caused by various factors such as high unemployment, increasing taxes, interest rates, or other changes in fiscal or monetary policy, high gasoline prices, declining home prices, tight credit markets or foreign political or economic unrest. Any material decline in consumer confidence or a decline in family “food away from home” spending could cause our sales, operating results, profits, business or financial condition to decline. If we fail to adapt to changes in customer preferences and trends, we may lose customers and our sales may deteriorate.

If we were to experience widespread difficulty renewing existing leases on favorable terms, our revenue or occupancy costs could be adversely affected.

We lease substantially all of the properties on which we operate restaurants, and some of our leases are due for renewal or extension options in the next several years. Some leases are subject to renewal at fair market value, which could involve substantial increases, and a smaller number expire without any renewal option. While we currently expect to pursue the renewal of substantially all of our expiring restaurant leases, any difficulty renewing a significant number of such leases, or any substantial increase in rents associated with lease renewals, could adversely impact us. If we have to close any restaurants due to difficulties in renewing leases, we would lose revenue from the affected restaurants and may not be able to open suitable replacement restaurants. Conversely, substantial increases in rents associated with lease renewals would increase our occupancy costs, reducing our restaurant margins.

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Risks Related to our Unique Business Strategy

We may not persuade customers of the benefits of paying our prices for higher-quality food.

Our success depends in large part on our ability to persuade customers that food made with higher-quality ingredients is worth the prices they will pay at our restaurants relative to prices offered by some of our competitors, particularly those in the quick-service restaurant segment. We may not successfully educate customers about the quality of our food, and customers may not care even if they do understand our approach. That could require us to change our pricing, advertising or promotional strategies, which could materially and adversely affect our results of operations or the brand identity that we have tried to create. Additionally, it will likely be more difficult for us to persuade the public about the quality and value of our food following the food-borne illnesses we experienced in 2015 and the associated deterioration of customer perceptions about our brand, and we cannot predict when those perceptions will improve, if ever.  If customers are not persuaded that we offer a good value for their money, our restaurant transaction counts could be adversely affected, which would negatively impact our business results.

Our Food With Integrity philosophy subjects us to risks.

The principle of Food With Integrity constitutes a significant part of our business strategy. We use a substantial amount of ingredients grown or raised with an emphasis on practices we believe to be more sustainable or responsible than some conventional practices, and we try to make our food as fresh as we can. We do, however, face challenges associated with pursuing Food With Integrity philosophy. There are higher costs and other risks associated with purchasing ingredients grown or raised with an emphasis on quality, sustainability and other responsible practices. Growth rate and weight gain can be lower for chickens, cattle and pigs that are not fed sub-therapeutic antibiotics and for cattle that are not given growth hormones. Crops grown organically or using other responsible practices can take longer to grow and crop yields can be lower. It can take longer to identify and secure relationships with suppliers that are able to meet our criteria for meat, dairy and produce ingredients. Given the costs associated with what we believe are more responsible farming practices, as well as uncertainty regarding demand due to changing customer perceptions, economic trends and other factors, many large suppliers have not found it economical to pursue business in this area. Although all of our restaurants generally serve meat from animals raised in accordance with criteria we’ve established in an effort to improve sustainability and promote animal welfare, we may experience shortages of meat meeting these criteria due to suppliers suspending production, market conditions, or other forces beyond our control. In the first quarter of 2015, through our ongoing auditing of suppliers, we identified a pork supplier that was not meeting our standards and suspended purchases of pork from this supplier. Without this supply, we did not have enough pork meeting our specifications for all of our restaurants and a large number of our restaurants were not serving carnitas for a number of months during 2015.  We believe our comparable restaurant sales were adversely impacted as a result.  We have experienced shortages of beef or chicken meeting our protocols on a periodic basis over the past several years as well, resulting in our serving commodity beef and chicken, which may have a negative impact on customer perceptions of our brand.

If as a result of any of the factors described above we are unable to obtain a sufficient and consistent supply of our preferred ingredients on a cost-effective basis, our food costs could increase, adversely impacting our operating margins. These factors could also cause us difficulties in aligning our brand with our Food With Integrity philosophy, which could make us less popular among our customers and cause sales to decline. Our commitment to the Food With Integrity philosophy may also leave us open to actions against us or criticism from special interest groups whose ideas regarding food issues differ from ours or who believe we should pursue different or additional goals with our Food With Integrity approach. Any adverse publicity that results from such criticism could damage our brand and adversely impact customer traffic at our restaurants. We may also face adverse publicity or liability for false advertising claims if suppliers do not adhere to all of the elements of our Food With Integrity programs, such as responsible meat protocols, requirements for organic or sustainable growing methods, our use of non-GMO ingredients in our food, and similar criteria on which we base our purchasing decisions. If any such supplier failures occur and are publicized, our reputation would be harmed and our sales may be adversely impacted. And our Food With Integrity message may result in customers holding us to a higher standard in terms of food safety as well, which may make it more difficult for us to recover from the food-borne illness incidents discussed elsewhere in this report, as customers who believe we failed to uphold our own standards may decline to return to our restaurants as frequently or at all.

Additionally, in response to increasing customer awareness and demand, some competitors have also begun to advertise their use of meats raised without the use of antibiotics or growth hormones, dairy products from cows not treated with rBGH, and other ingredients similar to those we seek as part of our Food With Integrity philosophy. If competitors become known for using these types of higher-quality or more sustainable ingredients, it could further limit our supply of these ingredients, and may make it more difficult for us to differentiate Chipotle and our restaurants, which could adversely impact our operating results.

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Our success may depend on the continued service and availability of key personnel, and recent changes in our management team may adversely impact us.

Our Chairman and Chief Executive Officer Steve Ells founded our company, has been the principal architect of our business strategy, and has led our growth from a single restaurant in 1993 to over 2,000 restaurants today.  Monty Moran, who served as our co-Chief Executive Officer for over 11 years before announcing his retirement in December 2016, and Jack Hartung, our Chief Financial Officer, have also served with us since early in our company’s history, and much of our growth has occurred under their direction as well. Additionally, Mark Crumpacker, our Chief Marketing and Development Officer, who has played a role in our marketing and branding efforts for many years and who has been an executive officer since joining us full time in January 2009, has been instrumental in formulating strategies to help us regain customers following the sales declines we experienced throughout 2016.  Curt Garner, who joined us as Chief Information Officer in November 2015, has had a key role in developing and executing our digital/mobile ordering platforms and strategy, and we believe these and other technology innovations will become increasingly important in helping us return to sales and profitability growth.  We believe our executive officers, each of whom is an at-will employee without any employment contract, have created an employee culture, food culture and business strategy at our company that has been critical to our success and that may be difficult to replicate under another management team. We also believe that it may be difficult to locate and retain executive officers who are able to grasp and implement our unique strategic vision. Monty Moran’s resignation from the co-Chief Executive Officer position in connection with his planned retirement was the first change in our executive officer team in a number of years. If our company culture or operations were to deteriorate following this or other changes in leadership, or if a new management team were to be unsuccessful in executing our strategy or were to change important elements of our current strategy, our growth prospects or future operating results may be adversely impacted. 

Regulatory and Legal Risks

Governmental regulation in one or more of the following areas may adversely affect our existing and future operations and results, including by harming our ability to open new restaurants or increasing our operating costs.

Employment and Immigration Regulations

We are subject to various federal and state laws governing our relationship with and other matters pertaining to our employees, including 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 and anti-discrimination laws. Complying with these rules subjects us to substantial expense and can be cumbersome, and can also expose us to liabilities from claims for non-compliance. For example, a number of lawsuits have been filed against us alleging violations of federal and state laws regarding employee wages and payment of overtime, meal and rest breaks, employee classification, employee record-keeping and related practices with respect to our employees. We incur legal costs to defend, and we could suffer losses from, these and similar cases, and the amount of such losses or costs could be significant. In addition, several states and localities in which we 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 requirements and these changes could increase our labor costs. In addition, see “—The effect of recent changes to U.S. healthcare laws may increase our healthcare costs…” below for a discussion of risks related to recent changes in U.S. healthcare laws.

We also are audited from time to time for compliance with work authorization requirements, and audit activity and federal criminal and civil investigations in this area are described in more detail above under “Risks Related to Operating in the Restaurant Industry—Our business could be adversely affected by increased labor costs or difficulties in finding and retaining top-performing employees,” as well as in Note 10. “Commitments and Contingencies” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Unauthorized workers may subject us to fines or penalties, and if any of our workers are found to be unauthorized our business may be disrupted as we try to replace lost workers with additional qualified employees. On the other hand, in the event we wrongfully reject work authorization documents, or if our compliance procedures are found to have a disparate impact on a protected class such as a racial minority or based on the citizenship status of applicants, we could be found to be in violation of anti-discrimination laws. We could experience adverse publicity arising from enforcement activity related to work authorization compliance, anti-discrimination compliance, or both, that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. Moreover, in addition to the criminal and civil investigations mentioned above under “Risks Related to Operating in the Restaurant Industry—Our business could be adversely affected by increased labor costs or difficulties in finding and retaining top-performing employees,” the office of the U.S. Attorney for the District of Columbia and the U.S. Securities and Exchange Commission investigated us for possible criminal and civil securities law violations relating to our employee work authorization compliance and related disclosures and statements as well. Any potential future investigations in this area may be expensive and distracting, and could subject us to fines, reputational damage, and other liabilities that could be significant.

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Additionally, while we do not currently have any unionized employees, 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 union organized, our labor costs could increase and our efforts to maintain a culture appealing only to top-performing employees could be impaired. Potential changes in labor laws, including the possible passage of legislation designed to make it easier for employees to unionize, could increase the likelihood of some or all of our employees being subjected to greater organized labor influence, and could have an adverse effect on our business and financial results by imposing requirements that could potentially increase our costs, reduce our flexibility and impact our employee culture.

Americans with Disabilities Act and Similar State Laws

We are subject to the U.S. Americans with Disabilities Act, or ADA, and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas. We have incurred substantial legal fees in connection with ADA-related complaints in the past, and we may in the future have to modify restaurants, for example by adding access ramps or redesigning certain architectural features, to provide service to or make reasonable accommodations for disabled persons under these laws. The expenses associated with these modifications, or any damages, legal fees and costs associated with litigating or resolving claims under the ADA or similar state laws, could be material.

Nutrition and Food Regulation

In recent years, there has been an increased legislative, regulatory and consumer focus at the federal, state and municipal levels on the food industry including nutrition and advertising practices. Restaurants operating in the quick-service and fast-casual segments have been a particular focus. For example, the State of California, New York City and a number of other jurisdictions around the U.S. have adopted regulations requiring that chain restaurants include calorie information on their menu boards or make other nutritional information available, and nation-wide nutrition disclosure requirements included in the U.S. health care reform law are scheduled to go into effect on May 5, 2017. These nutrition disclosure requirements may increase our expenses or slow customers as they move through the line, decreasing our throughput. These initiatives may also change customer buying habits in a way that adversely impacts our sales, and could subject us to liability if we make errors in calculating or disclosing the required information.

Privacy/Cybersecurity

We are required to collect and maintain personal information about our employees, and we collect information about customers as part of some of our marketing programs as well. The collection and use of such information is regulated at the federal and state levels, and by the European Union and its member states, and the regulatory environment related to information security and privacy is evolving and increasingly demanding. At the same time, we are relying increasingly on cloud computing and other technologies that result in third parties holding significant amounts of customer or employee information on our behalf. If our security and information systems or those of outsourced third party providers we use to store or process such information are compromised, or if we or such third parties otherwise fail to comply with these laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected from these types of security breaches or regulatory violations, which could impair our sales or ability to attract and keep qualified employees. Additional risks related to cybersecurity are described below under “General Business Risks-We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer and employee information.”

Local Licensure, Zoning and Other Regulation

Each of our restaurants is also subject to state and local licensing and regulation by health, alcoholic beverage, sanitation, food and workplace safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses or approvals for new restaurants, which could delay planned restaurant openings. In addition, stringent and varied requirements of local regulators with respect to zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations.

Environmental Laws

We are subject to federal, state and local environmental laws and regulations concerning the discharge, storage, handling, release and disposal of hazardous or toxic substances, as well as local ordinances restricting the types of packaging we can use in our restaurants. We have not conducted a comprehensive environmental review of our properties or operations. We have, however, conducted investigations of some of our properties and identified contamination caused by third-party operations. We believe any such contamination has been or should be addressed by the third party. If the relevant third party does not address or has not addressed the identified contamination properly or completely, then under certain environmental laws, we could be held liable as an owner or

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operator to address any remaining contamination, sometimes without regard to whether we knew of, or were responsible for, the release or presence of hazardous or toxic substances. Any such liability could be material. Further, we may not have identified all of the potential environmental liabilities at our properties, and any such liabilities could have a material adverse effect on our operations or results of operations. We also cannot predict what environmental laws will be enacted in the future, how existing or future environmental laws will be administered or interpreted, or the amount of future expenditures that we may need to make to comply with, or to satisfy claims relating to, environmental laws.

Other Aspects of Regulatory Risk

From time to time we are the target of litigation in connection with various laws and regulations that cover our business. Much of this litigation occurs in California even though currently only about 17% of our restaurants are located there. As we continue to expand in California, or if we are not able to effectively manage the increased litigation risks and expenses we have experienced in California, our business may be adversely impacted to a greater extent than if we did not operate in, or minimized our operations in, California.

Because we do not franchise, the costs of compliance and other risks associated with government regulation of our business, as described above, may be more pronounced for us than for restaurant companies at which some or all of these risks are borne by franchisees or other operating contractors.

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

We are facing ongoing government investigations into the food safety incidents that occurred in 2015, including the criminal investigation described in Note 10. “Commitments and Contingencies” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”  We also have received numerous claims from customers who were or claim to have been impacted by these incidents, and a number of those claimants have filed lawsuits against us.  We are cooperating in the government investigations and with many of the customers impacted by these incidents, but will incur significant legal and other costs in doing so. We have also been sued in a shareholder class action lawsuit in connection with the decline in our stock price in the wake of the food safety incidents, and defending this lawsuit will subject us to significant legal expense.  Additionally, the liabilities from customer claims and related litigation expenses may be greater than we anticipate due to the uncertainties inherent in litigation.  All of these costs, liabilities and expenses will negatively impact our operating results. Moreover, publicity regarding any legal proceedings related to food safety incidents may increase or prolong consumer awareness of the incidents or otherwise negatively impact perceptions of our brand, which may hamper our ability to regain lost sales or attract new customers to our restaurants.

The effect of recent changes to U.S. healthcare laws may increase our healthcare costs and negatively impact our financial results.

We offer eligible full-time and part-time U.S. employees the opportunity to enroll in healthcare coverage subsidized by us. For various reasons, many of our eligible employees currently choose not to participate in our healthcare plans. However, under the comprehensive U.S. health care reform law enacted in 2010, the Affordable Care Act, changes that became effective in 2014, and especially the employer mandate and employer penalties that became effective January 1, 2015, may increase our labor costs significantly in future years.  In 2015, we adopted a qualifying plan under the Affordable Care Act for our full-time hourly employees. Changes under the Affordable Care Act, including the imposition of a penalty on individuals who do not obtain healthcare coverage, may result in employees who are currently eligible but have not elected to participate in our healthcare plans increasingly finding it advantageous to do so, which may increase our healthcare costs in the future, which may further increase our healthcare expenses. It is also possible that even in light of recent changes in the healthcare plans we offer, healthcare plans offered by other companies with which we compete for employees will make us less attractive to our current or potential employees. And in any event, implementing the requirements of the Affordable Care Act has imposed some additional administrative costs on us, and those costs may increase over time. The costs and other effects of these new healthcare requirements cannot be determined with certainty, but they may have a material adverse effect on our financial and operating results.

We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us to material money damages and other remedies.

We’re subject to numerous claims alleging violations of federal and state laws regarding workplace and employment matters, including wages, work hours, overtime, vacation and family leave, discrimination, wrongful termination, and similar matters, and we could become subject to class action or other lawsuits related to these or different matters in the future. Our customers also occasionally file complaints or lawsuits against us alleging that we’re responsible for some illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality, operations or our food related disclosure or advertising practices.

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See “—Governmental regulation in one or more of the following areas may adversely affect our existing and future operations and results, including by harming our ability to open new restaurants or increasing our operating costs” above, for additional discussion of these types of claims. From time to time, we also face claims alleging that technology we use in our business infringes patents held by third parties. In addition, the restaurant industry has been subject to a growing number of claims based on the nutritional content of food products sold and disclosure and advertising practices. We have been subject to a number of these actions and may be subject to additional actions of this type in the future. We are also undergoing government investigations and have been sued in a shareholder class action lawsuit, each as described elsewhere in this report, including in Note 10. “Commitments and Contingencies” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data,” and these matters may be particularly expensive to defend and/or resolve.

We believe the number of many of the foregoing types of claims has increased as our business has grown and we have become more visible to potential plaintiffs and their lawyers, particularly in California. Regardless of whether any claims against us are valid, or whether we’re ultimately held liable for such claims, they may be expensive to defend and may divert time and money away from our operations and hurt our performance. A significant judgment for any claims against us could materially and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations, whether directed at us or at fast casual or quick-service restaurants generally, may also materially and adversely affect our reputation or prospects, which in turn could adversely affect our results.

General Business Risks

We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer and employee information.

We accept electronic payment cards for payment in our restaurants. During 2016 approximately 70% of our sales were attributable to credit and debit card transactions, and credit and debit card usage could continue to increase. A number of retailers have experienced actual or potential security breaches in which credit and debit card information may have been stolen, including a number of highly publicized incidents with well-known retailers in recent years. In August 2004, the merchant bank that processed our credit and debit card transactions informed us that we may have been the victim of a possible theft of card data. As a result, we recorded losses and related expenses totaling $4.3 million from 2004 through 2006.

We may in the future become subject to additional claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings in the future relating to these types of incidents. Proceedings related to theft of credit or debit card information may be brought by payment card providers, banks and credit unions that issue cards, cardholders (either individually or as part of a class action lawsuit) and federal and state regulators. Any such proceedings could distract our management from running our business and cause us to incur significant unplanned losses and expenses. Consumer perception of our brand could also be negatively affected by these events, which could further adversely affect our results and prospects. The liabilities resulting from any of the foregoing would likely be far greater than the losses we recorded in connection with the data breach incident in 2004.

We also are required to collect and maintain personal information about our employees, and we collect information about customers as part of some of our marketing programs as well. The collection and use of such information is regulated at the federal and state levels, and by the European Union and its member states, and the regulatory environment related to information security and privacy is increasingly demanding. At the same time, we are relying increasingly on cloud computing and other technologies that result in third parties holding significant amounts of customer or employee information on our behalf. We have seen an increase over the past several years in the frequency and sophistication of attempts to compromise the security of several of these systems. If the security and information systems that we or our outsourced third party providers use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with these laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected from these types of security breaches or regulatory violations, which could impair our sales or ability to attract and keep qualified employees.

Negative publicity relating to our restaurants or our company could adversely impact our reputation, which may significantly harm us.

We depend significantly on customers’ perception of and connection to our brand. In addition to the damage to our reputation from well-publicized food safety incidents during 2015 as described elsewhere in this report, we may experience negative publicity from time to time relating to food quality, customer complaints, restaurant facilities, advertising and other business practices, litigation alleging injuries or improper employee practices, government investigations or other regulatory issues, our suppliers’ potential failure to adhere to elements of our Food With Integrity protocols, other issues regarding the integrity of our suppliers’ food processing,

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employee relationships, customer or employee data breaches, or other matters, regardless of whether the allegations are valid or whether we are held to be responsible. The negative impact of adverse publicity relating to one or more restaurants or any of the foregoing topics may extend far beyond the restaurant(s) involved and affect many more, or even all, of our restaurants. The considerable expansion in the use of social media over recent years can further amplify any negative publicity that may be generated. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own operations. And even publicity that could reasonably be viewed as positive may have adverse consequences on our business.  For example, positive developments in regards to the food safety issues that have impacted us might have the effect of continuing or increasing customer awareness of the issue.

The adverse impact of publicity on customers’ perception of us could have a further negative impact on our sales. If the impact of any such publicity is particularly long-lasting, the value of our brand may suffer and our ability to grow could be diminished. Additionally, negative publicity about our employment practices may affect our reputation among employees and potential employees, which could make it more difficult for us to attract and retain top-performing employees. That could adversely impact the quality of the customer experience we can offer and our operations generally, and may increase our labor costs as well.

Our insurance coverage and self-insurance reserves may not cover future claims.

We maintain various insurance policies for employee health, worker’s compensation, general liability, property damage and auto liability. We are self-insured for our employee health plans but have third party insurance coverage to limit exposure for both individual and aggregate claim costs. We are also responsible for losses up to a certain limit for worker’s compensation, general liability, property damage, employment practices liability and auto liability insurance.  

For policies under which we are responsible for losses, we record a liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions, and is closely monitored and adjusted when warranted by changing circumstances. Our history of claims experience is relatively short and our significant growth during most of our operating history could affect the accuracy of estimates based on historical experience. If a greater amount of claims occurs compared to what we estimated, or if medical costs increase beyond what we expected, our accrued liabilities might not be sufficient and we may be required to record additional expense. Unanticipated changes may also produce materially different amounts of expense than reported under these programs, which could adversely impact our results of operations.  It is also possible that losses covered under one or more of our insurance policies may exceed the applicable policy limits, which would subject us to unexpected additional liabilities in an amount that could be significant enough to have a material adverse effect on our financial position.

We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.

Our ability to successfully implement our business plan depends in part on our ability to further build brand recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including our name and logos, our Food With Integrity strategy and the unique ambience of our restaurants. If our efforts to protect our intellectual property are inadequate, or if any third party misappropriates or infringes on our intellectual property, either in print or on the internet, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance. We are aware of restaurants in foreign jurisdictions using menu items, logos and other branding that we believe are based on our intellectual property, and our ability to halt these restaurants from using these elements may be limited in jurisdictions in which we are not operating. This could have an adverse impact on our ability to successfully expand into other jurisdictions in the future. We may also encounter claims from prior users of similar intellectual property in areas where we operate or intend to conduct operations. This could harm our image, brand or competitive position and cause us to incur significant penalties and costs.

Our quarterly results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.

Our quarterly results may fluctuate significantly and could fail to meet the expectations of securities analysts and investors because of factors including:

	changes in comparable restaurant sales and customer visits, including as a result of perceptions about our brand, competition, changes in consumer confidence or discretionary spending, and other factors listed in these Risk Factors;
	additional negative publicity about the occurrence of food-borne illnesses, the ingredients we use, or other problems at our restaurants;

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	fluctuations in supply costs, particularly for our most significant food items, including increased ingredient costs as a result of changes we’ve made to enhance the safety of our food;
	labor availability and wages of restaurant management and crew, as well as temporary fluctuations in labor costs as a result of large-scale changes in workforce;
	increases in marketing or promotional expenses as we introduce new marketing programs and strategies, or increased spending on existing marketing programs in an effort to drive sales;
	our ability to raise menu prices without adversely impacting customer traffic, particularly if food and labor costs were to increase;
	the timing of new restaurant openings and related revenues and expenses;
	operating costs at newly opened restaurants, which are often materially greater during the first several months of operation;
	the impact of inclement weather, natural disasters and other calamities, such as freezes that have impacted produce crops and droughts that have impacted livestock and the supply of certain meats;
	variations in general economic conditions, including the impact of declining interest rates on our interest income;
	increases in infrastructure costs;
	litigation, settlement costs and related legal expense;
	tax expenses, impairment charges and non-operating costs; and
	potential distraction or unusual expenses associated with our expansion into international markets or initiatives to expand new concepts.

Seasonal factors also cause our results to fluctuate from quarter to quarter. Our restaurant sales are typically lower during the winter months and the holiday season and during periods of inclement weather (because fewer people are eating out) and higher during the spring, summer and fall months (for the opposite reason). Our restaurant sales will also vary as a result of the number of trading days—that is, the number of days in a quarter when a restaurant is open.

As a result of these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year. Average restaurant sales or comparable restaurant sales in any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors, which could cause our stock price to fall. This risk may continue to be a greater concern during 2017, as the expectations of analysts and investors of a recovery in our business results may be higher than any level of recovery that we do actually achieve.

Additionally, we believe the market price of our common stock, which has generally traded at a higher price-earnings ratio than stocks of most or all of our peer companies, has typically reflected high market expectations for our future operating results. The trading market for our common stock has been volatile at times as well, including during 2016. As a result, if we fail to meet market expectations for our operating results in the future, any resulting decline in the price of our common stock could be significant.

Our anti-takeover provisions may delay or prevent a change in control of us, which could adversely affect the price of our common stock.

Certain provisions in our corporate documents and Delaware law may delay or prevent a change in control of us, which could adversely affect the price of our common stock. Our amended and restated certificate of incorporation and amended and restated bylaws contain some provisions that may make the acquisition of control of us without the approval of our board of directors more difficult, including provisions relating to the nomination, election and removal of directors, the structure of the board of directors and limitations on actions by our shareholders. In addition, Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders.

ITEM  1B.UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

As of December 31, 2016, there were 2,250 restaurants operated by Chipotle and our consolidated subsidiaries, 2,227 of which were Chipotle restaurants. The table below sets forth the locations (by state or country) of all restaurants in operation.
Alabama	12
Arizona	78
Arkansas	6
California	384
Colorado	76
Connecticut	22
Delaware	6
District of Columbia	23
Florida	135
Georgia	44
Idaho	7
Illinois	130
Indiana	34
Iowa	11
Kansas	26
Kentucky	18
Louisiana	8
Maine	5
Maryland	82
Massachusetts	50
Michigan	31
Minnesota	61
Missouri	37
Montana	3
Nebraska	9
Nevada	25
New Hampshire	6
New Jersey	50
New Mexico	4
New York	127
North Carolina	45
North Dakota	1
Ohio	168
Oklahoma	11
Oregon	26
Pennsylvania	73
Rhode Island	7
South Carolina	20
Tennessee	18
Texas	181
Utah	10
Vermont	1
Virginia	89
Washington	35
West Virginia	5
Wisconsin	19
Wyoming	2
Canada	17
France	5
Germany	1
United Kingdom	6
Total	2,250

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We categorize our restaurants as end-caps (at the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing, or other. Of our restaurants in operation as of December 31, 2016, we had 1,396 end-cap locations, 370 free-standing units, 346 in-line locations, and 138 other locations. The average restaurant size is about 2,500 square feet and seats about 57 people. Many of our restaurants also feature outdoor patio space.

Our main office is located at 1401 Wynkoop Street, Suite 500, Denver, Colorado, 80202 and our telephone number is (303) 595-4000. We lease our main office and substantially all of the properties on which we operate restaurants. For additional information regarding the lease terms and provisions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations,” as well as Note 8. “Leases” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”

We own 17 properties and operate restaurants on all of them.

ITEM  3.            LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 10. “Commitments and Contingencies” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”

ITEM  4.            MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM  5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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

	High		Low
2015
First Quarter	$	727.97	$	647.28
Second Quarter	$	699.03	$	598.04
Third Quarter	$	758.61	$	597.33
Fourth Quarter	$	757.00	$	477.97
	High		Low
2016
First Quarter	$	542.50	$	399.14
Second Quarter	$	473.17	$	384.77
Third Quarter	$	444.13	$	386.10
Fourth Quarter	$	440.00	$	352.96

As of January 26, 2017, there were approximately 1,233 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.

Purchases of Equity Securities by the Issuer

The table below reflects shares of common stock we repurchased during the fourth quarter of 2016.

		Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
October		49,969	$	403.18	49,969	$	149,060,523
	Purchased 10/1 through 10/31
November		57,640	$	391.17	57,640	$	126,513,735
	Purchased 11/1 through 11/30
December		62,268	$	384.56	62,268	$	102,567,759
	Purchased 12/1 through 12/31
Total		169,877	$	392.28	169,877	$	102,567,759

(1)Shares were repurchased pursuant to a repurchase program announced on May 11, 2016.

(2)This column includes $100 million in authorized repurchases announced on October 25, 2016, but does not include an additional $100 million in authorized repurchases announced on January 10, 2017.  Our authorized repurchase programs have no expiration date, but may be modified, suspended, or discontinued at any time.

Dividend Policy

We are not required to pay any dividends and have not declared or paid any cash dividends on our common stock. We intend to continue to retain earnings for use in the operation and expansion of our business and to repurchase shares of common stock (subject to market conditions), and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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COMPARISON OF CUMULATIVE TOTAL RETURN

The following graph compares the cumulative annual stockholders return on our common stock from December 31, 2011 through December 31, 2016 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, 2011. In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of our common stock. This graph is not “soliciting material,” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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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 (in thousands, except per share data).

		Year ended December 31,
	2016		2015		2014		2013		2012
Statement of Income:
Revenue	$	3,904,384	$	4,501,223	$	4,108,269	$	3,214,591	$	2,731,224
Food, beverage and packaging costs		1,365,580		1,503,835		1,420,994		1,073,514		891,003
Labor costs		1,105,001		1,045,726		904,407		739,800		641,836
Occupancy costs		293,636		262,412		230,868		199,107		171,435
Other operating costs		641,953		514,963		434,244		347,401		286,610
General and administrative expenses		276,240		250,214		273,897		203,733		183,409
Depreciation and amortization		146,368		130,368		110,474		96,054		84,130
Pre-opening costs		17,162		16,922		15,609		15,511		11,909
Loss on disposal of assets		23,877		13,194		6,976		6,751		5,027
Total operating expenses		3,869,817		3,737,634		3,397,469		2,681,871		2,275,359
Income from operations		34,567		763,589		710,800		532,720		455,865
Interest and other income (expense), net		4,172		6,278		3,503		1,751		1,820
Income before income taxes		38,739		769,867		714,303		534,471		457,685
Provision for income taxes		(15,801)		(294,265)		(268,929)		(207,033)		(179,685)
Net income	$	22,938	$	475,602	$	445,374	$	327,438	$	278,000
Earnings per share
Basic	$	0.78	$	15.30	$	14.35	$	10.58	$	8.82
Diluted	$	0.77	$	15.10	$	14.13	$	10.47	$	8.75
Weighted average common shares outstanding
Basic		29,265		31,092		31,038		30,957		31,513
Diluted		29,770		31,494		31,512		31,281		31,783
		December 31,
	2016		2015		2014		2013		2012
Balance Sheet Data:
Total current assets	$	522,374	$	814,647	$	859,511	$	653,095	$	537,745
Total assets	$	2,026,103	$	2,725,066	$	2,527,317	$	1,996,068	$	1,659,805
Total current liabilities	$	281,793	$	279,942	$	245,710	$	199,228	$	186,852
Total liabilities	$	623,610	$	597,092	$	514,948	$	457,780	$	413,879
Total shareholders’ equity	$	1,402,493	$	2,127,974	$	2,012,369	$	1,538,288	$	1,245,926

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. Factors that might cause such differences include those described in Item 1A. “Risk Factors” and elsewhere in this report.

Overview

Steve Ells, our founder, Chairman and CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls, and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in an interactive style allowing people to get what they want. Chipotle seeks out extraordinary ingredients that are not only fresh, but that are raised responsibly, with respect for the animals, land, and people who produce them. Chipotle prepares its food using whole, unprocessed ingredients and without the use of added colors, flavors or other additives typically found in fast food. Chipotle opened with a single restaurant in Denver in 1993 and as of December 31, 2016, operated 2,250 restaurants.

Our focus during 2017 is to return to sales and profitability growth and restore our restaurant economic model.  To do so, we have a renewed focus on ensuring that every guest in every one of our restaurants is provided with an excellent customer experience.  

2016 Highlights and Trends

Operating Results. Our sales and profitability were adversely impacted throughout 2016 as a result of a number of food-borne illness incidents associated with Chipotle restaurants in as many as 15 states, which were widely reported during the fourth quarter of 2015 and the first quarter of 2016.  Our comparable restaurant sales trends have improved sequentially for each quarter during 2016 as shown below:

	2016
		Mar. 31	Jun. 30	Sep. 30	Dec. 31	Full year
Comparable restaurant sales declines		(29.7%)	(23.6%)	(21.9%)	(4.8%)	(20.4%)
Impact of deferred revenue on comparable restaurant sales		-	-	(0.8%)	0.5%	(0.1%)

Our sales comparisons were lapping an easier compare in the fourth quarter due to lower sales levels in November and December 2015 as a result of the food-borne illness incidents. Comparable restaurant sales decreases were driven primarily by a 14.4% decrease in the number of transactions for the full year 2016, and to a lesser extent by decreases in average check. Comparable restaurant sales represent the change in period-over-period sales for restaurants beginning in their 13th full calendar month of operation. Average restaurant sales were $1.868 million as of December 31, 2016, decreasing from $2.424 million as of December 31, 2015. We define average restaurant sales as the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months. 

During the full year 2016, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) as a percent of revenue increased 13.3% as compared to the full year 2015. About 6.2% of the increase was attributable to sales deleveraging, while incremental marketing and promotional spend aimed at regaining our customers, combined with additional labor to support the sales promotions, contributed about 3.1% to the increase. Additionally, as part of our response to the food-borne illness incidents, we have implemented enhanced food safety procedures in our supply chain and restaurants that have increased our food costs as a percentage of revenue.  We anticipate that the ongoing impact of the enhanced food safety procedures on our food costs as a percentage of revenue will be approximately 1% compared to pre-crisis levels. 

Restaurant Development. As of December 31, 2016, we had 2,250 restaurants in operation, including 2,198 Chipotle restaurants throughout the United States, with an additional 29 international Chipotle restaurants and 23 non-Chipotle restaurants that were consolidated into our financial results. We opened 240 restaurants in 2016, net of relocations and closures, which contributed $156.2 million to revenue.  In the fourth quarter of 2016, we announced that we were exploring strategic alternatives for our 15 ShopHouse Southeast Asian Kitchen restaurants, and as a result, we recognized a non-cash impairment charge of $14.5 million.

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Stock Repurchases. In accordance with stock repurchases authorized by our Board of Directors, we purchased shares of our common stock during 2016 with an aggregate total repurchase price of $813.9 million. As of December 31, 2016,  $102.6 million was available for stock repurchases under the authorizations announced on May 11, 2016 and October 25, 2016.  On January 10, 2017, we also announced authorizations by our Board of Directors of up to an additional $100 million in common stock repurchases. We have entered into an agreement with a broker under SEC rule 10b5-1(c), authorizing the broker to make open market purchases of common stock from time to time, subject to market conditions. The existing repurchase agreement and the Board’s authorizations of the repurchases may be modified, suspended, or discontinued at any time.

Management and Governance Enhancements. In the fourth quarter of 2016, we announced that our Board of Directors named Steve Ells as our sole chief executive officer, and that Monty Moran, formerly our co-Chief Executive Officer, had stepped down from his officer and board positions and will retire effective June 9, 2017.  On December 19, 2016, we also announced the appointment of four new members to our Board of Directors, two of whom were nominated by Pershing Square Capital Management, L.P., which, together with its affiliates, we believe to be our largest shareholder.

2017 Outlook

Sales. We are targeting comparable restaurant sales increases in the high single digits for the full year 2017 as comparisons become easier in the first half of 2017, and based on our plans to attract more customers with a variety of marketing activities and improvements to our digital ordering platforms, and by improving the quality of the customer experience we provide in our restaurants.

Restaurant Operating Costs.  We expect to reduce restaurant level operating costs as a percent of revenue for the full year 2017. Our expectation is based in part on the increased sales we are anticipating and the resulting leverage in fixed operating costs, but we are forecasting additional improvements as well.  We expect food, beverage and packaging costs to decrease as a percent of revenue due to relief in avocado prices and more efficient food management. We also believe that other operating expenses will decline compared to 2016 as we reduce marketing and promotional spend as a percent of revenue from the elevated levels of 2016, although we still plan for these expenses in 2017 to be above historical levels. 

Other Expense Items and Restaurant Development Plans.  We expect that general and administrative expenses will increase in 2017 due to higher non-cash stock-based compensation expense and higher bonuses, although underlying general and administrative expenses for the year should remain relatively consistent with 2016.  The expected increase in stock based compensation is primarily a result of lower expense in 2016 due to an expense reversal for performance-based stock awards that did not vest, as well as higher expense in 2017 due to a planned retention award for non-executive employees and broadening the group of non-executive employees eligible for awards.  We expect to realize cost efficiencies in the development of our restaurants in 2017 by simplifying our restaurant design, and choosing real estate sites, such as end-caps, that can more easily and cost-efficiently be converted into Chipotle restaurants.  We intend to open between 195 and 210 restaurants for the full year 2017. Most of our 2017 restaurant openings are planned in markets that are proven or already have a Chipotle presence established.

Tax Rates. We expect the 2017 full year effective tax rate to be between 39.0% and 39.5%. However, as discussed in Note 1. “Description of Business and Summary of Significant Accounting Policies,” included in Item 8. “Financial Statements and Supplementary Data” the adoption of ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718)” will subject our tax rate to quarterly volatility from the effect of stock award exercise and vesting activities.

Restaurant Openings, Relocations and Closures

The following table details restaurant unit data for the years indicated.

	Year ended December 31,
	2016	2015	2014
Beginning of period	2,010	1,783	1,595
Openings	243	229	192
Relocations/closures	(3)	(2)	(4)
Total restaurants at end of period	2,250	2,010	1,783

Results of Operations

Our results of operations as a percentage of revenue and period-over-period variances are discussed in the following section.

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Revenue

	Year ended December 31,						% increase/ (decrease)	% increase/ (decrease)
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Revenue	$	3,904.4	$	4,501.2	$	4,108.3	(13.3%)	9.6%
Average restaurant sales	$	1.868	$	2.424	$	2.472	(22.9%)	(1.9%)
Comparable restaurant sales		(20.4%)		0.2%		16.8%
Number of restaurants as of the end of the period		2,250		2,010		1,783	11.9%	12.7%
Number of restaurants opened in the period, net of relocations/closures		240		227		188

In 2016,  the decrease in revenue was attributable to a decline in comparable restaurant sales, partially offset by new restaurant openings.Comparable restaurant sales decreased $914.7 million while revenue from restaurants not yet in the comparable restaurant base contributed $323.9 million, of which $156.2 million was attributable to restaurants opened in 2016. 

In 2015,  increased revenuewas primarily driven by new restaurant openings. Revenue from restaurants not yet in the comparable base contributed $390.4 million of the increase in sales in 2015, of which $183.6 million was attributable to restaurants opened during 2015.

Food, Beverage and Packaging Costs

	Year ended December 31,						% decrease	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Food, beverage and packaging	$	1,365.6	$	1,503.8	$	1,421.0	(9.2%)	5.8%
As a percentage of revenue		35.0%		33.4%		34.6%

Food, beverage and packaging costs increased as a percentage of revenue in 2016 primarily due toincreased waste and costs related to new food safety procedures as well as higher avocado prices, partially offset by relief in beef prices.  In dollar terms, food, beverage and packaging costs decreased in 2016 due to lower sales. 

Food, beverage and packaging costs decreased as a percentage of revenue in 2015 primarily due to the benefit of the nation-wide menu price increases taken in the second quarter of 2014 and relief in dairy and avocado costs. The decrease was partially offset by inflation on beef costs.

Labor Costs

	Year ended December 31,						% increase	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Labor costs	$	1,105.0	$	1,045.7	$	904.4	5.7%	15.6%
As a percentage of revenue		28.3%		23.2%		22.0%

Labor costs as a percentage of revenue increased in 2016 due primarily to sales deleveraging and wage inflation, partially offset by labor efficiencies resulting from fewer managers and crew in each of our restaurants.  Although we incurred additional costs to staff our restaurants for sales promotions during 2016, those incremental costs were offset by the improvement from 2015 when we incurred scheduling inefficiencies as a result of reporting challenges from a system change in early 2015. Labor costs increased in dollar terms for the year ended December 31, 2016 due to staffing needs for new restaurants.  

Labor costs as a percentage of revenue increased in 2015 compared to full year 2014 due primarily to wage inflation and an increased number of crew and managers in each of our restaurants caused by scheduling inefficiencies occurring earlier in the year.

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Occupancy Costs

	Year ended December 31,						% increase	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Occupancy costs	$	293.6	$	262.4	$	230.9	11.9%	13.7%
As a percentage of revenue		7.5%		5.8%		5.6%

Occupancy costs as a percentage of revenue increased in 2016 primarily due to lower average restaurant sales on a partially fixed-cost base. Occupancy costs increased in dollar terms for the year ended December  31, 2016, primarily due to costs associated with new restaurants.

In 2015, occupancy costs increased as a percentage of revenue primarily due to higher average rents for new locations.  

Other Operating Costs

	Year ended December 31,						% increase	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Other operating costs	$	642.0	$	515.0	$	434.2	24.7%	18.6%
As a percentage of revenue		16.4%		11.4%		10.6%

Other operating costs include, among other items, marketing and promotional costs, bank and credit card fees, and restaurant utilities and maintenance costs. Other operating costs increased as a percentage of revenue in 2016 due primarily to higher marketing and promotional expense as well as sales deleveraging.We increased our marketing and promotional spend in an effort to regain customers, which contributed $98.2 million to the increase.

Other operating costs increased as a percentage of revenue in 2015 due primarily to a change in the classification of kitchen gloves out of food, beverage, and packaging costs beginning in 2015, and higher marketing and promotional costs. 

General and Administrative Expenses

	Year ended December 31,						% increase	% decrease
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
General and administrative expense	$	276.2	$	250.2	$	273.9	10.4%	(8.6%)
As a percentage of revenue		7.1%		5.6%		6.7%

The increase in general and administrative expenses in dollar terms for 2016 primarily resulted from increased legal expense, higher payroll costs as we grew, and expenses associated with our biennial All Managers’ Conference held during 2016, partially offset bylowerbonus expense and travel costs. 

The decrease in general and administrative expenses in dollar terms in 2015 primarily resulted from decreased non-cash stock-based compensation expense, lower bonus expense, and decreased expense associated with our biennial All Managers’ Conferenceheld during 2014, partially offset by higher payroll costs as we grew.  Stock-based compensation expense decreased $39.4 million primarily due to a change in the structure of our executive compensation, as well as a decrease in our estimate of non-vested performance stock awards that we expect to vest.

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Depreciation and Amortization

	Year ended December 31,						% increase	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Depreciation and amortization	$	146.4	$	130.4	$	110.5	12.3%	18.0%
As a percentage of revenue		3.7%		2.9%		2.7%

Depreciation and amortization increased as a percentage of revenue in 2016 due tosales deleveraging.The increase in dollar terms was due primarily to depreciation and amortization costs associated with new restaurants. 

In 2015, depreciation and amortization increased as a percentage of revenue due to reinvestment costs for our restaurants as they age.  

Loss on Disposal of Assets

	Year ended December 31,						% increase	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Loss on disposal and impairment of assets	$	23.9	$	13.2	$	7.0	81.0%	89.1%
As a percentage of revenue		0.6%		0.3%		0.2%

Loss on disposal and impairment of assets increased in 2016primarily due toa non-cash impairment charge of $14.5 million to write-down substantially all of the value of the long-lived assets of our ShopHouse restaurants.  

Loss on disposal of assets increased in 2015 due to impairment charges resulting from an internally developed software program that we chose not to implement and related hardware, the discontinued use of certain kitchen equipment, as well as restaurant relocations. 

Income Tax Provision

	Year ended December 31,						% decrease	% increase
	2016		2015		2014		2016 over 2015	2015 over 2014
	(dollars in millions)
Provision for income taxes	$	15.8	$	294.3	$	268.9	(94.6%)	9.4%
Effective tax rate		40.8%		38.2%		37.6%

The 2016 effective tax rate was higher due to a higher state tax rate, not qualifying for the federal research and development tax credit in 2016, and non-deductible items on overall lower pre-tax operating income. The 2015 effective tax rate was higher than 2014 due primarily to 2014 benefiting from filing the 2013 tax returns, which included a non-recurring change in the estimate of usable employer credits.

Quarterly Financial Data/Seasonality

The following table presents data from the consolidated statement of income and comprehensive income for each of the eight quarters in the period ended December 31, 2016. The operating results for any quarter are not necessarily indicative of the results for any subsequent quarter. Results from the quarter ended December 31, 2015 and for each quarter in 2016 include the impact of the food-borne illness incidents described elsewhere in this report.

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	2016 Quarters Ended
	March 31		June 30		September 30		December 31
Revenue	$	834.5	$	998.4	$	1,037.0	$	1,034.6
Operating income (loss)	$	(46.6)	$	40.9	$	9.7	$	30.6
Net income (loss)	$	(26.4)	$	25.6	$	7.8	$	16.0
Number of restaurants opened in the quarter, net of relocations/closures		56		58		54		72
Comparable restaurant sales increase (decrease)		(29.7%)		(23.6%)		(21.9%)		(4.8%)
	2015 Quarters Ended
	March 31		June 30		September 30		December 31
Revenue	$	1,089.0	$	1,197.8	$	1,216.9	$	997.5
Operating income	$	197.8	$	227.4	$	234.8	$	103.6
Net income	$	122.6	$	140.2	$	144.9	$	67.9
Number of restaurants opened in the quarter, net of relocations/closures		49		48		53		79
Comparable restaurant sales increase (decrease)		10.4%		4.3%		2.6%		(14.6%)

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 the adverse publicity that we saw beginning in the fourth quarter of 2015 around food-borne illness incidents associated with our restaurants, as well as fluctuations in food or packaging costs or the timing of menu price increases. 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, the number of new restaurants opened in a quarter, anticipated and unanticipated events. New restaurants typically have lower margins following opening as a result of the expenses associated with opening new restaurants and their operating inefficiencies in the months immediately following opening. In addition, unanticipated events also impact our results. 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

Our primary liquidity and capital requirements are for new restaurant construction, working capital and general corporate needs. As of December 31, 2016, we had a cash and short-term investment balance of $417.7 million that we expect to utilize, along with cash flow from operations, to provide capital to support the growth of our business (primarily through opening restaurants), to repurchase additional shares of our common stock subject to market conditions, to maintain our existing restaurants and for general corporate purposes. As of December 31, 2016, there was $102.6 million remaining available under repurchase authorizations previously approved by our Board of Directors.  On January 10, 2017 we announced authorizations by our Board of Directors of up to an additional $100 million in common stock repurchases.  We also have a long term investments balance of $125.1 million, which consists of U.S. treasury notes with maturities of up to 15 months. We believe that cash from operations, together with our cash and investment balances, will be enough to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future.

We haven’t required significant working capital because customers generally pay using cash or credit and debit cards and because our operations do not require significant receivables, nor do they require significant inventories due, in part, to our use of various fresh ingredients. In addition, we generally have the right to pay for the purchase of food, beverage and supplies some time after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support our growth.

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One of our primary uses of cash is in new restaurant development. Our total capital expenditures for 2016 were $258.8 million, and we expect to incur capital expenditures of about $224 million in 2017, of which about $170 million relates to our construction of new restaurants before any reductions for landlord reimbursements, and the remainder primarily relates to restaurant reinvestments, information technology and infrastructure initiatives, and other corporate expenses. Our expected reduction in capital expenditures is due to fewer planned restaurant openings and lower average investment costs per restaurant in 2017. In 2016, we spent on average about $880,000 in development and construction costs per restaurant, or about $790,000 net of landlord reimbursements of $90,000.  For new restaurants to be opened in 2017, we anticipate average development costs will decrease due to cost savings initiatives.

Contractual Obligations

Our contractual obligations as of December 31, 2016 were as follows:

	2016
	Total		1 year		2-3 years		4-5 years		After 5 years
	(in thousands)
Operating leases	$	3,682,979	$	264,911	$	537,995	$	521,132	$	2,358,941
Deemed landlord financing	$	3,895	$	423	$	846	$	885	$	1,741
Other contractual obligations(1)	$	301,623	$	232,014	$	69,609	$	-	$	-
Total contractual cash obligations	$	3,988,497	$	497,348	$	608,450	$	522,017	$	2,360,682

(1)We enter into various purchase obligations in the ordinary course of business. Those that are binding primarily relate to amounts owed for orders related to produce and other ingredients and supplies, construction contractor and subcontractor agreements, orders submitted for equipment for restaurants under construction, and marketing initiatives and corporate sponsorships.

The majority of our restaurants and administrative office leases are non-cancelable obligations. Our leases generally have initial terms of either five to ten years with two or more five-year extensions, for end-cap and in-line restaurants, or 10 to 15 years with several five-year extensions, for free-standing restaurants. Our leases generally require us to pay a proportionate share of real estate taxes, insurance, common charges and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds, although we generally do not expect to pay significant contingent rent on these properties based on the thresholds in those leases.

Off-Balance Sheet Arrangements

As of December 31, 2016 and 2015, we had no off-balance sheet arrangements or obligations.

Inflation

The primary areas of our operations affected by inflation are food, labor, healthcare costs, fuel, utility costs, materials used in the construction of our restaurants, and insurance. Although a significant majority of our crew members make more than the federal and applicable state and local minimum wage, increases in the applicable federal or state minimum wage may have an impact on our labor costs by causing wage inflation above the minimum wage level. Additionally, many of our leases require us to pay property taxes, maintenance, utilities and insurance, all of which are generally subject to inflationary increases. In the past we have largely been able to offset inflationary increases with menu price increases. There have been, and there may be in the future, delays in implementing such menu price increases. If we do raise menu prices in the future, general competitive pressures may limit our ability to completely recover cost increases attributable to inflation.

Critical Accounting Estimates

We describe our significant accounting policies in Note 1. “Description of Business and Summary of Significant Accounting Policies” and Note  6. “Stock Based Compensation” of our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” 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 believe that of our critical accounting estimates, the following involve a higher degree of judgement and subjectivity:

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Leases

We lease nearly all of our restaurant locations. Our leases typically contain escalating rentals over the lease term as well as optional renewal periods. We have estimated that our lease term, including reasonably assured renewal periods, is the lesser of the lease term or 20 years.  We account for our leases by recognizing rent expense on a straight-line basis over the reasonably assured lease term. The majority of our leasehold improvements are also depreciated over the reasonably assured lease term.  If the estimate of our reasonably assured lease term was changed, our depreciation and rent expense could differ materially.

Stock-based Compensation

We recognize compensation expense for equity awards over the vesting period based on the award’s fair value. We use the Black-Scholes valuation model to determine the fair value of our stock-only stock appreciation rights, or SOSARs, and we use the Monte Carlo simulation model to determine the fair value of stock awards that contain market conditions. Both of these models require assumptions to be made regarding our stock price volatility, the expected life of the award and expected dividend rates. The volatility assumption was based on our historical data and implied volatility, and the expected life assumptions were based on our historical data. Similarly, the compensation expense of performance share awards, and SOSARs with performance-based vesting conditions is based in part on the estimated probability of our achieving levels of performance associated with particular levels of payout for performance shares and with vesting for performance SOSARs. We determine the probability of achievement of future levels of performance by comparing the relevant performance level with our internal estimates of future performance. Those estimates are based on a number of assumptions, and different assumptions may have resulted in different conclusions regarding the probability of our achieving future levels of performance relevant to the payout levels for the awards. Had we arrived at different assumptions of stock price volatility or expected lives of our SOSARs, or different assumptions regarding the probability of our achieving future levels of performance with respect to performance share awards and performance SOSARs, our stock-based compensation expense and results of operations could have been different.  Awards that contain service, performance and market conditions ultimately vest based on Chipotle’s relative performance versus a restaurant industry peer group in the annual averages of revenue growth, net income growth, and total shareholder return. Our estimates of Chipotle’s future performance and the future performance of the restaurant industry peer group are assumptions that involve a high degree of subjectivity. If we had arrived at different assumptions for revenue growth or net income for Chipotle or the peer group, our stock-based compensation expense and results of operations could have been different. 

Insurance Liability

We maintain various insurance policies for workers’ compensation, general liability and auto damage with varying deductibles as high as $1 million per incident, and for property which generally has a $1.5 million per incident deductible. We are self-insured for employee health but have third party insurance coverage to limit exposure to these claims. We record a liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions, and is closely monitored and adjusted when warranted by changing circumstances. Our history of claims experience is relatively short and our significant growth during most of our operating history could affect the accuracy of estimates based on historical experience. If a greater amount of claims occurs compared to what we have estimated, or if medical costs increase beyond what we expected, our accrued liabilities might not be sufficient and we may be required to record additional expense. Actual claims experience could also be more favorable than estimated, which would result in expense reductions. Unanticipated changes may produce materially different amounts of expense than that reported under these programs. The total estimated insurance liabilities as of December 31, 2016 were $49.4 million.

Reserves/Contingencies for Litigation and Other Matters

We are involved in various claims and legal actions that arise in the ordinary course of business. These actions are subject to many uncertainties, and we cannot predict the outcomes with any degree of certainty. Consequently, we were unable to estimate the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of December 31, 2016. Although we have recorded liabilities related to a number of legal actions, our estimates used to determine the amount of these liabilities may not be accurate, and there are other legal actions for which we have not recorded a liability.  As a result, in the event legal actions for which we have not accrued a liability or for which our accrued liabilities are not accurate are resolved, such resolution may affect our operating results and cash flows. 

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ITEM  7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Price Risks

We are exposed to commodity price risks. Many of the ingredients we use to prepare our food, our packaging materials, as well as utilities to run our restaurants are commodities or ingredients that are affected by the price of other commodities, exchange rates, foreign demand, weather, seasonality, production, availability and other factors outside our control. We work closely with our suppliers and use a mix of forward pricing protocols under which we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing protocols under which we agree on a fixed price with our supplier for the duration of that protocol, and formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of the goods, such as spot prices. However, a majority of the dollar value of goods purchased by us is effectively at spot prices. Generally our pricing protocols with suppliers can remain in effect for periods ranging from one to 24 months, depending on the outlook for prices of the particular ingredient. In several cases, we have minimum purchase obligations. We’ve tried to increase, where necessary, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign demand, weather, crises and other world events that may affect our ingredient prices. Increases in ingredient prices could adversely affect our results if we choose for competitive or other reasons not to increase menu prices at the same rate at which ingredient costs increase, or if menu price increases result in customer resistance.

Changing Interest Rates

We are also exposed to interest rate risk through fluctuations of interest rates on our investments. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. As of December 31, 2016, we had $500.5 million in investments and interest-bearing cash accounts, including insurance-related restricted trust accounts classified in other assets, and $37.6 million in accounts with an earnings credit we classify as interest income, which combined earned a weighted average interest rate of 0.71%.

Foreign Currency Exchange Risk

A portion of our operations consist of activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. However, a substantial majority of our operations and investment activities are transacted in the U.S. and therefore our foreign currency risk is not material at this date.

37

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	39
Consolidated Balance Sheet as of December 31, 2016 and 2015	40
Consolidated Statement of Income and Comprehensive Income for the years ended December 31, 2016, 2015 and 2014	41
Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2016, 2015 and 2014	42
Consolidated Statement of Cash Flows for the years ended December 31, 2016, 2015 and 2014	43
Notes to Consolidated Financial Statements	44

38

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Chipotle Mexican Grill, Inc.

We have audited the accompanying consolidated balance sheets of Chipotle Mexican Grill, Inc. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chipotle Mexican Grill, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 6, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Denver, Colorado

February 6, 2017

39

CHIPOTLE MEXICAN GRILL, INC.

CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)

	December 31,
	2016		2015
Assets
Current assets:
Cash and cash equivalents	$	87,880	$	248,005
Accounts receivable, net of allowance for doubtful accounts of $259 and $1,176 as of December 31, 2016 and 2015, respectively		40,451		38,283
Inventory		15,019		15,043
Prepaid expenses and other current assets		44,080		39,965
Income tax receivable		5,108		58,152
Investments		329,836		415,199
Total current assets		522,374		814,647
Leasehold improvements, property and equipment, net		1,303,558		1,217,220
Long term investments		125,055		622,939
Other assets		53,177		48,321
Goodwill		21,939		21,939
Total assets	$	2,026,103	$	2,725,066
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	78,363	$	85,709
Accrued payroll and benefits		76,301		64,958
Accrued liabilities		127,129		129,275
Total current liabilities		281,793		279,942
Deferred rent		288,927		251,962
Deferred income tax liability		18,944		32,305
Other liabilities		33,946		32,883
Total liabilities		623,610		597,092
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2016 and 2015, respectively		-		-
Common stock $0.01 par value, 230,000 shares authorized, and 35,833 and 35,790 shares issued as of December 31, 2016 and 2015, respectively		358		358
Additional paid-in capital		1,238,875		1,172,628
Treasury stock, at cost, 7,019 and 5,206 common shares at December 31, 2016 and 2015, respectively		(2,049,389)		(1,234,612)
Accumulated other comprehensive income (loss)		(8,162)		(8,273)
Retained earnings		2,220,811		2,197,873
Total shareholders' equity		1,402,493		2,127,974
Total liabilities and shareholders' equity	$	2,026,103	$	2,725,066

See accompanying notes to consolidated financial statements.

40

CHIPOTLE MEXICAN GRILL, INC.

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

	Year ended December 31,
	2016		2015		2014
Revenue	$	3,904,384	$	4,501,223	$	4,108,269
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		1,365,580		1,503,835		1,420,994
Labor		1,105,001		1,045,726		904,407
Occupancy		293,636		262,412		230,868
Other operating costs		641,953		514,963		434,244
General and administrative expenses		276,240		250,214		273,897
Depreciation and amortization		146,368		130,368		110,474
Pre-opening costs		17,162		16,922		15,609
Loss on disposal and impairment of assets		23,877		13,194		6,976
Total operating expenses		3,869,817		3,737,634		3,397,469
Income from operations		34,567		763,589		710,800
Interest and other income, net		4,172		6,278		3,503
Income before income taxes		38,739		769,867		714,303
Provision for income taxes		(15,801)		(294,265)		(268,929)
Net income	$	22,938	$	475,602	$	445,374
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments		(1,291)		(6,322)		(2,049)
Unrealized gain (loss) on investments, net of income taxes of $(849),  $946, and $0		1,402		(1,522)		-
Other comprehensive income (loss), net of income taxes		111		(7,844)		(2,049)
Comprehensive income	$	23,049	$	467,758	$	443,325
Earnings per share:
Basic	$	0.78	$	15.30	$	14.35
Diluted	$	0.77	$	15.10	$	14.13
Weighted average common shares outstanding:
Basic		29,265		31,092		31,038
Diluted		29,770		31,494		31,512

See accompanying notes to consolidated financial statements.

41

CHIPOTLE MEXICAN GRILL, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands)

	Common Stock					Treasury Stock					Accumulated Other Comprehensive Income (Loss)
	Shares	Amount		Additional Paid-In Capital		Shares	Amount		Retained Earnings		Available-for-Sale Securities			Foreign Currency Translation	Total
Balance, December 31, 2013	35,245	$	352	$	919,840	4,212	$	(660,421)	$	1,276,897	$	-		1,620	$	1,538,288
Stock-based compensation					97,618											97,618
Stock plan transactions and other	149		2		(193)											(191)
Excess tax benefit on stock-based compensation					21,667											21,667
Acquisition of treasury stock						155		(88,338)								(88,338)
Net income										445,374						445,374
Other comprehensive income (loss), net of income tax														(2,049)		(2,049)
Balance, December 31, 2014	35,394	$	354	$	1,038,932	4,367	$	(748,759)	$	1,722,271	$	-		(429)	$	2,012,369
Stock-based compensation					59,465											59,465
Stock plan transactions and other	396		4		(211)											(207)
Excess tax benefit on stock-based compensation					74,442											74,442
Acquisition of treasury stock						839		(485,853)								(485,853)
Net income										475,602						475,602
Other comprehensive income (loss), net of income tax												(1,522)		(6,322)		(7,844)
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
Stock-based compensation					65,112											65,112
Stock plan transactions and other	43		-		(185)											(185)
Excess tax benefit on stock-based compensation					1,320											1,320
Acquisition of treasury stock						1,813		(814,777)								(814,777)
Net income										22,938						22,938
Other comprehensive income (loss), net of income tax												1,402		(1,291)		111
Balance, December 31, 2016	35,833	$	358	$	1,238,875	7,019	$	(2,049,389)	$	2,220,811	$	(120)	$	(8,042)	$	1,402,493

See accompanying notes to consolidated financial statements.

42

CHIPOTLE MEXICAN GRILL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

	Year ended December 31,
	2016		2015		2014
Operating activities
Net income	$	22,938	$	475,602	$	445,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		146,368		130,368		110,474
Deferred income tax (benefit) provision		(14,207)		11,666		(20,671)
Loss on disposal and impairment of assets		23,877		13,194		6,976
Bad debt allowance		(262)		(23)		9
Stock-based compensation expense		64,166		57,911		96,440
Excess tax benefit on stock-based compensation		(1,320)		(74,442)		(21,667)
Other		(604)		582		104
Changes in operating assets and liabilities:
Accounts receivable		(1,923)		(3,504)		(10,966)
Inventory		(91)		262		(2,307)
Prepaid expenses and other current assets		(4,259)		(5,259)		(658)
Other assets		(4,855)		(5,619)		1,071
Accounts payable		(6,734)		19,525		2,168
Accrued liabilities		33,491		(7,440)		35,019
Income tax payable/receivable		54,340		32,756		8,831
Deferred rent		37,030		32,911		27,025
Other long-term liabilities		1,287		4,826		4,845
Net cash provided by operating activities		349,242		683,316		682,067
Investing activities
Purchases of leasehold improvements, property and equipment		(258,842)		(257,418)		(252,590)
Purchases of investments		-		(559,372)		(521,004)
Maturities of investments		45,000		352,650		254,750
Proceeds from sale of investments		540,648		-		-
Net cash provided by (used in) investing activities		326,806		(464,140)		(518,844)
Financing activities
Acquisition of treasury stock		(837,655)		(460,675)		(88,338)
Excess tax benefit on stock-based compensation		1,320		74,442		21,667
Stock plan transactions and other financing activities		52		(207)		(66)
Net cash used in financing activities		(836,283)		(386,440)		(66,737)
Effect of exchange rate changes on cash and cash equivalents		110		(4,196)		(224)
Net change in cash and cash equivalents		(160,125)		(171,460)		96,262
Cash and cash equivalents at beginning of year		248,005		419,465		323,203
Cash and cash equivalents at end of year	$	87,880	$	248,005	$	419,465
Supplemental disclosures of cash flow information
Income taxes paid	$	23,862	$	248,547	$	280,687
Increase (decrease) in purchases of leasehold improvements, property, and equipment accrued in accounts payable and accrued liabilities	$	(1,781)	$	(2,870)	$	9,424
Increase (decrease) in acquisition of treasury stock accrued in accrued liabilities	$	(22,878)	$	25,178	$	-

See accompanying notes to consolidated financial statements.

43

CHIPOTLE MEXICAN GRILL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollar and share amounts in thousands, unless otherwise specified)

1. Description of Business and Summary of Significant Accounting Policies

Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (collectively the “Company”) develops and operates restaurants that serve a focused menu of burritos, tacos, burrito bowls and salads, made using fresh, high-quality ingredients. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States as well as 29 international Chipotle restaurants and 23 non-Chipotle restaurants. The Company transitioned the management of its operations from nine to eleven regions during 2016 and aggregates its operations to one reportable segment.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, including wholly and majority owned subsidiaries. All intercompany balances and transactions have been eliminated.

Management Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.

Revenue Recognition

The Company recognizes revenue, net of discounts and incentives, when payment is tendered at the point of sale.  The Company recognizes 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.   These costs are recognized in other operating costs in the consolidated statement of income and comprehensive income and in accrued liabilities in the consolidated balance sheet.  The Company reports revenue net of sales-related taxes collected from customers and remitted to governmental taxing authorities.

During the year ended December 31, 2016, the Company introduced a limited-time frequency program that awarded free food or merchandise to customers based on frequency of monthly visits. The Company deferred revenue reflecting the portion of original sales allocated to the rewards that were earned by program participants and not redeemed at the end of the year, and recorded a corresponding liability in accrued liabilities on its consolidated balance sheet. The portion of revenue allocated to the rewards was based on the estimated value of the award earned and takes into consideration company-specific historical redemption patterns for similar promotions.  Rewards expire according to the loyalty awards terms and conditions. The Company recognizes revenue when awards are redeemed or expire.

The Company sells gift cards which do not have an expiration date and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when: (i) the gift card is redeemed by the customer; or (ii) the Company determines 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. The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. Gift card breakage is recognized in revenue as the gift cards are used on a pro rata basis over a six-month period beginning at the date of the gift card sale and is included in revenue in the consolidated statement of income and comprehensive income. The Company has determined that 4% of gift card sales will not be redeemed and will be retained by the Company. Breakage recognized during the years ended December 31, 2016, 2015 and 2014 was $3,624, $4,226 and $3,146, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally-insured limits.  The Company has not experienced any losses related to these balances and believes the risk to be minimal.

44

Accounts Receivable

Accounts receivable primarily consists of receivables from third party gift card distributors, tenant improvement receivables, vendor rebates, receivables arising from the normal course of business, and payroll-related tax receivables. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable based on a specific review of account balances. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recoverability is considered remote.

Inventory

Inventory, consisting principally of food, beverages, and supplies, is valued at the lower of first-in, first-out cost or net realizable value. Certain key ingredients (beef, pork, chicken, beans, rice, sour cream, cheese, and tortillas) are purchased from a small number of suppliers.

Investments

Investments classified as “trading” securities are carried at fair value with any unrealized gain or loss being recorded in the consolidated statement of income and comprehensive income. Investments classified as “available-for-sale” are carried at fair market value with unrealized gains and losses, net of tax, included as a component of other comprehensive income (loss). Held-to-maturity securities are carried at amortized cost. The Company recognizes impairment charges on its investments in the consolidated statement of income and comprehensive income when management believes the decline in the fair value of the investment is other-than-temporary.

Leasehold Improvements, Property and Equipment

Leasehold improvements, property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and construction of a restaurant are capitalized and were $8,076, $9,554 and $7,756 for the years ended December 31, 2016, 2015 and 2014, respectively. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives of leasehold improvements, property and equipment. The changes in estimated useful lives did not have a material impact on depreciation in any period. The estimated useful lives are:

Leasehold improvements and buildings	3-20 years
Furniture and fixtures	4-7 years
Equipment	3-10 years

Goodwill

Goodwill represents the excess of cost over fair value of net assets of the business acquired. Goodwill is not subject to amortization, but instead is tested for impairment at least annually, and the Company is required to record any necessary impairment adjustments. Impairment is measured as the excess of the carrying value over the fair value of the goodwill. Based on the Company’s analysis, no impairment charges were recognized on goodwill for the years ended December 31, 2016, 2015 and 2014.

Other Assets

Other assets consist primarily of restricted cash assets of $28,490 and $22,572 as of December 31, 2016 and 2015, respectively, a rabbi trust as described further in Note 7. “Employee Benefit Plans,” transferable liquor licenses which are carried at the lower of fair value or cost, and rental deposits related to leased properties. Restricted cash assets are primarily insurance-related restricted trust assets.

45

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of reviewing restaurant assets to be held and used for potential impairment, assets are grouped together at the market level, or in the case of a potential relocation or closure, at the restaurant level. The Company manages its restaurants as a group with significant common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the years ended December 31, 2016, 2015 and 2014, an aggregate impairment charge of $17,394, $6,675 and $0, respectively, was recognized in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

Impairment charges recognized during the year ended December 31, 2016 resulted primarily from the Company’s determination that its ShopHouse Southeast Asian Kitchen restaurants were impaired and the recognition of a non-cash impairment charge of $14,505 ($8,014 net of tax), representing substantially all of the value of long-lived assets of ShopHouse. The decision to impair the assets was based on an analysis of each restaurant’s past and present operating performance, including a significant change from comparable restaurant sales increases to decreases, and projected future cash flows expected to be generated by the restaurant assets.  The Company has decided not to invest further in developing and growing the ShopHouse brand and is pursuing strategic alternatives. During the year ended December 31, 2015, the impairment charges resulted from an internally developed software program that the Company chose not to implement and the related hardware, the discontinued use of certain kitchen equipment from the Company’s restaurants, as well as restaurant relocations. The fair value of restaurants, including ShopHouse, was determined using level 3 inputs (unobservable inputs) based on a discounted cash flows method.

Income Taxes

The Company recognizes deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of its assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impacts of investment tax credits are recognized as an immediate adjustment to income tax expense. When it is more likely than not that a portion or all of a deferred tax asset will not be realized in the future, the Company provides a corresponding valuation allowance against the deferred tax asset. When it is more likely than not that a position will be sustained upon examination by a tax authority that has full knowledge of all relevant information, the Company measures the amount of tax benefit from the position and records the largest amount of tax benefit that is greater than 50% likely of being realized after settlement with a tax authority. The Company’s policy is to recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in the provision for income taxes in the consolidated statement of income and comprehensive income.

Restaurant Pre-Opening Costs

Pre-opening costs, including rent, wages, benefits and travel for training and opening teams, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business.

Insurance Liability

The Company maintains various insurance policies including workers’ compensation, employee health, general liability, automobile, and property damage. Pursuant to these policies, the Company is responsible for losses up to certain limits and is required to estimate a liability that represents the ultimate exposure for aggregate losses below those limits. This liability is based on management’s estimates of the ultimate costs to be incurred to settle known claims and, where applicable, claims not reported as of the balance sheet date. The estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions, and economic conditions. If actual trends differ from the estimates, the financial results could be impacted. As of December 31, 2016 and 2015, $35,550 and $28,391, respectively, of the estimated liability was included in accrued payroll and benefits and $13,881 and $11,898, respectively, was included in accrued liabilities in the consolidated balance sheet.

46

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred and totaled $102,969, $69,257 and $57,290 for the years ended December 31, 2016, 2015 and 2014, respectively. Advertising and marketing costs are included in other operating costs in the consolidated statement of income and comprehensive income.

Rent

Rent expense for the Company’s leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The lease term is the lesser of 20 years inclusive of reasonably assured renewal periods, or the lease term. The lease term begins when the Company has 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 in the consolidated balance sheet. Pre-opening rent is included in pre-opening costs in the consolidated statement of income and comprehensive 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 of the Company’s operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified target amounts. The Company recognizes contingent rent expense provided the achievement of that target is considered probable.

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short-term nature.

Fair Value Measurements

Fair value is the price the Company would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For assets and liabilities recorded or disclosed at fair value on a recurring basis, the Company determines fair value based on the following:

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Foreign Currency Translation

The Company’s international operations generally use the local currency as the functional currency. Assets and liabilities are translated at exchange rates in effect as of the balance sheet date. Income and expense accounts are translated at the average monthly exchange rates during the year. Resulting translation adjustments are recorded as a separate component of other comprehensive income (loss) in the consolidated statement of income and comprehensive income.

Recently Issued Accounting Standards and Adoption of Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, “Statement of Cash Flows (Topic 230)”, which provides guidance on the classification of restricted cash to be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2017 using a retrospective adoption method and early adoption is permitted. For the years ended December 31, 2016, 2015 and 2014, $28,490, $22,572 and $19,889, respectively, of restricted cash would have been included in cash and cash equivalents and changes in the balance excluded from net cash provided by operating activities in the consolidated statement of cash flows if this new guidance had been adopted as of the respective dates.

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In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718).” The pronouncement was issued to simplify the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016.  The guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Upon adoption, any future excess tax benefits or deficiencies will be recorded to the provision for income taxes in the consolidated statement of income, instead of additional paid-in capital in the consolidated balance sheet. For the years ended December 31, 2016, 2015 and 2014, $1,320, $74,442 and $21,667, respectively, of excess tax benefits were recorded to additional paid-in capital that would have been recorded as a reduction to the provision for income taxes if this new guidance had been adopted as of the respective dates.  Additionally, excess tax benefits will be classified as operating activities in the consolidated statement of cash flow instead of in financing activities as required under the current guidance. The Company has not selected a transition method, and except as described above, does not expect the provisions of ASU 2016-09 to have an impact on the Company’s consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The pronouncement requires the recognition of a liability for lease obligations and a corresponding right-of-use asset on the balance sheet and disclosure of key information about leasing arrangements. This pronouncement is effective for reporting periods beginning after December 15, 2018 using a modified retrospective adoption method.  The Company’s adoption of ASU No. 2016-02 will have a significant impact on its consolidated balance sheet as it will record material assets and obligations for current operating leases. The Company is evaluating the impact that adoption will have on its consolidated statement of income.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” as amended by multiple standards updates. The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The pronouncement is effective for reporting periods beginning after December 15, 2017. The expected adoption methodof ASU 2014-09is being evaluated by the Company, andthe adoption is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. 

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements. Additionally, the adoption of accounting pronouncements during 2016 did not have an impact on the Company’s consolidated financial position or results of operations.

2. Supplemental Financial Information

Leasehold improvements, property and equipment were as follows:

	December 31,
	2016		2015
Land	$	12,943	$	13,052
Leasehold improvements and buildings		1,572,606		1,419,418
Furniture and fixtures		157,541		142,825
Equipment		405,937		362,800
Leasehold improvements, property and equipment		2,149,027		1,938,095
Accumulated depreciation		(845,469)		(720,875)
Leasehold improvements, property and equipment, net	$	1,303,558	$	1,217,220

Accrued payroll and benefits were as follows:

	December 31,
	2016		2015
Worker's compensation liability	$	33,038	$	26,408
Accrued payroll		22,338		13,780
Other accrued payroll and benefits		20,925		24,770
Accrued payroll and benefits	$	76,301	$	64,958

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Accrued liabilities were as follows:

	December 31,
	2016		2015
Gift card liability	$	59,438	$	51,055
Transaction tax payable		20,435		15,634
Treasury stock liability		2,300		25,178
Other accrued expenses		44,956		37,408
Accrued liabilities	$	127,129	$	129,275

3.  Investments

As of December 31, 2016 and 2015, the Company’s investments consisted of U.S. treasury notes with maturities up to approximatelytwo years and were classified as available-for-sale.  Fair market value of U.S. treasury notes is measured on a recurring basis based on Level 1 inputs (level inputs are described in Note 1 under “Fair Value Measurements”).

The Company designates the appropriate classification of its investments at the time of purchase based upon the intended holding period. During the year ended December 31, 2015, the Company transferred the classification of its investments from held-to-maturity to available-for-sale due to anticipated liquidity needs related to increased repurchases of shares of the Company’s common stock.The carrying value of held-to-maturity securities transferred to available-for-sale during the year ended December 31, 2015 was $1,040,850 and the fair market value of those securities was determined to be $1,038,138, resulting in an unrealized holding loss of $2,712.  As a result, the Company recorded $2,468  ($1,522, net of tax) of unrealized holding losses in other comprehensive income (loss), and an other-than-temporary impairment charge of $244 in interest and other income (expense), in the consolidated statement of income and comprehensive income.

The following is a summary of available-for-sale securities:

	December 31,
	2016		2015
Amortized cost	$	455,109	$	1,040,850
Unrealized gains (losses)		(218)		(2,712)
Fair market value	$	454,891	$	1,038,138

The following is a summary of unrealized gains (losses) of available-for-sale securities recorded in other comprehensive income (loss):

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on available-for-sale securities	$	2,251	$	(2,468)	$	-
Unrealized gains (losses) on available-for-sale securities, net of tax	$	1,402	$	(1,522)	$	-

The following is a summary of available-for-sale securities activity recorded in interest and other income (expense) in the consolidated statement of income and comprehensive income:

	Year ended December 31,
	2016		2015		2014
Realized gains (losses) from sale of available-for-sale securities	$	547	$	-	$	-
Other-than-temporary impairment	$	-	$	244	$	-

The Company has elected to fund certain deferred compensation obligations through a rabbi trust, the assets of which are designated as trading securities, as described further in Note 7. “Employee Benefit Plans.”

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4. Income Taxes

The components of the provision for income taxes are as follows:

	Year ended December 31,
	2016		2015		2014
Current tax:
U.S. Federal	$	20,765	$	244,470	$	248,219
U.S. State		8,687		37,957		41,225
Foreign		556		172		156
		30,008		282,599		289,600
Deferred tax:
U.S. Federal		(11,596)		11,000		(13,890)
U.S. State		(2,546)		699		(6,740)
Foreign		(2,470)		(2,288)		(3,075)
		(16,612)		9,411		(23,705)
Valuation allowance		2,405		2,255		3,034
Provision for income taxes	$	15,801	$	294,265	$	268,929

Actual taxes paid for each tax period were less than the current tax expense due to the excess tax benefit on stock-based compensation of $1,320, $74,442, and $21,667 during the years ended December 31, 2016, 2015, and 2014, respectively.

The effective tax rate differs from the statutory tax rates as follows:

	Year ended December 31,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of related federal income tax benefit	13.3		3.6		3.7
Federal credits	(10.1)		(0.4)		(0.5)
Enhanced deduction for food donation	(2.4)		(0.2)		(0.1)
Valuation allowance	6.0		0.3		0.4
Other	6.2		-		0.1
Return to provision and other discrete items	(7.2)		(0.1)		(1.0)
Effective income tax rate	40.8	%	38.2	%	37.6	%

The 2016 effective tax rate was higher due to a higher state tax rate, not qualifying for the federal research and development tax credit in 2016, and non-deductible items on overall lower pre-tax operating income. Additionally, 2014 included a benefit from filing the 2013 tax returns, which included a non-recurring change in the estimate of usable employer credits resulting in a lower effective tax rate than 2015.

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Deferred income tax liabilities are taxes the Company expects to pay in future periods. Similarly, deferred income tax assets are recorded for expected reductions in taxes payable in future periods. Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax liabilities and assets consist of the following:  

	December 31,
	2016		2015
Deferred income tax liability:
Leasehold improvements, property and equipment	$	204,640	$	192,125
Goodwill and other assets		1,856		1,696
Prepaid assets and other		6,012		8,297
Total deferred income tax liability		212,508		202,118
Deferred income tax asset:
Deferred rent		63,159		57,716
Gift card liability		5,563		3,171
Capitalized transaction costs		500		502
Stock-based compensation and other employee benefits		101,628		83,058
Foreign net operating loss carry-forwards		9,580		11,407
State credits		4,595		4,783
Allowances, reserves and other		19,359		18,577
Valuation allowance		(10,820)		(9,401)
Total deferred income tax asset		193,564		169,813
Net deferred income tax liability	$	18,944	$	32,305

The unrecognized tax benefits are as follows:

	2016		2015		2014
Beginning of year	$	3,776	$	1,342	$	-
Increase resulting from prior year tax position		-		402		-
Increase resulting from current year tax position		435		2,032		1,342
End of year	$	4,211	$	3,776	$	1,342

During the year ending December 31, 2016, $430 of interest was accrued for uncertain tax positions. The Company is open to federal and state tax audits until the applicable statutes of limitations expire. Tax audits by their very nature are often complex and can require several years to complete. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2013. For the majority of states where the Company has a significant presence, it is no longer subject to tax examinations by tax authorities for tax years before 2013.   As of December 31, 2016, the Company had cumulative gross foreign net operating losses of $36,464, which have no expiration date.

5. Shareholders’ Equity

Through December 31, 2016, the Company announced authorizations by its Board of Directors of the expenditure of an aggregate of up to $2,100,000 to repurchase shares of the Company’s common stock. On January 10, 2017, the Company announced that its Board of Directors authorized the expenditure of up to an additional $100,000 to repurchase shares of its common stock. Under the remaining repurchase authorization, shares may be purchased from time to time in open market transactions, subject to market conditions.

The shares of common stock repurchased under authorized programs were 1,811during the year ended December 31, 2016, 839during the year ended December 31, 2015 and 154 during the year ended December 31, 2014, for a total cost of $813,881, $485,841 and $87,996 during 2016, 2015 and 2014, respectively. As of December 31, 2016, $102,568 was available to be repurchased under the authorized programs. The shares repurchased are being held in treasury until such time as they are reissued or retired, at the discretion of the Board of Directors.

During 2016, 2015, and 2014, shares of common stock were netted and surrendered as payment for minimum statutory tax withholding obligations in connection with the exercise and vesting of outstanding stock awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by the Company but are not part of publicly announced share repurchase programs.

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6. Stock Based Compensation

The Company issues shares pursuant to the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the “2011 Incentive Plan”), approved at the annual shareholders’ meeting on May 13, 2015. Shares issued pursuant to awards granted prior to the 2011 Incentive Plan were issued subject to previous stock plans that were also approved by shareholders. For purposes of counting the shares remaining available under the 2011 Incentive Plan, each share issuable pursuant to outstanding full value awards, such as restricted stock units and performance shares, count as two shares used, whereas each share underlying a stock appreciation right or stock option count as one share used. Under the 2011 Incentive Plan, 5,560 shares of common stock have been authorized and reserved for issuance to eligible participants, of which 2,165 represent shares that were authorized for issuance but not issued or subject to outstanding awards at December 31, 2016. The 2011 Incentive Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to select the individuals to whom awards will be granted or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), to determine the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule and all other terms and conditions of the awards. The exercise price for stock awards granted under the 2011 Incentive Plan cannot be less than fair market value at the date of grant.

Stock only stock appreciation rights (“SOSARs”) generally vest equally over two and three years and expire after seven years. Stock-based compensation expense is generally recognized on a straight-line basis for each separate vesting portion. Compensation expense related to employees eligible to retire and retain full rights to the awards is recognized over six months which coincides with the notice period. The Company has also granted SOSARs and stock awards with performance vesting conditions and/or market vesting conditions. Compensation expense on SOSARs subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period. Compensation expense on stock awards subject to performance conditions, which is based on the quantity of awards the Company has determined are probable of vesting, is recognized over the longer of the estimated performance goal attainment period or time vesting period. Compensation expense is recognized ratably for awards subject to market conditions regardless of whether the market condition is satisfied, provided that the requisite service has been provided. Some stock-based compensation awards are made to employees involved in the Company’s new restaurant development activities, and expense for these awards is recognized as capitalized development and included in leasehold improvements, property and equipment in the consolidated balance sheet.

The following table sets forth stock-based compensation expense, including SOSARs and stock awards:

	Year ended December 31,
	2016		2015		2014
Stock-based compensation expense	$	65,112	$	59,465	$	97,618
Stock-based compensation expense, net of tax		35,974		36,666		60,084
Stock-based compensation expense recognized as capitalized development		946		1,554		1,178

The tables below summarize the option and SOSAR activity under the stock incentive plans (in thousands, except years and per share data):

	2016			2015			2014
	Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share
Outstanding, beginning of year	1,694	$	490.70	2,087	$	395.46	1,690	$	312.44
Granted	460	$	457.77	379	$	659.12	764	$	545.66
Exercised	(124)	$	315.87	(716)	$	297.25	(315)	$	310.32
Forfeited or cancelled	(113)	$	559.25	(56)	$	554.73	(52)	$	419.74
Outstanding, end of year	1,917	$	490.06	1,694	$	490.70	2,087	$	395.46

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	Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	1,917	$	490.06	4.4	$	22,040
Vested and expected to vest as of December 31, 2016	1,851	$	489.18	4.3	$	22,040
Exercisable as of December 31, 2016	846	$	422.32	3.3	$	22,040

During the year ended December 31, 2014 the Company granted 220SOSARs that include performance conditions. No SOSARs that include performance conditions were granted during 2015 or 2016. As of December 31, 2016, 388 SOSARs that include performance conditions were outstanding, of which 278 awards had met the performance conditions. In addition to time vesting described above, the shares vest upon achieving a targeted cumulative cash flow from operations. The total intrinsic value of options and SOSARs exercised during the years ended December 31, 2016, 2015 and 2014 was $15,946, $260,466 and $88,245. Unearned compensation as of December 31, 2016 was $34,862 for SOSAR awards, and is expected to be recognized over a weighted average period of 1.5 years.

The following table reflects the average assumptions utilized in the Black-Scholes option-pricing model to value SOSAR awards granted for each year:

	2016			2015			2014
Risk-free interest rate		1.0	%		1.1	%		0.8	%
Expected life (years)		3.5			3.4			3.4
Expected dividend yield		0.0	%		0.0	%		0.0	%
Volatility		32.2	%		30.8	%		33.3	%
Weighted-average Black-Scholes fair value per share at date of grant	$	117.48		$	156.32		$	136.18

The risk-free interest rate is based upon U.S. Treasury rates for instruments with similar terms and the expected life assumptions were based on the Company’s historical data. The Company has not paid dividends to date and does not plan to pay dividends in the near future. The volatility assumption was based on the Company’s historical data and implied volatility.

A summary of non-vested stock award activity under the stock incentive plans is as follows (in thousands, except per share data):

	2016			2015			2014
	Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share
Outstanding, beginning of year	116	$	511.88	70	$	525.60	71	$	520.27
Granted	90	$	509.05	47	$	785.32	2	$	495.92
Vested	(7)	$	605.83	(1)	$	413.07	(2)	$	284.11
Forfeited or cancelled	(74)	$	529.54	-	$	534.55	(1)	$	410.55
Outstanding, end of year	125	$	606.24	116	$	511.88	70	$	525.60

At December 31, 2016, 116 of the outstanding non-vested stock awards were subject to performance and/or market conditions, in addition to service vesting conditions. During the first quarter of 2016, the Company awarded 73 shares, net of cancellations, that are subject to both service and market vesting conditions. The quantity of shares that will vest may range from 0% to 400% of a targeted number of shares, and will be determined based on the price of the Company’s common stock reaching certain targets for a consecutive number of days during the three year period starting on the grant date.  If the minimum defined stock price target is not met, then no shares will vest.

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During the year ended December 31, 2015, the Company awarded 40 performance shares that were subject to service, performance, and market vesting conditions (“the 2015 stock awards”). The quantity of shares that will ultimately vest is determined based on the Company’s relative performance versus a restaurant industry peer group in the annual average of: revenue growth, net income growth, and total shareholder return. The quantity of shares awarded ranges from 0% to 200% based on the level of achievement of the performance and market conditions. If minimum targets are not met, then no shares will vest. Each performance and market measure will be weighted equally, and performance is calculated over a three year period beginning January 1, 2015 through December 31, 2017.

During the year ended December 31, 2013, the Company granted 66 stock awards that were subject to both service and performance vesting conditions (“the 2013 stock awards”). The performance conditions for the grant required achievement of specific targets for cumulative cash flow from operations during a three year period. Targets were not met and none of the stock awards vested.

During the year ended December 31, 2016, the Company adjusted its estimate of 2015 stock awards expected to vest as well as reduced its expense for the 2013 stock awards that did not vest. The impact of these changes resulted in a cumulative reduction to expense of $6,031  ($3,332 net of tax as well as $0.11 to basic and diluted earnings per share) in the year ended December 31, 2016.  

The Company’s measurement of the grant date fair value of the 2015 and 2016 stock awards included using a Monte Carlo simulation model, which incorporates into the fair-value determination the possibility that the market condition may not be satisfied, using the following assumptions:

	2016			2015
Risk-free interest rate		0.9	%		1.0	%
Expected life (years)		3.0			2.9
Expected dividend yield		0.0	%		0.0	%
Volatility		31.4	%		33.7	%

The assumptions are based on the same factors as those described for SOSARs, except that the expected life is based on the contractual performance period for stock awards.

Unearned compensation as of December 31, 2016 was $39,758 for non-vested stock awards the Company has determined are probable of vesting, and is expected to be recognized over a weighted average period of 1.7 years. The fair value of shares earned as of the vesting date during the year ended December 31, 2016, 2015, and 2014 was $2,787,  $634, and $783, respectively.

7. Employee Benefit Plans

The Company maintains the Chipotle Mexican Grill 401(k) Plan (the “401(k) Plan”).The Company matches 100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed. Employees become eligible to receive matching contributions after one year of service with the Company. For the years ended December 31, 2016, 2015, and 2014, Company matching contributions totaled approximately $5,939, $4,995 and $3,881, respectively. In addition to the traditional pre-tax deferral options, during 2016 the 401(k) Plan began offering a Roth after-tax deferral option.

The Company also maintains the Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan (the “Deferred Plan”) which covers eligible employees of the Company. The Deferred Plan is a non-qualified plan that allows participants to make tax-deferred contributions that cannot be made under the 401(k) Plan because of Internal Revenue Service limitations. Participants’ earnings on contributions made to the Deferred Plan fluctuate with the actual earnings and losses of a variety of available investment choices selected by the participant. Total liabilities under the Deferred Plan as of December 31, 2016 and 2015 were $17,843 and $18,331, respectively, and are included in other long-term liabilities in the consolidated balance sheet. The Company matches 100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed once the 401(k) contribution limits are reached. For the years ended December 31, 2016, 2015, and 2014, the Company made deferred compensation matches of $225, $617, and $536 respectively, to the Deferred Plan.

The Company has elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in mutual funds, consistent with the investment choices selected by participants in their Deferred Plan accounts, which are designated as trading securities and carried at fair value, and are included in other assets in the consolidated balance sheet. Fair value of mutual funds is measured using Level 1 inputs (quoted prices for identical assets in active markets), and the fair values of the investments in the rabbi trust were $17,843 and $18,331 as of December 31, 2016 and 2015, respectively. The Company records trading gains and losses in general and administrative expenses in the consolidated statement of

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income and comprehensive income, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure of the Deferred Plan liability.

The following table sets forth unrealized gains and losses on investments held in the rabbi trust:

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on investments held in rabbi trust	$	586	$	(571)	$	184

The Company offers an employee stock purchase plan (“ESPP”). Employees become eligible to participate after one year of service with the Company and may contribute up to 15% of their base earnings, subject to an annual maximum dollar amount, toward the monthly purchase of the Company’s common stock. Under the ESPP, 250 shares of common stock have been authorized and reserved for issuances to eligible employees, of which 247 represent shares that were authorized for issuance but not issued at December 31, 2016.  For each of the years ended December 31, 2016, 2015, and 2014, the number of shares issued under the ESPP were less than 1.

8. Leases

The Company generally operates its restaurants in leased premises. Lease terms for traditional shopping center or building leases generally include combined initial and option terms of 20-25 years. Ground leases generally include combined initial and option terms of 30-40 years. The option terms in each of these leases are typically in five-year increments. Typically, the lease includes rent escalation terms every five years including fixed rent escalations, escalations based on inflation indexes, and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. The leases generally provide for the payment of common area maintenance, property taxes, insurance and various other use and occupancy costs by the Company. In addition, the Company is the lessee under non-cancelable leases covering certain offices.

Contractually required future minimum cash lease payments under existing operating leases as of December 31, 2016 are as follows:

2017	$	264,911
2018		268,862
2019		269,133
2020		263,732
2021		257,400
Thereafter		2,358,941
Total minimum lease payments	$	3,682,979

Minimum lease payments have not been reduced by minimum sublease rentals of $5,342 due in the future under non-cancelable subleases.

Rental expense consists of the following:

	Year ended December 31,
	2016		2015		2014
Minimum rentals	$	255,955	$	227,602	$	200,575
Contingent rentals	$	1,811	$	4,542	$	4,616
Sublease rental income	$	(2,074)	$	(1,879)	$	(1,838)

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The Company has six sales and leaseback transactions. These transactions do not qualify for sale leaseback accounting because of the Company’s deemed continuing involvement with the buyer-lessor due to fixed price renewal options, which results in the transaction being recorded under the financing method. Under the financing method, the assets remain on the consolidated balance sheet and the proceeds from the transactions are recorded as a financing liability.  A portion of lease payments are applied as payments of deemed principal and imputed interest. The deemed landlord financing liability was $2,854 and $3,060 as of December 31, 2016, and 2015, respectively, with the current portion of the liability included in accrued liabilities, and the remaining portion included in other liabilities in the consolidated balance sheet.

9. Earnings Per Share

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying SOSARs and non-vested stock awards (collectively “stock awards”). Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Stock awards are excluded from the calculation of diluted EPS in the event they are subject to performance conditions or antidilutive. The following stock awards were excluded from the calculation of diluted EPS:

	Year ended December 31,
	2016		2015		2014
Stock awards subject to performance conditions		263		266		385
Stock awards that were antidilutive		1,316		289		232
Total stock awards excluded from diluted earnings per share		1,579		555		617

The following table sets forth the computations of basic and diluted earnings per share:

	Year ended December 31,
	2016		2015		2014
Net income	$	22,938	$	475,602	$	445,374
Shares:
Weighted average number of common shares outstanding		29,265		31,092		31,038
Dilutive stock awards		505		402		474
Diluted weighted average number of common shares outstanding		29,770		31,494		31,512
Basic earnings per share	$	0.78	$	15.30	$	14.35
Diluted earnings per share	$	0.77	$	15.10	$	14.13

10. Commitments and Contingencies

Purchase Obligations

The Company enters into various purchase obligations in the ordinary course of business, generally of a short term nature. Those that are binding primarily relate to commitments for food purchases and supplies, amounts owed under contractor and subcontractor agreements, orders submitted for equipment for restaurants under construction, and marketing initiatives and corporate sponsorships.

Litigation

Receipt of Grand Jury Subpoenas

On January 28, 2016, the Company was served with a Federal Grand Jury Subpoena from the U.S. District Court for the Central District of California in connection with an official criminal investigation being conducted by the U.S. Attorney’s Office for the Central District of California, in conjunction with the U.S. Food and Drug Administration’s Office of Criminal Investigations.  The subpoena requires the production of documents and information related to company-wide food safety matters dating back to January 1, 2013.  The Company intends to continue to fully cooperate in the investigation.  It is not possible at this time to determine

56

whether the Company will incur, or to reasonably estimate the amount of, any fines or penalties in connection with the investigation pursuant to which the subpoena was issued.

Shareholder Class Action

On January 8, 2016, Susie Ong filed a complaint in the U.S. District Court for the Southern District of New York on behalf of a purported class of purchasers of shares of the Company’s common stock between February 4, 2015 and January 5, 2016.  The complaint purports to state claims against the Company, each of its co-Chief Executive Officers and its Chief Financial Officer under Sections 10(b) and 20(a) of the Exchange Act and related rules, based on the Company’s alleged failure during the claimed class period to disclose material information about the Company’s quality controls and safeguards in relation to consumer and employee health. The complaint asserts that those failures and related public statements were false and misleading and that, as a result, the market price of the Company’s stock was artificially inflated during the claimed class period. The complaint seeks damages on behalf of the purported class in an unspecified amount, interest, and an award of reasonable attorneys’ fees, expert fees and other costs.  The Company intends to defend this case vigorously, but it is not possible at this time to reasonably estimate the outcome of or any potential liability from the case.

Shareholder Derivative Actions

On March 21, 2016, Jessica Oldfather filed a shareholder derivative action in the Court of Chancery of the State of Delaware alleging that the Company’s Board of Directors and officers breached their fiduciary duties in connection with allegedly excessive compensation awarded from 2011 to 2015 under the Company’s stock incentive plan. On December 8, 2016, the Court of Chancery dismissed the complaint, with prejudice.

On April 6, 2016, Uri Skorski filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Oldfather complaint and also alleging that the Company’s Board of Directors and officers breached their fiduciary duties in connection with the Company’s alleged failure to disclose material information about the Company’s food safety policies and procedures. On April 14, 2016, Mark Arnold and Zachary Arata filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Skorski complaint. On May 26, 2016, the court issued an order consolidating the Skorski and Arnold/Arata actions into a single case. On August 8, 2016, Sean Gubricky filed a shareholder derivative action the U.S. District Court for the District of Colorado, alleging that the Company’s Board of Directors and certain officers failed to institute proper food safety controls and policies, issued materially false and misleading statements in violation of federal securities laws, and otherwise breached their fiduciary duties to the Company.  On September 1, 2016, Ross Weintraub filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Gubricky complaint.On December 27, 2016, Cyrus Lashkari filed a shareholder derivative action the U.S. District Court for the District of Colorado, making largely the same allegations as the foregoing shareholder derivative complaints.  Each of these actions purports to state a claim for damages on behalf of the Company, and is based on statements in the Company’s SEC filings and related public disclosures, as well as media reports and Company records. The Company intends to defend these cases vigorously, but it is not possible at this time to reasonably estimate the outcome of or any potential liability from these cases.

Notices of Inspection of Work Authorization Documents and Related Civil and Criminal Investigations

Following an inspection during 2010 by the U.S. Department of Homeland Security, or DHS, of the work authorization documents of the Company’s restaurant employees in Minnesota, the Immigration and Customs Enforcement arm of DHS, or ICE, issued to the Company a Notice of Suspect Documents identifying a large number of employees who, according to ICE and notwithstanding the Company’s review of work authorization documents for each employee at the time they were hired, appeared not to be authorized to work in the U.S. The Company approached each of the named employees to explain ICE’s determination and afforded each employee an opportunity to confirm the validity of their original work eligibility documents, or provide valid work eligibility documents. Employees who were unable to provide valid work eligibility documents were terminated in accordance with the law. In December 2010, the Company was also requested by DHS to provide the work authorization documents of restaurant employees in the District of Columbia and Virginia, and the Company provided the requested documents in January 2011. The Company subsequently received requests from the office of the U.S. Attorney for the District of Columbia for work authorization documents covering all of the Company’s employees since 2007, plus employee lists and other documents concerning work authorization. In May 2012, the U.S. Securities and Exchange Commission notified the Company that it was conducting a civil investigation of the Company’s compliance with employee work authorization verification requirements and its related disclosures and statements, and the office of the U.S. Attorney for the District of Columbia advised the Company that its investigation had broadened to include a parallel criminal and civil investigation of the Company’s compliance with federal securities laws. During the fourth quarter of 2016, the Company entered into an agreement with the office of the U.S. Attorney for the District of Columbia to resolve the DHS and ICE investigations.

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Miscellaneous

The Company is involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity or capital resources. However, a significant increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially and adversely affect the Company’s business, financial condition, results of operations and cash flows.

11. Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data:

	2016
	March 31		June 30		September 30		December 31
Revenue	$	834,459	$	998,383	$	1,036,982	$	1,034,560
Operating income (loss)	$	(46,604)	$	40,895	$	9,726	$	30,550
Net income (loss)	$	(26,432)	$	25,596	$	7,799	$	15,975
Basic earnings (loss) per share	$	(0.88)	$	0.88	$	0.27	$	0.55
Diluted earnings (loss) per share	$	(0.88)	$	0.87	$	0.27	$	0.55
	2015
	March 31		June 30		September 30		December 31
Revenue	$	1,089,043	$	1,197,783	$	1,216,890	$	997,507
Operating income	$	197,801	$	227,416	$	234,759	$	103,613
Net income	$	122,641	$	140,204	$	144,883	$	67,874
Basic earnings per share	$	3.95	$	4.51	$	4.65	$	2.19
Diluted earnings per share	$	3.88	$	4.45	$	4.59	$	2.17

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ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM  9A.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2016, 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. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter ended December 31, 2016 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

The management of Chipotle Mexican Grill, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016, 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, 2016, 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, 2016. This report follows.

59

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Chipotle Mexican Grill, Inc.

We have audited Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Chipotle Mexican Grill, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Chipotle Mexican Grill, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Chipotle Mexican Grill, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February 6, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Denver, Colorado

February 6, 2017

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ITEM 9B.OTHER INFORMATION

On February 3, 2017, we entered into a Registration Rights Agreement with Pershing Square Capital Management, L.P., and certain affiliates thereof.  Pursuant to the Registration Rights Agreement, the Pershing Square shareholders may make up to four requests that we file a registration statement to register the sale of shares of our common stock that the Pershing Square shareholders beneficially own, subject to the limitations and conditions provided in the Registration Rights Agreement. 

The Registration Rights Agreement also provides that we will file and keep effective, subject to certain limitations, a shelf registration statement covering shares of our common stock beneficially owned by the Pershing Square shareholders, and also provides certain piggyback registration rights to the Pershing Square shareholders. 

The registration rights provided in the agreement terminate as to any Pershing Square shareholder upon the earliest of (i) the date on which such shares are disposed of pursuant to an effective registration statement, (ii) the date on which such securities are sold pursuant to Rule 144, and (iii) such shareholder ceasing to beneficially own at least 5% of our outstanding common stock, provided such shareholder no longer has a representative serving on our Board of Directors, and is permitted to sell shares of common stock beneficially owned  by such shareholder under Rule 144(b)(1) of the Securities Act. 

The Registration Rights Agreement also contains customary indemnification provisions.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement which is filed as Exhibit 10.11 to this Annual Report on Form 10-K and is incorporated by reference herein.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Incorporated by reference from the definitive proxy statement for our 2017 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2016.

ITEM  11.EXECUTIVE COMPENSATION

Incorporated by reference from the definitive proxy statement for our 2017 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2016.

ITEM  12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents information regarding options and rights outstanding under our equity compensation plans as of December 31, 2016. All options/SOSARs reflected are options to purchase common stock.

	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights(1)	(b) Weighted-Average Exercise Price of Outstanding Options and Rights(1)	(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))(2)
Equity Compensation Plans Approved by Security Holders	2,042,317	$490.06	2,412,105
Equity Compensation Plans Not Approved by Security Holders	None	N/A	None
Total	2,042,317	$490.06	2,412,105

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

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(2)Includes 2,165,105 shares remaining available under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and 247,000 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, 2016, 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. 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 2017 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2016.

ITEM  13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference from the definitive proxy statement for our 2017 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2016.

ITEM  14.PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated by reference from the definitive proxy statement for our 2017 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2016.

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PART IV

ITEM  15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

1. All Financial statements

Consolidated financial statements filed as part of this report are listed under Item 8. “Financial Statements and Supplementary Data.”

2. Financial statement schedules

No schedules are required because either the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

3. Exhibits

The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

ITEM  16.FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHIPOTLE MEXICAN GRILL, INC.
By:	/s/    JOHN R. HARTUNG
Name:	John R. Hartung
Title:	Chief Financial Officer

Date: February 6, 2017

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Date	Title
/s/    STEVE ELLS	February 6, 2017	Chief Executive Officer and Chairman of the Board of Directors     (principal executive officer)
Steve Ells
/s/    JOHN R. HARTUNG	February 6, 2017	Chief Financial Officer     (principal financial and accounting officer)
John R. Hartung
/s/    ALBERT S. BALDOCCHI	February 6, 2017	Director
Albert S. Baldocchi
/s/    JOHN S. CHARLESWORTH	February 6, 2017	Director
John S. Charlesworth
/s/    NEIL W. FLANZRAICH	February 6, 2017	Director
Neil W. Flanzraich
/s/    PATRICK J. FLYNN	February 6, 2017	Director
Patrick J. Flynn
/s/    DARLENE J. FRIEDMAN	February 6, 2017	Director
Darlene J. Friedman
/s/    STEPHEN GILLETT	February 6, 2017	Director
Stephen Gillett
/s/ ROBIN S. HICKENLOOPER	February 6, 2017	Director
Robin S. Hickenlooper
/s/    KIMBAL MUSK	February 6, 2017	Director
Kimbal Musk
/s/MATTHEW PAULL	February 6, 2017	Director
Matthew Paull

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EXHIBIT INDEX

		Description of Exhibit Incorporated Herein by Reference
Exhibit Number	Exhibit Description	Form	File No.	Filing Date	Exhibit Number	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of Chipotle Mexican Grill, Inc.	10-Q	001-32731	October 26, 2016	3.1
3.2	Chipotle Mexican Grill, Inc. Amended and Restated Bylaws	8-K	001-32731	October 6, 2016	3.1
4.1	Form of Stock Certificate for Shares of Common Stock	10-K	001-32731	February 10, 2012	4.1
10.1†	Amended and Restated Chipotle Mexican Grill, Inc. 2006 Stock Incentive Plan	10-K	001-32731	February 17, 2011	10.2
10.1.1†	Form of 2009 Stock Appreciation Rights Agreement	10-K	001-32731	February 19, 2009	10.2.7
10.1.2†	Form of 2011 Stock Appreciation Rights Agreement	10-K	001-32731	February 17, 2011	10.2.10
10.1.3†	Form of 2011 Performance-Based Stock Appreciation Rights Agreement	10-K	001-32731	February 17, 2011	10.2.11
10.2†	Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan	10-Q	001-32731	October 26, 2016	10.1
10.2.1†	Form of Board Restricted Stock Units Agreement	10-Q	001-32731	July 22, 2014	10.1
10.2.2†	Form of Stock Appreciation Rights Agreement	10-Q	001-32731	April 20, 2012	10.1
10.2.3†	Form of Performance-Based Stock Appreciation Rights Agreement	10-Q	001-32731	April 20, 2012	10.2
10.2.4†	Form of 2014 Stock Appreciation Rights Agreement	-	-	-	-	X
10.2.5†	Form of 2014 Performance-Based Stock Appreciation Rights Agreement	-	-	-	-	X
10.2.6†	Form of 2015 Performance Share Agreement	10-Q	001-32731	April 22, 2015	10.2
10.2.7†	Form of 2016 Stock Appreciation Rights Agreement	10-Q	001-32731	April 27, 2016	10.1
10.2.8†	Form of 2016 Performance Share Agreement	10-Q	001-32731	April 27, 2016	10.2
10.3	Amended and Restated Registration Rights Agreement dated January 31, 2006 among Chipotle Mexican Grill, Inc., McDonald’s Corporation and certain shareholders	10-K	001-32731	March 17, 2006	10.6
10.4†	Board Pay Policies	10-Q	001-32731	April 22, 2015	10.1
10.5†	Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan	10-K	001-32731	February 23, 2007	10.11
10.5.1†	Amendment No. 1 to Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan	10-Q	001-32731	August 1, 2007	10.1
10.5.2†	Amendment No. 2 to Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan	10-Q	001-32731	October 31, 2007	10.1
10.6†	Form of Director and Officer Indemnification Agreement	8-K	001-32731	March 21, 2007	10.1
10.7†	Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan	10-K	001-32731	February 10, 2012	10.11
10.8†	Chipotle Mexican Grill, Inc. 2014 Cash Incentive Plan	10-Q	001-32731	July 19, 2013	10.1
10.9†	Retirement and Non-Competition Agreement dated December 9, 2016 between Chipotle Mexican Grill, Inc. and Montgomery F. Moran	8-K	001-32731	December 12, 2016	10.1
10.10	Investor Agreement dated December 14, 2016 between Chipotle Mexican Grill, Inc. and Pershing Square Capital Management, L.P.	8-K	001-32731	December 19, 2016	10.1
10.11	Registration Rights Agreement dated February 3, 2017, between Chipotle Mexican Grill, Inc. and Pershing Square Capital Management, L.P.	-	-	-	-	X
21.1	Subsidiaries of Chipotle Mexican Grill, Inc.	-	-	-	-	X

65

23.1	Consent of Ernst & Young LLP (as the independent registered public accounting firm of Chipotle Mexican Grill, Inc.)	-	-	-	-	X
24.1	Power of Attorney (included on signature page of this report)	-	-	-	-	X
31.1	Certification of Chief Executive Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
31.2	Certification of Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
32.1	Certification of Chief Executive Officer and Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
101	The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheet as of December 31, 2016 and December 31, 2015, (ii) Consolidated Statement of Income and Comprehensive Income for the years ended December 31, 2016, 2015 and 2014, (iii) Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2016, 2015 and 2014, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (v) Notes to the Consolidated Financial Statements	-	-	-	-	X

†-denotes management contract or compensatory plan or arrangement.

66

EX-10.11

Exhibit 10.11

EXECUTION VERSION

CHIPOTLE MEXICAN GRILL, INC.

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of February 3, 2017 (this “Agreement”), by and between Pershing Square Capital Management, L.P. (“Pershing Square”), as investment advisor of the funds it advises (such funds, together with Pershing Square in such capacity, collectively, the “Pershing Square Group”), and Chipotle Mexican Grill, Inc. a Delaware corporation (the “Company”).

R E C I T A L S

WHEREAS, the Pershing Square Group has purchased 2,882,463 shares of common stock, par value $0.01, of the Company (the “Common Stock”);

WHEREAS, the Company and the Pershing Square Group desire to define certain registration rights (“Registration Rights”) with respect to the Common Stock and certain other securities on the terms and subject to the conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the parties hereby agree as follows:

SECTION 1.

DEFINITIONS

As used in this Agreement, the following terms have the respective meanings set forth below:

“Affiliate” shall mean as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, the first Person.  A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise;

“Agreement” shall have the meaning set forth in the Preamble hereof;

“Beneficial Ownership” and terms of similar import shall be as defined under and determined pursuant to Rule 13d-3 promulgated under the Exchange Act.

“Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act;

“Common Stock” shall have the meaning set forth in the Recitals hereof;

“Company” shall have the meaning set forth in the Preamble hereof;

 “Demand Notice” shall have the meaning set forth in Section 2(a)(i) hereof;

“Demand Registration” shall have the meaning set forth in Section 2(a)(i) hereof;

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended (or any successor act), and the rules and regulations promulgated thereunder;

 “FINRA” shall mean the Financial Industry Regulatory Authority;

“Holder” shall mean (i) individually or collectively, any or all of the entities of the Pershing Square Group (solely in their capacity as holders of Registrable Securities), and (ii) any Permitted Assignees under Section 3(e) hereof;

“Indemnified Party” shall have the meaning set forth in Section 2(f)(iii) hereof;

“Indemnifying Party” shall have the meaning set forth in Section 2(f)(iii) hereof;

“Issuer Free Writing Prospectus” shall mean an “Issuer Free Writing Prospectus,” as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities;

“Losses” shall have the meaning set forth in Section 2(f)(i) hereof;

“Other Stockholders” shall mean Persons who by virtue of agreements with the Company (other than this Agreement) are entitled to include their securities in any registration of the offer or sale of securities pursuant to the Securities Act, including those shareholders set forth on Schedule 1 to that certain Amended and Restated Registration Rights Agreement dated January 31, 2006 among Chipotle Mexican Grill, Inc., McDonald’s Corporation (the “2006 Registration Rights Agreement”) filed as Exhibit 10.4 to the Company’s Form 10-K for the fiscal year ended December 31, 2015;

“Participating Holders” shall mean any Holders participating in a Registration relating to the Registrable Securities;

“Permitted Assignees” shall have the meaning set forth in Section 3(e) hereof;

“Pershing Square” shall have the meaning set forth in the Preamble hereof;

“Pershing Square Group” shall have the meaning set forth in the Preamble hereof;

“Person” shall mean an individual, partnership, joint-stock company, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof;

“Piggyback Registration” shall have the meaning set forth in Section 2(b)(i) hereof;

“Prospectus” shall mean the prospectus (including any preliminary, final or summary prospectus) included in any Registration Statement, all amendments and supplements to such prospectus and all other material incorporated by reference in such prospectus;

-2-

 “Qualifying Employee Stock” shall mean (i) rights and options issued under employee benefits plans of the Company or any predecessor or otherwise to employees in compensation arrangements approved by the Board of Directors of the Company or any predecessor and any securities issued after the date hereof upon exercise of such rights and options and options issued to employees of the Company or any predecessor as a result of adjustments to options in connection with the reorganization of the Company or any predecessor and (ii) restricted stock, restricted stock units and other such equity-linked securities and awards issued after the date hereof under employee benefit plans and securities issued after the date hereof in settlement thereof, if any;

“Register”, “Registered” and “Registration” shall mean a registration effected by preparing and (a) filing a Registration Statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such Registration Statement, or (b) filing a Prospectus and/or prospectus supplement in respect of an appropriate effective Registration Statement;

“Registrable Securities” shall mean (i) any shares of Common Stock acquired or held by a Holder prior to or after the date hereof or (ii) any securities of the Company or its Affiliates issued as a dividend or other distribution with respect to, or in exchange for or in conversion, exercise or replacement of or offered wholly or partly in any tender or exchange offer in consideration of any Registrable Securities described in (i);  provided that as to any particular Registrable Securities, such securities shall cease to qualify as Registrable Securities for purposes of this Agreementupon the earliest to occur of:  (A)  the date on which such securities are disposed of pursuant to an effective Registration Statement under the Act;  (B)  the date on which such securitiesare sold pursuant to Rule 144;(C) with respect to the Registrable Securities held by any Holder, any time that such Holder (x) Beneficially Owns Registrable Securities representing less than 5% of the then outstanding securitiesof the Company, (y) no longer has a representative acting as a director on the Company’s Board of Directors and (z) is permitted to sell such Registrable Securities under Rule 144(b)(1); and  (D)  the date on which such securities shall have ceased to be outstanding;  

“Registration Expenses” shall have the meaning set forth in Section 2(d) hereof;

“Registration Rights” shall have the meaning set forth in the Recitals hereof;

“Registration Statement” shall mean any registration statement of the Company on Form S-3 that covers Registrable Securities pursuant to the provisions of this Agreement filed with, or to be filed with, the Commission under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits, financial information and all material incorporated by reference in such registration statement;

“Requesting Holder”shall have the meaning set forth in Section 2(a)(i) hereof;

 “Rule 144”; “Rule 144A” shall mean Rule 144 and Rule 144A, respectively, under the Securities Act (or any successor provisions then in force);

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 “Scheduled Black-Out Period” shall mean the period from and including the last day of a fiscal quarter of the Company to and including the later of (i) the business day after the day on which the Company publicly releases its earnings information for such quarter or annual earnings information, as applicable, and (ii) the day on which the executive officers and directors of the Company are no longer prohibited by Company policies applicable with respect to such quarterly earnings period from buying or selling equity securities of the Company;

“security”, “securities” shall have the meaning set forth in Section 2(a)(1) of the Securities Act;

“Securities Act” shall mean the Securities Act of 1933, as amended (or any successor statute thereto), and the rules and regulations promulgated thereunder;

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company that covers all the Registrable Securities (and may cover other securities of the Company) on Form S-3 and under Rule 415 promulgated under the Securities Act, or any successor rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein;

“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities; and

“Underwriters’ Maximum Number” shall mean, for any Demand Registration or Piggyback Registration, that number of securities to which such registration should, in the opinion of the managing Underwriter(s) of such registration, in the light of marketing factors (including an adverse effect on the per share offering price), be limited.

SECTION 2.

REGISTRATION RIGHTS

(a) Demand Registration.

(i) Request for Registration.  Subject to the limitations and conditions of Section 2(a)(ii), if the Company shall receive from any Holder or any group of Holders (each a “Requesting Holder,” and collectively, the “Requesting Holders”) a written demand (the “Demand Notice”), such Demand Notice permitted to be delivered immediately upon the execution of this Agreement, that the Company effect any Registration (the “Demand Registration”) with respect to all or a part of the Registrable Securities owned by such Requesting Holder(s) having an estimated aggregate fair market value of at least $200.0 million (which demand shall set forth the specified amount of Registrable Securities for which registration is requested and the intended method of disposition thereof), the Company shall:

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(1) as promptly as reasonably practicable give written notice of the proposed Registration to all other Holders in accordance with the terms of Section 2(b);

(2) use its commercially reasonable efforts to file a Registration Statement with the Commission in accordance with the request of the Requesting Holder(s), including without limitation the method of disposition specified therein and covering resales of the Registrable Securities requested to be registered, as promptly as reasonably practicable but no later than within 60 days of receipt of the Demand Notice;

(3) use commercially reasonable efforts to cause such Registration Statement to be declared or become effective as promptly as practicable, but in no event later than 45 days after the date of initial filing of a Registration Statement pursuant to Section 2(a)(i)(2); and

(4) use commercially reasonable efforts to keep such Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for the period as requested in writing by the Requesting Holder(s) or such longer period as may be requested in writing by any Holder participating in such Registration (which periods shall be extended to the extent of any suspensions of sales pursuant to Sections 2(a)(ii)(3));

provided,  however, that the Company shall be permitted to file a post-effective amendment or prospectus supplement to any currently effective Shelf Registration Statement in lieu of an additional Registration Statement pursuant to Section 2(a)(i) to the extent the Company determines, and the Requesting Holder(s) agree that the Registrable Securities of the Requesting Holder(s) may be sold thereunder by such Requesting Holder(s) pursuant to their intended plan of distribution (in which case such post-effective amendment or prospectus supplement shall be counted against the limited number of Demand Registrations).  If there is a recommendation of an underwriter that the Company not file a post-effective amendment or prospectus supplement to a Shelf Registration Statement in lieu of an additional Registration Statement requested by the Requesting Holder(s), the Company shall consider in good faith alternative approaches.

(ii) Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to effect, or take any action to effect, any such Demand Registration pursuant to this Section 2(a)or to file a post-effective amendment to any Registration Statement or to amend or supplement any Prospectus in a Registration Statement:

(1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process unless the Company is already subject to service in such jurisdiction, qualify to do business in effecting such Registration, qualification or compliance or subject itself to taxation on its income in any jurisdiction where it is not then subject to taxation,  except as may be required by the Securities Act or applicable rules or regulations thereunder;

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(2) With respect to securities that are not Registrable Securities;

(3) If the Company has notified the Requesting Holders that in the good faith judgment of the Company, it would be materially detrimental to the Company or its security holders for such Registration to be effected at such time, in which event the Company shall have the right to defer such Registration for a period of not more than 60 days; provided, that such right to delay a Registration pursuant to clause (3) shall be exercised by the Company only if the Company has exercised (or is concurrently exercising) similar black-out rights against holders of similar securities that have registration rights, if any;

(4) Solely with respect to any Affiliate of the Company, during any Scheduled Black-Out Period; or

(5) if the Company shall have previously effected a registration with respect to Registrable Securities,  in which case the Company shall not be required to effect a subsequent registration pursuant hereto until a period of 180 days shall have elapsed from the effective date of the most recent such previous registration;

provided, that the total number of days that any such suspension, deferral or delay in Registration pursuant to clauses (3), and (4) in the aggregate may be in effect in any 360 day period shall not exceed 120 days. 

(iii) In consultation with the Company and Pershing Square, the Registration Statement filed pursuant to the request of the Requesting Holder may include shares of Common Stock which are held by Holders and Persons who, by virtue of agreements with the Company (other than this Agreement), are entitled to include their securities in any such Registration, if any.

(iv) Underwriting.  If the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten public offering, the Requesting Holder, in consultation with the Company, shall select one or more investment banking firms of national standing reasonably acceptable to each to be the Underwriters for the offering. The Company and the Requesting Holder(s) shall enter into an underwriting agreement in customary form with the managing Underwriter(s).

(v) The number of Demand Registrations that the Holders shall be entitled to request, and that the Company shall be obligated to undertake, pursuant to this Section 2(a) shall be four, less the number of shelf takedowns requested by the Holders pursuant to Section 3(c) below; provided, that the Company shall not be obligated to undertake more than three underwritten offerings pursuant to this Section 2 during the term of this Agreement, provided,  further that in no event shall the Company be required to effect more than one underwritten offering in any twelve-month period pursuant to this Section 2. No Demand Registration shall count for the purposes of the first clause of the limitations in this Section 2(a)(iv) if the Requesting Holder(s) determine in good faith to withdraw (within 30 days of making the Demand Registration and in any event prior to the filing of the Registration Statement or prospectus supplement relating to such request) the proposed

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Registration, upon written notice to the Company, due to marketing conditions or regulatory reasons.

(vi) Priority on Demand Registration.  If, in connection with an underwritten Demand Registration, the managing Underwriter(s) give written advice to the Requesting Holder(s) or the Company of an Underwriters’ Maximum Number, then the Requesting Holders(s) or the Company, as applicable, shall so advise the Company and all Requesting Holder(s) and the Company will be obligated and required to include in such Registration only the Underwriters’ Maximum Number, which securities will be so included in the following order of priority: (i) first, Registrable Securities of the Requesting Holder(s) and the Registrable Securities of any Holder as agreed to by the Requesting Holder(s), pro rata on the basis of the aggregate number of Registrable Securities owned by all Requesting Holder(s) who have delivered written requests for Registration pursuant to this Section 2.01 (provided, that if the aggregate number of Registrable Securities of the Requesting Holder(s) to be included in the Demand Registration is less than 50% of the number requested to be so included by such Requesting Holder(s), the Requesting Holder(s) may withdraw such Demand Request by giving notice to the Company within three (3) days of receipt of notice of the number of Registrable Securities of the Requesting Holder to be included; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this Agreement), (ii) second, any shares of Common Stock to be sold by the Company and (iii) third, any shares of Common Stock requested to be included by Other Stockholders, with priorities among them as the Company shall so determine to the extent in compliance with such other agreements with the Company.

(vii) In the case of an underwritten offering under this Section 2(a), the price, underwriting discount and other financial terms for the Registrable Securities shall be determined by the Requesting Holder(s) in consultation with the Company; provided, however, the Company may require Registrable Securities requested to be registered pursuant hereto to be included in such underwriting on the same terms and conditions as shall be applicable to the other securities being sold through underwriters under such registration.

(b) Piggyback Registration.

(i) If the Company shall determine to register the offer or sale of any of its capital stock either (x) for its own account, (y) for the account of the Requesting Holder(s) listed in Section 2(a) pursuant to the terms thereof, or (z) for the account of Other Stockholders (other than (A) a registration relating solely to Qualifying Employee Stock, (B) a registration relating solely to a Rule 145 transaction under the Securities Act or otherwise made in connection with mergers, acquisitions, exchange offers, subscription offers or dividend reinvestment plans or (C) a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement) (each such registration not withdrawn or abandoned prior to the effective date thereof being herein called a “Piggyback Registration”), the Company will, subject to the conditions set forth in this Section 2(b):

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(1) promptly, but in any event not less than 15 days prior to filing the applicable Registration Statements, give to each of the Holders a written notice thereof; and

(2) subject to Section 2(b)(ii) below and any transfer restrictions any Holder may be a party to, include in such Piggyback Registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by the Holders.  Such written request must specify the specific amount of  the Holders’ Registrable Securities for which inclusion is requested and the intended method of disposition thereof and shall be received by the Company within 15 days after written notice from the Company is given under Section 2(b)(i)(1) above.  In the event that any Holder makes such written request, the Holder may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, at any time at least two (2) Business Days prior to the effective date of the Registration Statement relating to such Piggyback Registration.  No Piggyback Registration shall count towards the number of Demand Registrations to which the Holders are entitled under Section 2(a)(iv). In the event any Holder requests inclusion in a Piggyback Registration pursuant to this Section 2(b) in connection with a distribution of Registrable Securities to its partners or members, the Piggyback Registration shall provide for the resale by such partners or members, if requested by such Holder.

(ii) Underwriting.  If the Piggyback Registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise each of the Holders as a part of the written notice given pursuant to Section 2(b)(i)(1) above.  In such event, the right of each of the Holders to a Piggyback Registration pursuant to this Section 2(b) shall be conditioned upon such Holders’ participation in such underwriting and the inclusion of such Holders’ Registrable Securities in the underwriting to the extent provided herein.  The Holders whose Registrable Securities are to be included in such Piggyback Registration shall (together with the Company and any Other Stockholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form for secondary public offerings with the managing underwriter or underwriters selected for underwriting by the Company (and if the Registration was initiated by a Holder pursuant to Section 2(a), such underwriters must be selected by the Requesting Holder(s) and the Company and reasonably acceptable to each other); provided,  however, that such underwriting agreement shall not provide for indemnification or contribution obligations on the part of any Holder or Other Stockholder greater than the obligations of the Holders under Section 2(f)(ii) or Section 2(f)(iv) except as may be customary and reasonable. 

(iii) Priority on Piggyback Registrations.  If a Piggyback Registration is an underwritten registration, and the managing Underwriter(s) shall give written advice to the Company of an Underwriters’ Maximum Number, then securities will be included in the following order of priority: (i) equity securities proposed to be included in such Piggyback Registration by the Company for its own account, or on the account of such Other

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Stockholders for whom the registration was originally being effected pursuant to demand or other registration rights, as applicable and (ii) if the Underwriters’ Maximum Number exceeds the number of securities proposed to be included pursuant to clause (i), securities requested to be included by those shareholders set forth on Schedule 1 to the 2006 RegistrationRights Agreement, pursuant to such agreement, in accordance with the priorities described therein and (iii) if theUnderwriters’ Maximum Number exceeds the number of securities proposed to beincluded pursuant to clauses (i) and (ii), then such excess, up to the Underwriters’ Maximum Number, shall be allocated pro rata to Participating Holders and Other Stockholders on the basis of the number of securities requested to be included therein by each such Person.

(c) Shelf Registration Statement.  Notwithstanding anything to the contrary herein, as soon as reasonably practicable, but in no event more than 30 days from the date of this Agreement, the Company shall (i) prepare and file with (or confidentially submit to) the Commission a Shelf Registration Statement that covers all Registrable Securities then outstanding for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act or any successor rule thereto and (ii) use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter.  From and after the declaration of effectiveness by the Commission of such Shelf Registration Statement, the Company shall use commercially reasonable efforts to cause such Shelf Registration Statement to be continuously effective so long as there are any Registrable Securities outstanding.

In connection with such Shelf Registration Statement, the Company will, subject to the terms and limitations of this Section 2, as promptly as reasonably practicable upon notice from any Requesting Holder in accordance with the terms of this Section 2(c), cooperate in any shelf take-down by amending or supplementing the Prospectus related to such Registration as may be reasonably requested by such Holder or as otherwise required to reflect the number of Registrable Securities to be sold thereunder.  The Company shall not be required to maintain in effect more than one Shelf Registration at any one time. 

(d) Suspension of Effectiveness.  Notwithstanding anything to the contrary in this Agreement, the Company shall not be obligated to keep a Registration Statement or a Shelf Registration Statement continuously effective pursuant to Section 2(a)(i)(4) or Section 2(c) and may suspend the use of the prospectus included therein, if the Company determines in good faith that it would be materially detrimental to the Company or its security holders not to suspend the use of such Registration Statement or Shelf Registration Statement;  provided,  however, that the Company shall not be permitted to (i) suspend the use of the Registration Statement or Shelf Registration Statement, as applicable, for a period exceeding60 days in succession or (ii) provide aSuspension Notice (as defined below) more than three (3) times in any twelve (12) month period. In the case of an event that causes the Company to suspend the use of a Registration Statement or Shelf Registration filed pursuant to the terms herein (a “Suspension Event”), the Company shall give a notice to the Requesting Holders (a “Suspension Notice”) to suspend sales of the Registrable Securities and such notice shall state generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing. The Requesting Holders may recommence effecting sales of the Registrable Securities pursuant to the applicable Registration Statement or Shelf Registration Statement, as applicable, following further written

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notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Requesting Holders promptly following the conclusion of any Suspension Event or its effect.

(e) Duplicate Registrations.  The Company shallnot be required to effect a registration under this Agreement if the Registrable Securities that are the subject of such request are at the time of such request included in an effective registration statement of the Company permitting the resale of such Registrable Securities in the manner contemplated by theRequesting Holder.  Notwithstanding the forgoing, a Holder may exercise its rights pursuant to Section 2(b)(i) if the Registrable Securities subject to such request are at the time of such request included in an effective registration statement of the Company permitting the resale of such Registrable Securities in the manner contemplated by the Requesting Holder.

(f) Expenses of Registration.  Except as otherwise provided in this Agreement, all expenses incurred by the Company incidental to the Company’s performance of or compliance with this Agreement (the “Registration Expenses”), including (i) all Registration and filing fees (including (A) with respect to Company filings required to be made with the SEC, all applicable securities exchanges and/or FINRA and (B) compliance with securities or blue sky laws including any fees and disbursements of counsel for the underwriter(s) in connection with blue sky qualifications of the Registrable Securities); (ii) word processing, duplicating and printing expenses; (iii) messenger, telephone and delivery expenses; (iv) fees and disbursements of counsel for the Company; (v) fees and disbursements of the Company’s independent certified public accountants (including, without limitation, the fees and disbursements in connection with any “comfort” letters pursuant to Section 2(f)(x)) of this Agreement, other special experts, retained by the Company, shall be borne by the Company.  The Company shall, in any event, pay the expenses of any annual audit or quarterly review, the expenses of any liability insurance, the expenses and fees for listing the Registrable Securities to be registered on the applicable securities exchange.  All underwriting discounts, selling commissions travel or other expenses associated with any“road show” or other selling efforts incurred by the Holder(s) in connection with any Demand Request, fees and disbursements of counsel to any Holder(s), the expenses of any liabilityinsurance obtained by any Holder(s) and transfer taxes incurred in connection with the offering of any Registrable Securities shall be borne by the Participating Holder(s). Any other provisions of this Agreement notwithstanding, if a registration request is withdrawn at the request of the Holder(s), then the Holder(s) responsible for such request shall pay all Registration Expenses incurred in connection with such registration unless the withdrawal of such request is the result of facts or circumstances relating to the Company (based on the reasonable determination of the Holders) that arise after the date on which such request was made and could reasonably have a material adverse effect on the offering of the Registrable Securities.

(g) Registration Procedures.  In the case of each Registration effected by the Company subject to this Section 2, the Company will keep the Holders advised in writing as to the initiation of each Registration and, to the best of knowledge thereof, as to the completion thereof.  At its expense, the Company will:

(i) as promptly as practicable, prepare and file with the Commission such pre- and post-effective amendments to such Registration Statement, supplements to the Prospectus and such amendments or supplements to any Issuer Free Writing Prospectus as

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may be (1) reasonably requested by the Requesting Holder(s) (if any), (2) reasonably requested by any other Participating Holder (to the extent such request relates to information relating to such Participating Holder), or (3) necessary to keep such Registration effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;

(ii) notify the Participating Holders and the managing underwriter or underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as promptly as practicable after notice thereof is received by the Company (1) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable Prospectus or Issuer Free Writing Prospectus or any amendment or supplement thereto has been filed, (2) to the extent any of the following relates to the Participating Holders or information supplied by the Participating Holders, of any written comments by the Commission or any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement, Prospectus or Issuer Free Writing Prospectus or for additional information, (3) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or any order by the Commission or any other regulatory authority preventing or suspending the use of any Prospectus or any Issuer Free Writing Prospectus or the initiation or threatening of any proceedings for such purposes and (4) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(iii) promptly notify the Participating Holders and the managing underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement, the Prospectus included in such Registration Statement (as then in effect) or any Issuer Free Writing Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of such Prospectus or any Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, and when any Issuer Free Writing Prospectus includes information that may conflict with the information contained in the Registration Statement, or, if for any other reason the Company shall have determined in good faith it necessary during such time period to amend or supplement such Registration Statement, Prospectus or Issuer Free Writing Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare and file with the Commission, and furnish without charge to the Participating Holders and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement, Prospectus or Issuer Free Writing Prospectus which shall correct such misstatement or omission or effect such compliance;

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(iv) use its reasonable best efforts to prevent, or obtain the withdrawal of, any stop order or other order suspending the use of any Prospectus or any Issuer Free Writing Prospectus;

(v) deliver to each Participating Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary Prospectus), any Issuer Free Writing Prospectus and any amendment or supplement thereto as such Participating Holder or underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement thereto by such Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities thereby) and such other documents as such Participating Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Participating Holder or underwriter;

(vi) subject to the terms set forth in Section 2(a)(ii)(1) and Section 2(c) hereof, on or prior to the date on which the applicable Registration Statement is declared effective, use its reasonable best efforts to register or qualify the offer or sale of the Registrable Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions in the United States as any Participating Holder reasonably (in light of such Participating Holder’s intended plan of distribution) requests and do any and all other acts and things that may be reasonably necessary or advisable to enable such Participating Holder to consummate the disposition of the Registrable Securities owned by such Participating Holder pursuant to such Registration Statement;

(vii) make such representations and warranties to the Participating Holders and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in underwritten public offerings;

(viii) in connection with an underwritten offering, enter into such customary agreements (including underwriting and indemnification agreements) and take such other customary and appropriate actions as the Requesting Holder(s) or the managing underwriter, if any, reasonably requests in order to expedite or facilitate the Registration and disposition of such Registrable Securities;

(ix) use its commercially reasonable efforts to obtain for delivery to the managing underwriter, if any, an opinion or opinions from counsel for the Company dated the effective date of the Registration Statement or, in the event of an underwritten offering, the date of the closing under the underwriting agreement, in form and substance as is customarily given to underwriters in an underwritten secondary public offering;

(x) in the case of an underwritten offering, use commercially reasonable efforts to obtain for delivery to the Company and the managing underwriter, if any, a “comfort” letter from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants in an underwritten secondary public offering as may be reasonably requested;

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(xi) cooperate with each Participating Holder and the underwriters, if any, of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

(xii) use its commercially reasonable efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed or quoted on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed if the listing of such securities is then permitted under the rules of such exchange and trading system;

(xiii) cooperate with the Participating Holders and the underwriters, if any, to facilitate the timely preparation and delivery of certificates (or non-physical certificates, such as through the use of The Depositary Trust Company’s Direct Registration System), with requisite CUSIP numbers, representing Registrable Securities to be sold and not bearing any restrictive legends;

(xiv) in the case of an underwritten offering, make reasonably available the appropriate officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter in any such underwritten offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto;

(xv) use its commercially reasonable efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical security instruments into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s);

(xvi) use its commercially reasonable efforts to take such actions as are under its control to become or remain a well-known seasoned issuer (as such term in defined in Rule 405 under the Securities Act) and not become an ineligible issuer (as such term is defined in Rule 405 under the Securities Act) during the period when such Registration Statement remains in effect; and

(xvii) make available for inspection by a representative of Participating Holders that are selling at least twenty percent (20%) of the Registrable Securities included in such Registration (and who is named in the applicable prospectus supplement as a Person who may be deemed to be an underwriter with respect to an offering and sale of Registrable Securities), the managing underwriter(s), if any, and any attorneys or accountants retained by such Holders or the managing underwriters(s), at the offices where normally kept, during reasonable business hours, financial and other records and pertinent corporate documents of the Company, and cause the officers, directors and employees of the Company to supply all information in each case reasonably requested by any such representative, managing underwriter, attorney or accountant in connection with such Registration Statement, in each case as shall be advisable to conduct a reasonable investigation within the meaning of the Securities Act; provided, that if any such information is identified by the Company as being confidential or proprietary, each Person

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receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information and shall sign customary confidentiality agreements reasonably requested by the Company prior to the receipt of such information.

(h) Indemnification.

(i) Indemnification by the Company.  With respect to each Demand Registration or Piggyback Registration which has been effected pursuant to this Section 2, the Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, (1) each of the Participating Holders and each of its officers, directors, limited or general partners and members thereof, (2) each member, limited or general partner of each such member, limited or general partner, (3) each of their respective Affiliates, officers, directors, shareholders, employees, advisors, and agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each underwriter, if any, and each person who controls (within the meaning of the Securities Act or the Exchange Act) any underwriter, against any and all claims, losses, damages, penalties, judgments, suits, costs, liabilities, reasonable attorney’s fees and reasonable documented out of pocket expenses of investigating and defending a claim (or actions in respect thereof)  (collectively, the “Losses”) arising out of or based on (A) any untrue statement (or alleged untrue statement) of a material fact contained in any Registration Statement (including any Prospectus or Issuer Free Writing Prospectus) or any other document incident to any such Demand Registration or Piggyback Registration, qualification or compliance, (B) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made not misleading), or (C) any violation by the Company of the Securities Act, the Exchange Act or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with any such Demand Registration or Piggyback Registration, qualification or compliance, and will reimburse each of the Persons listed above, for any reasonable and documented legal and any other expenses reasonably incurred in connection with investigating and defending any such Losses, provided, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based on any untrue statement or omission of material fact based upon written information furnished to the Company by the Participating Holders or underwriter and stated to be specifically for use therein. The liability imposed by this Section2(h)(i) will be in addition to any liability which the Company may otherwise have.

(ii) Indemnification by the Participating Holders.  Each of the Participating Holders agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, each of its directors and officers and each underwriter, if any, of the Company’s securities covered by such a Registration Statement, each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) or such underwriter, each other Participating Holder and each of their respective officers, directors, partners and members, and each Person controlling such Participating Holder (within the meaning of the Securities Act or the Exchange Act) against any and all Losses arising out of or based on (A) any untrue statement (or alleged untrue

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statement) of a material fact contained in any Registration Statement (including any Prospectus or Issuer Free Writing Prospectus) or any other document incident to any such Demand Registration or Piggyback Registration, qualification or compliance (including any notification or the like) made by such Participating Holder in writing or (B) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Participating Holder therein not misleading (in the case of any Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made not misleading) and will reimburse the Persons listed above for any reasonable and documented legal or any other expenses reasonably incurred in connection with investigating or defending any such Losses, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in reliance upon and in conformity with written information furnished to the Company by such Participating Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Participating Holders hereunder shall be limited to an amount equal to the net proceeds (after giving effect to any underwriters discounts and commissions) such Participating Holder receives in such Demand Registration or Piggyback Registration. The liability imposed by this Section 2(h)(i) will be in addition to any liability which the Participating Holders may otherwise have.

(iii) Conduct of the Indemnification Proceedings.  Each party entitled to indemnification under this Section 2(f) (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such party’s expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party), and provided,  further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2(f) unless the Indemnifying Party is prejudiced thereby.  It is understood and agreed that the Indemnifying Party shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate legal counsel for all Indemnified Parties; provided,  however, that where the failure to be provided separate legal counsel could potentially result in a conflict of interest on the part of such legal counsel for all Indemnified Parties, separate counsel shall be appointed for Indemnified Parties to the extent needed to alleviate such potential conflict of interest.  No Indemnifying Party, in the defense of any such claim or litigation shall, except with the prior written consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.  Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request

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in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

(iv) If the indemnification provided for in this Section 2(f) is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any Losses, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions (or alleged statements or omissions) which resulted in such Losses, as well as any other relevant equitable considerations, including any relative benefits obtained.  The relative benefit received by the Company shall be deemed to be equal to the total value received or proposed to be received (after deducting expenses) by the Company pursuant to the sale of securities in any offering, if any.  The relative benefit received by the Holders shall be deemed to be equal to the total value received or proposed to be received (after deducting expenses) by the Holders of securities in an offering, if any. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided,  however, that the obligations of each of the Participating Holders hereunder shall be several and not joint and shall be limited to an amount equal to the net proceeds (after giving effect to any underwriters discounts and commissions) such Participating Holder receives in such Demand Registration or Piggyback Registration and, provided, further, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  For purposes of this Section 2(f)(iv), each Person, if any, who controls an underwriter or agent within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such underwriter or agent and each director of the Company, each officer of the Company who signed a Registration Statement, and each Person, if any, who controls the Company or a selling Holder within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company or such selling Holder, as the case may be.

(v) Subject to the limitations on the Holders’ liability set forth in Section 2(f)(ii) and Section 2(f)(iv), the remedies provided for in this Section 2(f) are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or equity.  The remedies shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any Indemnified Party and survive the transfer of such securities by such Holder.

(vi) The obligations of the Company and of the Participating Holders hereunder to indemnify any underwriter or agent who participates in an offering (or any Person, if any, controlling such underwriter or agent within the meaning of Section 15 of the Securities Act) shall be conditioned upon the underwriting or agency agreement with such

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underwriter or agent containing an agreement by such underwriter or agent to indemnify and hold harmless the Company, each of its directors and officers, each other Participating Holder, and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) or such Participating Holder against all Losses, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such underwriter or agent expressly for use in such filings described in this sentence.

(i) Participating Holders.

(i) Each of the Participating Holders shall furnish to the Company such information regarding such Participating Holder and its partners and members, and the distribution proposed by such Participating Holder as the Company may reasonably request in writing and as shall be reasonably requested in connection with any Registration, qualification or compliance referred to in this Section 2. 

(ii) In the event that, either immediately prior to or subsequent to the effectiveness of any Registration Statement, any Participating Holder shall distribute Registrable Securities to its partners or members, such Participating Holder shall so advise the Company promptly and provide such information as shall be necessary to permit an amendment to such Registration Statement to provide information with respect to such partners or members, as selling security holders.  As soon as is reasonably practicable following receipt of such information, the Company shall file an appropriate amendment to such Registration Statement reflecting the information so provided.  Any incremental expense to the Company resulting from such amendment shall be borne by such Participating Holder.

(iii) Each Holder agrees that at the time that such Holder is a Participating Holder, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2(g)(iii), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder’s receipt of the copies of a supplemented or amended Prospectus or Issuer Free Writing Prospectus or until such Holder is advised in writing by the Company that the use of the Prospectus or Issuer Free Writing Prospectus, as the case may be, may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company all copies, other than any permanent file copies then in such Holder’s possession, of the most recent Prospectus or any Issuer Free Writing Prospectus covering such Registrable Securities at the time of receipt of such notice.  If the Company shall give such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective by the number of days during the period from and including the date of the giving of notice pursuant to Section 2(g)(iii) to the date when the Company shall make available to such Holder a copy of the supplement or amended Prospectus or Issuer Free Writing Prospectus or is advised in writing that the use of the Prospectus or Issuer Free Writing Prospectus may be resumed.

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(j) Rule 144.  With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of restricted securities to the public without registration, the Company agrees to use its commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time during which it is subject to such reporting requirements (or, if the Company is not required to file such reports, it will, upon the reasonable request of the Holders holding a majority of the then outstanding Registrable Securities, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144 under the Securities Act).

(k) Termination.  The Registration Rights set forth in this Section 2 shall terminate and cease to be available as to any securities held by a Holder at such time as such Holder (after owning) first ceases to own any Registrable Securities.

(l) Notwithstanding any provision of this Agreement to the contrary, in order for a Registration to be included as a Registration for purposes of this Section 2, the Registration Statement in connection therewith shall have been continually effective in compliance with the Securities Act and usable for resale for the full period established with respect to such Registration (except in the case of any suspension of sales pursuant to (A) a Scheduled Black-Out Period, or (B) Section 2(g)(iii) hereof, in which case such period shall be extended to the extent of such suspension).

(m) Notwithstanding any provision of this Agreement to the contrary, if the Company is required to file a post-effective amendment to a Registration Statement to incorporate the Company’s quarterly and annual reports and related financial statements on Form 10-Q and Form 10-K, the Company shall use its reasonable best efforts to promptly file such post-effective amendment and may postpone or suspend effectiveness of such Registration Statement to the extent the Company determines necessary to comply with applicable securities laws; provided, that the period by which the Company postpones or suspends the effectiveness of a shelf Registration Statement pursuant to this Section 2(m) plus any suspension, deferral or delay pursuant to Section 2(g)(iii) shall not exceed 60 days in the aggregate in any twelve-month period.

SECTION 3.

MISCELLANEOUS

(a) Governing Law; Jurisdiction.  This Agreement and any claim, controversy or dispute arising under this Agreement and/or the interpretation and enforcement of the rights and duties of the parties shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof. Each of the Holders and the Company (a) irrevocably and unconditionally submits to the sole and exclusive jurisdiction of the Chancery Court of the State of Delaware (or, if the Delaware Court of Chancery lacks jurisdiction over the action or proceeding, the sole and exclusive forum shall be another state or federal court located within the State of Delaware) for purposes of all legal proceedings arising out of this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction and venue by motion or other request for leave from any such court, (c) agrees that it shall not bring any action arising under this Agreement or otherwise in any court other than the

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Chancery Court of the State of Delaware (or, if the Delaware Court of Chancery lacks jurisdiction over the action or proceeding, the sole and exclusive forum shall be another state or federal court located within the State of Delaware).

(b) Section Headings.  The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.

(c) Notices.  All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, (a) if given by telecopy or email, when such telecopy is transmitted to the telecopy number set forth below or sent to the email address set forth below, as applicable, and the appropriate confirmation is received or (b) if given by any other means, when actually received during normal business hours at the address specified in this section:

(i) If to the Company:

Chipotle Mexican Grill, Inc.
1401 Wynkoop Street, Suite 500
Denver, CO 80202
Attention:  General Counsel

Email: cmessner@messner.com
Facsimile: (303) 623-0552

With a copy to (which shall not constitute notice):

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Sabastian V. Niles; Daniel A. Neff; David A. Katz

Email: SVNiles@wlrk.com;  DANeff@WLRK.com;  DAKatz@WLRK.com
Facsimile: (212) 403-2366

(ii) If to the Holders:

Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42nd Floor
New York, NY 10019

Attention: William A. Ackman; Steve Milankov

Email: ackman@persq.com;  milankov@persq.com

Facsimile: (212) 286-1133

With a copy to (which shall not constitute notice):

Cadwalader, Wickersham & Taft LLP

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One World Financial Center

New York, New York 10281

Attention: Richard M. Brand

Email: richard.brand@cwt.com

Facsimile: (212) 504-6666

(d) Reproduction of Documents.  This Agreement and all documents relating thereto, including, without limitation, any consents, waivers and modifications which may hereafter be executed, may be reproduced by the Holders by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and the Holders may destroy any original document so reproduced.  The parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Holders in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

(e) Successors and Assigns.  Neither this Agreement nor any right or obligation hereunder may be assigned in whole or in part by any party without the prior written consent of the other parties hereto and any purported assignment in violation of this provision shall be void; provided,  however, that the rights and obligations hereunder of any Holder may be assigned, in whole or in part, to any Person who acquires such Registrable Securities that is an Affiliate of any Holder (each such Affiliate a “Permitted Assignee”).  Any assignment pursuant to this Section 3(e) shall be effective and any Person shall become a Permitted Assignee only upon receipt by the Company of (1) a written notice from the transferring Holder stating the name and address of the transferee and identifying the number of shares of Registrable Securities with respect to which the rights under this Agreement are being transferred and, if fewer than all of the rights attributable to a Holder hereunder are to be so transferred, the nature of the rights so transferred and (2) a written instrument by which the transferee agrees to be bound by all of the terms and conditions applicable to a Holder of such Registrable Securities.  Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties.

(f) Several Nature of Commitments.  The obligations of each Holder hereunder are several and not joint, and relate only to the Registrable Securities held by such Holder from time to time.  No Holder shall bear responsibility to the Company for breach of this Agreement or any information provided by any other Holder.

(g) Entire Agreement; Amendment and Waiver.  This Agreement constitutes the entire understanding of the parties hereto relating to the subject matter hereof and supersedes all prior understandings among such parties.  This Agreement may be amended with (and only with) the written consent of the Company and the Holders holding a majority of the then outstanding Registrable Securities and any such amendment shall apply to all Holders and all of their Registrable Securities; provided,  however, that, notwithstanding the foregoing, no amendment to this Agreement may adversely affect the rights of a Holder hereunder without the prior written consent of such Holder; provided,  further, that, notwithstanding the foregoing, additional Holders may become party hereto upon an assignment of rights and obligations hereunder pursuant to Section 3(e); providedfurther,  however, that other than as set forth in Section 3(e), the Company may not add additional parties hereto without the consent of Holders

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holding a majority of the then outstanding Registrable Securities.  The observance of any term of this Agreement may be waived by the party or parties waiving any rights hereunder; provided, that any such waiver shall apply to all Holders and all of their Registrable Securities only if made by Holders holding a majority of then-outstanding Registrable Securities.

(h) Injunctive Relief.  It is hereby agreed and acknowledged that it will be impossible to measure in money the damage that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law.  Any such Person shall, therefore, be entitled (in addition to any other remedy to which it may be entitled in law or in equity) to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

(i) WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTIONS, SUITS, DEMAND LETTERS, JUDICIAL, ADMINISTRATIVE OR REGULATORY PROCEEDINGS, OR HEARINGS, NOTICES OF VIOLATION OR INVESTIGATIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (B) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY.

(j) Other Registration Rights.  Each of the Holders acknowledges that (i) prior to the date of this Agreement the Company has enteredinto the 2006 Registration Rights Agreement and (ii) notwithstanding anything to the contrary in this Agreement, the registration rights granted to the Holders hereunder are subject to the registration rights provided under the 2006 Registration Rights Agreement. After the date of this Agreement, the Company shall not enter into any registration rights agreement that is inconsistent with or violates the rights granted to the Holders by this Agreement.

(k) Severability.  In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement which shall remain in full force and effect.

(l) Counterparts.  This Agreement may be executed in two or more counterparts (including by email or facsimile signature), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

(m) Interpretation of this Agreement.  Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

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[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date first set forth above.

CHIPOTLE MEXICAN GRILL, INC.

By:    /s/   John R. Hartung
Name: John R. Hartung
Title: Chief Financial Officer

On behalf of the Pershing Square Group

PERSHING SQUARE CAPITAL MANAGEMENT, L.P.

By: PS Management GP, LLC, its General Partner

By:     /s/  William A. Ackman
Name:  William A. Ackman
Title:    Managing Member

EX-10.2.4

Exhibit 10.2.4

Stock Appreciation Rights Agreement

This Stock Appreciation Rights Agreement (“SAR Agreement”) evidences the grant to[]  (the “Participant”) by Chipotle Mexican Grill, Inc.  (the “Company”) of the right to receive shares of Common Stock of the Company (the “Shares”) on the terms and conditions provided for below (the “SARs”) pursuant to the Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the “Plan”).  This SAR Agreement and the SARs granted hereunder are expressly subject to all of the terms, definitions and provisions of the Plan as it may be amended and restated from time to time.  Capitalized terms used in this SAR Agreement and not defined herein shall have the meanings attributed to them in the Plan.

1. Grant Date and Term.  The date on which the SARs are granted is  []  (the “Grant Date”).  The term of the SARs is from the Grant Date until the seventh anniversary of the Grant Date, subject to earlier termination in connection with employment termination.

2. Number of Shares Subject to SARs; Rights Conferred by Grant of SARs.  The number of Shares subject to the SARs is number of sars.  The SARs represent the right, upon exercise, to receive a number of Shares with a fair market value, determined on the date of exercise, equal to the product of (i) the aggregate number of Shares with respect to which this SAR is exercised and (ii) the excess of (A) the fair market value of a Share as of the date of exercise over (B) the SAR Base Price specified below.  The fair market value of a share on the date of exercise shall be determined as provided in Section 5 below.  The Participant shall not be entitled to receive a cash payment in respect of the Shares underlying the SARs on any dividend payment date for the Shares.

3. Base Price.  The Base Price of the SARs is  [](subject to any adjustment under Section 9 of the Plan).

4. Vesting.  Subject to the provisions of the Plan and the Participant’s continued employment with the Company (as defined in the Plan), the SARs shall vest as to fifty percent of all Shares subject to the SARs on the second anniversary of the Grant Date and the remaining Shares subject to the SARs on the third anniversary of the Grant Date.  No accelerated vesting shall occur except as provided in the Plan, as determined by the Committee or as described in Section 10,  11 or 13 of this SAR Agreement.

5. Exercise of SARs.  Except as provided in the Plan, the Participant may exercise a vested SAR, in whole or in part, at any time during the term of the SARs by providing written notice to the Company stating the number of shares in respect of which the SAR is being exercised.  Such written notice may be delivered in person or by certified mail to the Corporate Secretary of the Company or in such other form or manner as the Committee may approve or any administrative agent engaged by the Company may specify for such purpose, including by electronic means.  The SARs may not be exercised with respect to a number of Shares that is less than the lesser of (i) twenty-five or (ii) the total number of Shares remaining available for exercise pursuant to this SAR Agreement.  Upon exercise, the Participant will receive a number of Shares having a fair market value at the time of exercise equal to the product of (A) the excess of the fair market value

of a Share at time of exercise over the Base Price and (B) the number of Shares with respect to which the SARs are exercised.  For purposes of this Section 5, fair market value shall be the most recent real time trading price of a Share at the time of exercise of the SAR as determined in good faith by the Committee or any agent engaged by the Company to administer the exercise of the SARs, based on transactions reported on the NYSE or other national securities exchange, provided that if the Shares are not then listed and traded on the NYSE or other national securities exchange, fair market value shall be what the Committee determines in good faith to be the fair market value of a Share at the time of such exercise, using such criteria as it shall determine, in its discretion, to be appropriate for valuation.

6. Transferability of SAR.

The SARs granted hereby shall not be transferable except in accordance with the following provisions:

(a) Limit on Transfers.  During the Participant’s lifetime, all SARs shall be exercisable only by the Participant or by the legal guardian of a disabled Participant.

(b) Dispositions to Beneficiaries.  A Participant shall have the right to designate a beneficiary who shall be entitled to exercise the Participant’s SARs (subject to their terms and conditions) following the Participant’s death, and to whom any amounts payable following the Participant’s death shall be paid.  Such designation shall be made in such manner and in accordance with such procedures as may be established by the Committee from time to time.  If no beneficiary designation has been made to the Committee at the time of a Participant’s death, then the Participant’s beneficiary shall be deemed to be the Participant’s estate or heirs pursuant to the laws of descent and distribution.  In order to exercise a SAR after the Participant’s death, the beneficiary, or if no beneficiary designation has been made the personal representative of Participant’s estate or Participant’s lawful heirs, must agree to be bound by the provisions of the Plan and this SAR Agreement and to be treated as the “Participant” under the Plan and the SAR Agreement.  All references to a “Participant” under the Plan and this SAR Agreement shall be deemed to refer to the Participant’s beneficiaries, the personal representative of Participant’s estate or Participant’s heirs, as applicable after his or her death; provided,  however, that references in the Plan or this SAR Agreement to the employment of a Participant or to the termination of such Employment or to any competitive activity by a Participant shall continue to refer to the employment or any competitive activity of the Participant.

(c) Legal Restrictions on Transferability and Exercise.  The SARs covered hereby may not be exercised in any manner or at any time if the issuance of Shares upon the exercise of the SARs would constitute a violation of any applicable federal or state securities or other law or regulation.  The Participant agrees that if any of the Shares acquired by exercise of the SARs granted hereunder are registered under the Securities Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any Shares acquired by exercise of the SARs will be made by the Participant or by any successor under circumstances such that the Participant or such successor may be deemed an underwriter, as defined in the Securities Act.

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7. Withholding Taxes.  No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to the SARs, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount.  If approved by the Committee in its sole discretion, the minimum required tax withholding obligations may be settled with Shares, including without limitation Shares otherwise delivered upon exercise of the SARs.  The obligations of the Company under the Plan and this SAR Agreement shall be conditional on such payment, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant.

8. Applicability of the Plan.  The SARs and the Shares that may be purchased by exercise of the SARs are subject to all provisions of the Plan and all determinations of the Committee shall be made in accordance with the terms of the Plan.  By executing this SAR Agreement, the Participant expressly acknowledges (i) receipt of the Plan and any current Plan prospectus and (ii) the applicability of all provisions of the Plan to the SARs.  In the event of any inconsistency between this SAR Agreement and the Plan, the Plan shall control.

9. General Termination of Employment.  This Section 9 sets forth the normal treatment of the SARs following the date on which the employment relationship between Participant and the Company (including any subsidiary or parent of the Company) ceases to exist (the “Date of Termination”) where such termination does not result from circumstances described in Sections 10 through 12 below.  Notwithstanding any provision of this Section 9 or ensuing Sections 10 through 11 to the contrary, after a Participant’s Date of Termination, no SAR may be exercised after the end of its full term specified pursuant to Section 1.  In addition, the Participant’s SARs, and the rights and obligations set forth herein, are subject to amendment, adjustment or termination pursuant to the Plan and/or Section 14:

(a) Unvested SARs Held on the Date of Termination.  Any unvested SARs held by the Participant as of the Date of Termination shall immediately expire.

(b) Post-Termination Exercise and Expiration.  The deadline for Participant’s exercise of any vested SARs held by the Participant as of the Date of Termination (the “Exercise Deadline”) shall be 90 days after the Date of Termination.  Any vested but unexercised SARs not exercised on or before the Exercise Deadline shall immediately expire.

10. Participant’s Retirement.  The Company has specified criteria for classification as a “Retiree” for purposes of certain compensation plans which include a requirement that an employee shall have achieved the combined Age and Years of Service (as those terms are defined below) of at least 70.  In this Section 10, the term “Age” of a Participant means (as of a particular date of determination), the Participant’s age on that date in whole years and any fractions thereof, and the term “Years of Service” means the number of years and fractions thereof during the period beginning on a Participant’s most recent commencement of employment with the Company or a subsidiary or parent of the Company and ending on such Participant’s Date of Termination.  In the event that a Participant meeting the Age and Years of Service criteria for classification as a Retiree retires, then provided such Participant gave the Chief Executive Officer of the Company or his or

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her designee at least six months prior written notice of retirement and additionally agreed for a period of two years after such retirement not to engage in any “competitive activity” with the Company (as determined from time to time by the Committee), the following special provisions shall apply:

(a) Unvested SARs Held on the Date of Termination.  Any unvested SARs held by the Participant as of the Date of Termination shall vest on the regularly scheduled vesting date or dates described in Section 4 above as if the Participant remained employed by the Company, provided, however, that there shall be no additional vesting under this Section 10(a) if the Participant at any time during the two year period after retirement engaged in any competitive activity with the Company as described above.

(b) Post-Termination Exercise and Expiration.  The Exercise Deadline for the Participant’s vested SARs (determined after application of Section 10(a)) shall be (i) the third anniversary of the Date of Termination in the case of any SARs that were vested as of the Date of Termination, and (ii) the third anniversary of the applicable vesting date in the case of any SARs that were unvested as of the Date of Termination.

11. Death or Disability.  In the event that a Participant’s Employment is terminated by reason of death or disability (for purposes of this SAR Agreement, “disability” shall mean that the Participant is unable to perform his or her job duties due to a medically diagnosed permanent physical or mental condition), the following shall apply:

(a) Unvested SARs Held on the Date of Termination.  Any unvested SARs held by the Participant as of the Date of Termination shall immediately vest.

(b)  Post-Termination Exercise and Expiration.  The Exercise Deadline for any SARs held by the Participant (or his or her beneficiaries or estate, in the case of death) on the Date of Termination shall be the third anniversary of the Date of Termination.  Any unexercised SARs held by the Participant (or his or her beneficiaries or estate, in the case of death) shall expire immediately after the Exercise Deadline.

12. Termination For Cause.  In the event that the Company determines a Participant’s Employment is terminated for Cause (as defined in the Plan), any SARs held by such Participant on the Date of Termination, whether vested or unvested, shall immediately expire.

13. Change in Control.  In the event of a Change in Control following which the Common Stock will not continue to be listed for trading on a national securities exchange, the Committee shall arrange for the substitution for any unvested SARs with the grant of a replacement award (the “Replacement Award”) to Participant of an option or stock appreciation right issued by the surviving or successor entity (or the ultimate parent thereof) in such Change in Control that meets all of the following criteria:

(a) Such Replacement Award shall be denominated in securities listed for trading following such Change in Control on a national securities exchange. 

(b) Such Replacement Award shall provide Participant with substantially the same economic value and benefits as provided by this SAR Agreement and the unvested

4

SARs, including (i) an aggregate exercise or base price equal to the aggregate Base Price of the unvested SARs, (ii) an aggregate spread determined immediately after such Change in Control equal to the aggregate spread of the unvested SARs as determined immediately prior to such Change in Control, and (iii) a ratio of exercise price or base price to the fair market value of the stock subject to such Replacement Award, as determined immediately after the Change in Control, that is equal to the ratio of Base Price of the unvested SARs to the Fair Market Value of the Common Stock, as determined immediately prior to the Change in Control.  Notwithstanding anything to the contrary contained herein, the substitution of the Replacement Award for the unvested SARs shall be done in a manner that complies with Section 409A of the Code.

(c) Such Replacement Award shall vest on the earlier to occur of the date the SARs would otherwise have vested under the terms of this SAR Agreement and the third anniversary of the Grant Date, subject to Participant’s continued employment with the surviving or successor entity (or a direct or indirect subsidiary or ultimate parent thereof) through such date, provided, however, that such Replacement Award will vest immediately if Participant’s employment is terminated by the surviving or successor entity Without Cause or by Participant for Good Reason, in either case at any time prior to the date of vesting of such Replacement Award.

(d) Notwithstanding Section 13(c), such Replacement Award shall vest immediately prior to (i) any transaction with respect to the surviving or successor entity (or parent or subsidiary company thereof) of substantially similar character to a Change in Control, or (ii) the securities underlying such Replacement Award ceasing to be listed on a national securities exchange.

Upon such substitution the unvested SARs and this SAR Agreement shall terminate and be of no further force and effect; but if the Committee does not or cannot provide for a Replacement Award meeting all of the terms set forth above, any unvested SARs shall vest immediately prior to such Change in Control and the Participant shall be entitled to exercise the SARs and receive upon such exercise the consideration to which Participant would have been entitled in such Change in Control transaction as a holder of Common Stock had the SARs been exercised in accordance with Section 5 on the business day immediately preceding such Change in Control transaction. 

14. Modification; Waiver.  Except as provided in the Plan or this SAR Agreement, no provision of this SAR Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Participant and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged, provided that any change that is advantageous to Participant may be made by the Committee without Participant’s consent or written signature or acknowledgement.  No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this SAR Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Participant acknowledges and agrees that the Committee has the right to amend an outstanding SAR in whole or in part from time-to-time if the Committee believes, in its sole and absolute discretion, such amendment is required or appropriate in order to conform the SAR to, or otherwise satisfy any legal requirement (including without limitation the provisions of Section 409A of the Code).  Such

5

amendments may be made retroactively or prospectively and without the approval or consent of the Participant to the extent permitted by applicable law, provided that the Committee shall not have any such authority to the extent that the grant or exercise of such authority would cause any tax to become due under Section 409A of the Code.

15. Notices.  Except as the Committee may otherwise prescribe or allow in connection with communications procedures developed in coordination with any third party administrator engaged by the Company, all notices, including notices of exercise, requests, demands or other communications required or permitted with respect to the Plan, shall be in writing addressed or delivered to the parties.  Such communications shall be deemed to have been duly given to any party when delivered by hand, by messenger, by a nationally recognized overnight delivery company, by facsimile, or by first-class mail, postage prepaid and return receipt requested, in each case to the applicable addresses set forth below:

If to the Participant:
	to the Participant’s most recent address on the records of the Company
If to the Company:
	Chipotle Mexican Grill, Inc. 1401 Wynkoop Street, Suite 500 Denver, CO 80202 Attn: Executive Director – Human Resources Facsimile: 303-222-2500

(or to such other address as the party in question shall from time to time designate by written notice to the other parties). 

16. Compensation Recovery.   The Company may cancel, forfeit or recoup any rights or benefits of, or payments to, the Participant hereunder, including but not limited to any Shares issued by the Company upon exercise of vested SARs or the proceeds from the sale of any such Shares, under any future compensation recovery policy that it may establish and maintain from time to time, to meet listing requirements that may be imposed in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or otherwise.  The Company shall delay the exercise of its rights under this Section for the period as may be required to preserve equity accounting treatment.

17. Governing Law.  Except to the extent that provisions of the Plan are governed by applicable provisions of the Code or other substantive provisions of federal law, the Plan and all SARs made and actions taken thereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof.

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Signature page to Stock Appreciation Rights Agreement

CHIPOTLE MEXICAN GRILL, INC.

By: Darlene Friedman

Chair, Compensation Committee of the Board of Directors

[Participant Name:]

Participant

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EX-10.2.5

Exhibit 10.2.5

Stock Appreciation Rights Agreement

This Stock Appreciation Rights Agreement (“SAR Agreement”) evidences the grant to[]  (the “Participant”) by Chipotle Mexican Grill, Inc. (the “Company”) of the right to receive shares of Common Stock of the Company (the “Shares”) on the terms and conditions provided for below (the “SARs”) pursuant to the Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the “Plan”).  This SAR Agreement and the SARs granted hereunder are expressly subject to all of the terms, definitions and provisions of the Plan as it may be amended and restated from time to time.  Capitalized terms used in this SAR Agreement and not defined herein shall have the meanings attributed to them in the Plan.

1. Grant Date and Term.  The date on which the SARs are granted is  []  (the “Grant Date”).  The term of the SARs is from the Grant Date until the seventh anniversary of the Grant Date, subject to earlier termination in connection with employment termination or failure to satisfy the performance goals as described hereunder.

2. Number of Shares Subject to SARs; Rights Conferred by Grant of SARs.  The number of Shares subject to the SARs is number of sars.  The SARs represent the right, upon exercise, to receive a number of Shares with a fair market value, determined on the date of exercise, equal to the product of (i) the aggregate number of Shares with respect to which this SAR is exercised and (ii) the excess of (A) the fair market value of a Share as of the date of exercise over (B) the SAR Base Price specified below.  The fair market value of a share on the date of exercise shall be determined as provided in Section 5 below.  The Participant shall not be entitled to receive a cash payment in respect of the Shares underlying the SARs on any dividend payment date prior to receiving the Shares.

3. Base Price.  The Base Price of the SARs is  [](subject to any adjustment under Section 9 of the Plan).

4. Vesting.

(a) Generally.  This grant of SARs is divided into two tranches, each of which is subject to both (A) a performance vesting condition (the “Performance Condition”) and (B) a service-based vesting condition that requires the Participant to remain employed through certain dates (the “Service Condition”).  Fifty percent (50%) of the SARs granted hereunder shall be designated as “Tranche I SARs” and fifty percent (50%) of the SARs granted hereunder shall be designated as “Tranche II SARs.”  The Participant will become vested in a tranche of SARs only when both the Performance Condition and the Service Condition have been satisfied for that particular tranche of SARs.  In no event will any unvested SAR become vested after the expiration of the term provided in Section 1.

(b) Performance Condition.  Subject to the provisions of the Plan, the Performance Condition for each tranche of SARs will be satisfied on the dates that the Committee certifies the Company’s achievement of the Performance Conditions for such tranche as set forth in Appendix A.

(c) Service Condition.  Subject to the provisions of the Plan and the Participant’s continued employment with the Company (as defined in the Plan), the Service Condition for the Tranche I SARs shall be satisfied if the Participant remains employed by the Company (as defined in the Plan) until the second anniversary of the Grant Date and the Service Condition on the Tranche II SARs shall be satisfied if the Participant remains employed until the third anniversary of the Grant Date.

(d) No accelerated vesting shall occur except as provided in the Plan, as determined by the Committee or as described in Section 10,  11 or 13 of this SAR Agreement.

5. Exercise of SARs.  Except as provided in the Plan, the Participant may exercise a vested SAR, in whole or in part, at any time during the term of the SARs by providing written notice to the Company stating the number of shares in respect of which the SAR is being exercised.  Such written notice may be delivered in person or by certified mail to the Corporate Secretary of the Company or in such other form or manner as the Committee may approve or any administrative agent engaged by the Company may specify for such purpose, including by electronic means.  The SARs may not be exercised with respect to a number of Shares that is less than the lesser of (i) twenty-five or (ii) the total number of Shares remaining available for exercise pursuant to this SAR Agreement.  Upon exercise, the Participant will receive a number of Shares having a fair market value at the time of exercise equal to the product of (A) the excess of the fair market value of a Share at time of exercise over the Base Price and (B) the number of Shares with respect to which the SARs are exercised.For purposes of this Section 5, fair market value shall be the most recent real time trading price of a Share at the time of exercise of the SAR as determined in good faith by the Committee or any agent engaged by the Company to administer the exercise of the SARs, based on transactions reported on the NYSE or other national securities exchange, provided that if the Shares are not then listed and traded on the NYSE or other national securities exchange, fair market value shall be what the Committee determines in good faith to be the fair market value of a Share at the time of such exercise, using such criteria as it shall determine, in its discretion, to be appropriate for valuation.

6. Transferability of SAR.

The SARs granted hereby shall not be transferable except in accordance with the following provisions:

(a) Limit on Transfers.    During the Participant’s lifetime, all SARs shall be exercisable only by the Participant or by the legal guardian of a disabled Participant. 

(b) Dispositions to Beneficiaries.    A Participant shall have the right to designate a beneficiary who shall be entitled to exercise the Participant’s SARs (subject to their terms and conditions) following the Participant’s death, and to whom any amounts payable following the Participant’s death shall be paid.  Such designation shall be made in such manner and in accordance with such procedures as may be established by the Committee from time to time.  If no beneficiary designation has been made to the Committee at the time of a Participant’s death, then the Participant’s beneficiary shall be deemed to be the Participant’s estate or heirs pursuant to the laws of descent and

2

distribution.  In order to exercise a SAR after the Participant’s death, the beneficiary, or if no beneficiary designation has been made the personal representative of Participant’s estate or Participant’s lawful heirs, must agree to be bound by the provisions of the Plan and this SAR Agreement and to be treated as the “Participant” under the Plan and the SAR Agreement.  All references to a “Participant” under the Plan and this SAR Agreement shall be deemed to refer to the Participant’s beneficiaries, the personal representative of Participant’s estate or Participant’s heirs, as applicable after his or her death; provided,  however, that references in the Plan or this SAR Agreement to the employment of a Participant or to the termination of such Employment or to any competitive activity by a Participant shall continue to refer to the employment or any competitive activity of the Participant. 

(c) Legal Restrictions on Transferability and Exercise.    The SARs covered hereby may not be exercised in any manner or at any time if the issuance of Shares upon the exercise of the SARs would constitute a violation of any applicable federal or state securities or other law or regulation.  The Participant agrees that if any of the Shares acquired by exercise of the SARs granted hereunder are registered under the Securities Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any Shares acquired by exercise of the SARs will be made by the Participant or by any successor under circumstances such that the Participant or such successor may be deemed an underwriter, as defined in the Securities Act. 

7. Withholding Taxes.    No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to the SARs, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount.  If approved by the Committee in its sole discretion, the minimum required tax withholding obligations may be settled with Shares, including without limitation Shares otherwise delivered upon exercise of the SARs.  The obligations of the Company under the Plan and this SAR Agreement shall be conditional on such payment, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. 

8. Applicability of the Plan.    The SARs and the Shares that may be purchased by exercise of the SARs are subject to all provisions of the Plan and all determinations of the Committee shall be made in accordance with the terms of the Plan.  By executing this SAR Agreement, the Participant expressly acknowledges (i) receipt of the Plan and any current Plan prospectus and (ii) the applicability of all provisions of the Plan to the SARs.  In the event of any inconsistency between this SAR Agreement and the Plan, the Plan shall control. 

9. General Termination of Employment.    This Section 9 sets forth the normal treatment of the SARs following the date on which the employment relationship between Participant and the Company (including any subsidiary or parent of the Company) ceases to exist (the “Date of Termination”) where such termination does not result from circumstances described in Sections 10 through 12 below.  Notwithstanding any provision of this Section 9 or ensuing Sections 10 through 11 to the contrary, after a Participant’s Date of Termination, no SAR may be exercised after the end of its full term specified pursuant to Section 1.  In addition, the Participant’s

3

SARs, and the rights and obligations set forth herein, are subject to amendment, adjustment or termination pursuant to the Plan and/or Section 14:

(a) Unvested SARs Held on the Date of Termination.    Any unvested SARs held by the Participant as of the Date of Termination shall immediately expire. 

(b) Post-Termination Exercise and Expiration.    The deadline for Participant’s exercise of any vested SARs held by the Participant as of the Date of Termination (the “Exercise Deadline”) shall be 90 days after the Date of Termination.  Any vested but unexercised SARs not exercised on or before the Exercise Deadline shall immediately expire. 

10. Participant’s Retirement.    The Company has specified criteria for classification as a “Retiree” for purposes of certain compensation plans which include a requirement that an employee shall have achieved the combined Age and Years of Service (as those terms are defined below) of at least 70.  In this Section 10, the term “Age” of a Participant means (as of a particular date of determination), the Participant’s age on that date in whole years and any fractions thereof, and the term “Years of Service” means the number of years and fractions thereof during the period beginning on a Participant’s most recent commencement of employment with the Company or a subsidiary or parent of the Company and ending on such Participant’s Date of Termination.  In the event that a Participant meeting the Age and Years of Service criteria for classification as a Retiree retires, then provided such Participant gave the Chief Executive Officer of the Company or his or her designee at least six months prior written notice of retirement and additionally agreed for a period of two years after such retirement not to engage in any “competitive activity” with the Company (as determined from time to time by the Committee), the following special provisions shall apply:

(a) Unvested SARs Held on the Date of Termination.    The Service Condition for any unvested SARs shall be deemed satisfied immediately.  The SARs shall continue to be subject to the Performance Condition.

(b) Post-Termination Exercise and Expiration.    The deadline for the Participant’s exercise of any vested SARs shall be seven years after the Grant Date.

11. Death or Disability.  In the event that a Participant’s Employment is terminated by reason of death or disability (for purposes of this SAR Agreement, “disability” shall mean that the Participant is unable to perform his or her job duties due to a medically diagnosed permanent physical or mental condition), the following shall apply:

(a) Unvested SARs Held on the Date of Termination.    The Service Condition with respect to any unvested SARs shall be deemed to have been met.  If the Performance Condition is met, the Participant shall be entitled to the number of SARs which would otherwise have been become vested under Appendix A multiplied by a fraction, the numerator of which is the number of full calendar months of active employment the Participant has completed since January 1, 2014, and the denominator of which is the number of full calendar months on and after January 1, 2013 that elapsed until the Company achieved the applicable Performance Condition.

4

(b)  Post-Termination Exercise and Expiration.    The Exercise Deadline for any vested SARs held by the Participant (or his or her beneficiaries or estate, in the case of death) on the Date of Termination shall be the third anniversary of the Date of Termination or, if later, 90 days after the date on which the SARs became vested due to attainment of the applicable Performance Condition.  Any unexercised SARs held by the Participant (or his or her beneficiaries or estate, in the case of death) shall expire immediately after the Exercise Deadline.

12. Termination For Cause.    In the event that the Company determines a Participant’s Employment is terminated for Cause (as defined in the Plan), any SARs held by such Participant on the Date of Termination, whether vested or unvested, shall immediately expire.

13. Change in Control.  In the event of a Change in Control following which the Common Stock will not continue to be listed for trading on a national securities exchange, the Committee shall arrange for the substitution for any unvested SARs with the grant of a replacement award (the “Replacement Award”) to Participant of an option or stock appreciation right issued by the surviving or successor entity (or the ultimate parent thereof) in such Change in Control that meets all of the following criteria:

(a) Such Replacement Award shall be denominated in securities listed for trading following such Change in Control on a national securities exchange. 

(b) Such Replacement Award shall provide Participant with substantially the same economic value and benefits as provided by this SAR Agreement and the unvested SARs, including (i) an aggregate exercise or base price equal to the aggregate Base Price of the unvested SARs, (ii) an aggregate spread determined immediately after such Change in Control equal to the aggregate spread of the unvested SARs as determined immediately prior to such Change in Control, and (iii) a ratio of exercise price or base price to the fair market value of the stock subject to such Replacement Award, as determined immediately after the Change in Control, that is equal to the ratio of Base Price of the unvested SARs to the Fair Market Value of the Common Stock, as determined immediately prior to the Change in Control.  Notwithstanding anything to the contrary contained herein, the substitution of the Replacement Award for the unvested SARs shall be done in a manner that complies with Section 409A of the Code.

(c) Such Replacement Award shall vest on the earlier to occur of the date the SARs would otherwise have vested under the terms of this SAR Agreement and the third anniversary of the Grant Date, subject to Participant’s continued employment with the surviving or successor entity (or a direct or indirect subsidiary or ultimate parent thereof) through such date, provided, however, that such Replacement Award will vest immediately if Participant’s employment is terminated by the surviving or successor entity Without Cause or by Participant for Good Reason, in either case at any time prior to the date of vesting of such Replacement Award.

(d) Notwithstanding Section 13(c), such Replacement Award shall vest immediately prior to (i) any transaction with respect to the surviving or successor entity (or parent or subsidiary company thereof) of substantially similar character to a Change in

5

Control, or (ii) the securities underlying such Replacement Award ceasing to be listed on a national securities exchange. 

Upon such substitution the unvested SARs and this SAR Agreement shall terminate and be of no further force and effect; but if the Committee does not or cannot provide for a Replacement Award meeting all of the terms set forth above, any unvested SARs shall vest immediately prior to such Change in Control and the Participant shall be entitled to exercise the SARs and receive upon such exercise the consideration to which Participant would have been entitled in such Change in Control transaction as a holder of Common Stock had the SARs been exercised in accordance with Section 5 on the business day immediately preceding such Change in Control transaction. 

14. Modification; Waiver.    Except as provided in the Plan or this SAR Agreement, no provision of this SAR Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Participant and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged, provided that any change that is advantageous to Participant may be made by the Committee without Participant’s consent or written signature or acknowledgement.  No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this SAR Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Participant acknowledges and agrees that the Committee has the right to amend an outstanding SAR in whole or in part from time-to-time if the Committee believes, in its sole and absolute discretion, such amendment is required or appropriate in order to conform the SAR to, or otherwise satisfy any legal requirement (including without limitation the provisions of Section 409A of the Code).  Such amendments may be made retroactively or prospectively and without the approval or consent of the Participant to the extent permitted by applicable law, provided that the Committee shall not have any such authority to the extent that the grant or exercise of such authority would cause any tax to become due under Section 409A of the Code.

15. Notices.    Except as the Committee may otherwise prescribe or allow in connection with communications procedures developed in coordination with any third party administrator engaged by the Company, all notices, including notices of exercise, requests, demands or other communications required or permitted with respect to the Plan, shall be in writing addressed or delivered to the parties.  Such communications shall be deemed to have been duly given to any party when delivered by hand, by messenger, by a nationally recognized overnight delivery company, by facsimile, or by first-class mail, postage prepaid and return receipt requested, in each case to the applicable addresses set forth below:

If to the Participant:
	to the Participant’s most recent address on the records of the Company
If to the Company:
	Chipotle Mexican Grill, Inc. 1401 Wynkoop Street, Suite 500 Denver, CO 80202 Attn: Executive Director – Human Resources Facsimile: 303-222-2500

6

(or to such other address as the party in question shall from time to time designate by written notice to the other parties). 

16. Compensation Recovery.   The Company may cancel, forfeit or recoup any rights or benefits of, or payments to, the Participant hereunder, including but not limited to any Shares issued by the Company upon exercise of vested SARs or the proceeds from the sale of any such Shares, under any future compensation recovery policy that it may establish and maintain from time to time, to meet listing requirements that may be imposed in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or otherwise.  The Company shall delay the exercise of its rights under this Section for the period as may be required to preserve equity accounting treatment.

17. Governing Law.    Except to the extent that provisions of the Plan are governed by applicable provisions of the Code or other substantive provisions of federal law, the Plan and all SARs made and actions taken thereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof.

CHIPOTLE MEXICAN GRILL, INC.

By: Darlene Friedman

Chair, Compensation Committee of the Board of Directors

[Participant Name:]

Participant

7

APPENDIX A

Performance Condition:

The Performance Condition for the Tranche I SARs:

The Performance Condition for the Tranche II SARs:

8

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Subsidiary	Jurisdiction of Incorporation
CMG Strategy Co., LLC	Colorado
CMG Pepper, LLC	Colorado
Chipotle Mexican Grill of Colorado, LLC	Colorado
Chipotle Mexican Grill of Maryland, LLC	Maryland
Chipotle Mexican Grill of Kansas, LLC	Kansas
Chipotle Services, LLC	Colorado
Chipotle Mexican Grill U.S. Finance Co., LLC	Colorado
CMGGC, LLC	Colorado
Chipotle Mexican Grill Texas Holdings, LLC	Colorado
Chipotle Texas, LLC	Colorado
Chipotle Mexican Grill Canada Corp.	Nova Scotia, Canada
Chipotle Mexican Grill Holdings GmbH	Switzerland
Chipotle Mexican Grill UK Limited	United Kingdom
Chipotle Mexican Grill France SAS	France
CMG Purchasing Partners, LLP	Colorado
CMG Purchasing Co., LLC	Colorado
ShopHouse, LLC	Colorado
Chipotle Mexican Grill Germany GMBH	Germany
CMG Concessions, LLC	Colorado
PL Restaurant Holdings, LLC	Colorado
EMEA Tortilla, Ltd.	United Kingdom

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1)Registration Statement (Form S-8 No. 333-131289) pertaining to the Chipotle Executive Stock Option Plan, and the Chipotle Mexican Grill, Inc. 2006 Stock Incentive Plan,

(2)Registration Statement (Form S-8 No. 333-151278) pertaining to the Amended and Restated Chipotle Mexican Grill, Inc. 2006 Stock Incentive Plan,

(3)Registration Statement (Form S-8 No. 333-174474) pertaining to the Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan and the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan, and

(4)     Registration Statement (Form S-8 No. 333-204380) pertaining to the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan

of our reports dated February 6, 2017, with respect to the consolidated financial statements of Chipotle Mexican Grill, Inc. and the effectiveness of internal control over financial reporting of Chipotle Mexican Grill, Inc. included in this Annual Report (Form 10-K) of Chipotle Mexican Grill, Inc. for the year ended December 31, 2016.  

/s/ Ernst & Young LLP

Denver, Colorado

February 6, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Steve Ells, certify that:

1. I have reviewed this annual report on Form 10-K of Chipotle Mexican Grill, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February6, 2017

/s/     Steve Ells

Steve Ells

Founder, Chairman and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John R. Hartung, certify that:

1. I have reviewed this annual report on Form 10-K of Chipotle Mexican Grill, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February6, 2017

/s/     John R. Hartung

John R. Hartung

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Steve Ells, the Founder, Chairman and Chief Executive Officer of Chipotle Mexican Grill, Inc. (the “Registrant”) and John R. Hartung, the Chief Financial Officer of the Registrant, each hereby certifies that, to the best of his knowledge:

1. The Registrant’s Annual Report on Form 10-K for the period ended December31, 2016, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Registrant at the end of the period covered by the Periodic Report and results of operations of the Registrant for the periods covered by the Periodic Report.

Date: February6, 2017

/s/     Steve Ells	/s/     John R. Hartung
Steve Ells	John R. Hartung
Founder, Chairman and Chief Executive Officer (Principal Executive Officer)	Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016	Jan. 31, 2016
Document and Entity Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Entity Registrant Name	CHIPOTLE MEXICAN GRILL INC
Entity Central Index Key	0001058090
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding			28,772,830
Entity Public Float		$ 6.6
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No

XML

Condensed Consolidated Balance Sheet - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 87,880	$ 248,005
Accounts receivable, net of allowance for doubtful accounts of $259 and $1,176 as of December 31, 2016 and December 31, 2015, respectively	40,451	38,283
Inventory	15,019	15,043
Prepaid expenses and other current assets	44,080	39,965
Income tax receivable	5,108	58,152
Investments	329,836	415,199
Total current assets	522,374	814,647
Leasehold improvements, property and equipment, net	1,303,558	1,217,220
Long term investments	125,055	622,939
Other assets	53,177	48,321
Goodwill	21,939	21,939
Total assets	2,026,103	2,725,066
Current liabilities:
Accounts payable	78,363	85,709
Accrued payroll and benefits	76,301	64,958
Accrued liabilities	127,129	129,275
Total current liabilities	281,793	279,942
Deferred rent	288,927	251,962
Deferred income tax liability	18,944	32,305
Other liabilities	33,946	32,883
Total liabilities	623,610	597,092
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2016 and December 31, 2015, respectively	0	0
Common stock $0.01 par value, 230,000 shares authorized, and 35,833 and 35,790 shares issued as of December 31, 2016 and December 31, 2015, respectively	358	358
Additional paid-in capital	1,238,875	1,172,628
Treasury stock, at cost, 7,019 and 5,206 common shares at December 31, 2016 and December 31, 2015, respectively	(2,049,389)	(1,234,612)
Accumulated other comprehensive income (loss)	(8,162)	(8,273)
Retained earnings	2,220,811	2,197,873
Total shareholders' equity	1,402,493	2,127,974
Total liabilities and shareholders' equity	$ 2,026,103	$ 2,725,066

XML

Condensed Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Condensed Consolidated Balance Sheet [Abstract]
Allowance for doubtful accounts, Accounts receivable	$ 259	$ 1,176
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	600,000,000	600,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	230,000,000	230,000,000
Common stock, shares issued	35,833,000	35,790,000
Treasury stock, shares at cost	7,019,000	5,206,000

XML

Condensed Consolidated Statement of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Condensed Consolidated Statement of Income and Comprehensive Income [Abstract]
Revenue	$ 3,904,384	$ 4,501,223	$ 4,108,269
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging	1,365,580	1,503,835	1,420,994
Labor	1,105,001	1,045,726	904,407
Occupancy	293,636	262,412	230,868
Other operating costs	641,953	514,963	434,244
General and administrative expenses	276,240	250,214	273,897
Depreciation and amortization	146,368	130,368	110,474
Pre-opening costs	17,162	16,922	15,609
Loss on disposal and impairment of assets	23,877	13,194	6,976
Total operating expenses	3,869,817	3,737,634	3,397,469
Income from operations	34,567	763,589	710,800
Interest and other income, net	4,172	6,278	3,503
Income before income taxes	38,739	769,867	714,303
Provision for income taxes	(15,801)	(294,265)	(268,929)
Net income	22,938	475,602	445,374
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	(1,291)	(6,322)	(2,049)
Unrealized gain (loss) on investments, net of income taxes of $(849), $946, and $0	1,402	(1,522)	0
Other comprehensive income (loss), net of income taxes	111	(7,844)	(2,049)
Comprehensive income	$ 23,049	$ 467,758	$ 443,325
Earnings per share:
Basic	$ 0.78	$ 15.30	$ 14.35
Diluted	$ 0.77	$ 15.10	$ 14.13
Weighted average common shares outstanding:
Basic	29,265	31,092	31,038
Diluted	29,770	31,494	31,512

XML

Condensed Consolidated Statement of Income and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Condensed Consolidated Statement of Income and Comprehensive Income [Abstract]
Unrealized gain (loss) on investments, tax	$ (849)	$ 946	$ 0

XML

Consolidated Statement Of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Available-for-sale-securities [Member]	Foreign Currency Translation [Member]	Total
Balance at Dec. 31, 2013	$ 352	$ 919,840	$ (660,421)	$ 1,276,897		$ 1,620	$ 1,538,288
Balance, Shares at Dec. 31, 2013	35,245		4,212
Stock-based compensation		97,618					97,618
Stock plan transactions and other	$ 2	(193)					(191)
Stock plan transactions and other, Shares	149
Excess tax benefit on stock-based compensation		21,667					21,667
Acquisition of treasury stock (value)			$ (88,338)				(88,338)
Acquisition of treasury stock (shares)			155
Net income				445,374			445,374
Other Comprehensive Income (Loss), Net of Income Tax						(2,049)	(2,049)
Balance at Dec. 31, 2014	$ 354	1,038,932	$ (748,759)	1,722,271		(429)	2,012,369
Balance, Shares at Dec. 31, 2014	35,394		4,367
Stock-based compensation		59,465					59,465
Stock plan transactions and other	$ 4	(211)					(207)
Stock plan transactions and other, Shares	396
Excess tax benefit on stock-based compensation		74,442					74,442
Acquisition of treasury stock (value)			$ (485,853)				(485,853)
Acquisition of treasury stock (shares)			839
Net income				475,602			475,602
Other Comprehensive Income (Loss), Net of Income Tax					$ (1,522)	(6,322)	(7,844)
Balance at Dec. 31, 2015	$ 358	1,172,628	$ (1,234,612)	2,197,873	(1,522)	(6,751)	2,127,974
Balance, Shares at Dec. 31, 2015	35,790		5,206
Stock-based compensation		65,112					65,112
Stock plan transactions and other		(185)					(185)
Stock plan transactions and other, Shares	43
Excess tax benefit on stock-based compensation		1,320					1,320
Acquisition of treasury stock (value)			$ (814,777)				$ (814,777)
Acquisition of treasury stock (shares)			1,813				1,811
Net income				22,938			$ 22,938
Other Comprehensive Income (Loss), Net of Income Tax					1,402	(1,291)	111
Balance at Dec. 31, 2016	$ 358	$ 1,238,875	$ (2,049,389)	$ 2,220,811	$ (120)	$ (8,042)	$ 1,402,493
Balance, Shares at Dec. 31, 2016	35,833		7,019

XML

Condensed Consolidated Statement of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating activities
Net income	$ 22,938	$ 475,602	$ 445,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	146,368	130,368	110,474
Deferred income tax (benefit) provision	(14,207)	11,666	(20,671)
Loss on disposal and impairment of assets	23,877	13,194	6,976
Bad debt allowance	(262)	(23)	9
Stock-based compensation expense	64,166	57,911	96,440
Excess tax benefit on stock-based compensation	(1,320)	(74,442)	(21,667)
Other	(604)	582	104
Changes in operating assets and liabilities:
Accounts receivable	(1,923)	(3,504)	(10,966)
Inventory	(91)	262	(2,307)
Prepaid expenses and other current assets	(4,259)	(5,259)	(658)
Other assets	(4,855)	(5,619)	1,071
Accounts payable	(6,734)	19,525	2,168
Accrued liabilities	33,491	(7,440)	35,019
Income tax payable/receivable	54,340	32,756	8,831
Deferred rent	37,030	32,911	27,025
Other long-term liabilities	1,287	4,826	4,845
Net cash provided by operating activities	349,242	683,316	682,067
Investing activities
Purchases of leasehold improvements, property and equipment	(258,842)	(257,418)	(252,590)
Purchases of investments	0	(559,372)	(521,004)
Maturities of investments	45,000	352,650	254,750
Proceeds from sale of investments	540,648	0	0
Net cash provided by (used in) investing activities	326,806	(464,140)	(518,844)
Financing activities
Acquisition of treasury stock	(837,655)	(460,675)	(88,338)
Excess tax benefit on stock-based compensation	1,320	74,442	21,667
Stock plan transactions and other financing activities	52	(207)	(66)
Net cash used in financing activities	(836,283)	(386,440)	(66,737)
Effect of exchange rate changes on cash and cash equivalents	110	(4,196)	(224)
Net change in cash and cash equivalents	(160,125)	(171,460)	96,262
Cash and cash equivalents at beginning of period	248,005	419,465	323,203
Cash and cash equivalents at end of period	87,880	248,005	419,465
Supplemental disclosures of cash flow information
Income taxes paid	23,862	248,547	280,687
Increase (decrease) in purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities	(1,781)	(2,870)	9,424
Increase (decrease) in acquistion of treasury stock accrued in accrued liabilities	$ (22,878)	$ 25,178	$ 0

XML

Description Of Business And Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Description Of Business And Summary Of Significant Accounting Policies [Abstract]

Description Of Business And Summary Of Significant Accounting Policies

1. Description of Business and Summary of Significant Accounting Policies

Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (collectively the “Company”) develops and operates restaurants that serve a focused menu of burritos, tacos, burrito bowls and salads, made using fresh, high-quality ingredients. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States as well as 29 international Chipotle restaurants and 23 non-Chipotle restaurants. The Company transitioned the management of its operations from nine to eleven regions during 2016 and aggregates its operations to one reportable segment.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, including wholly and majority owned subsidiaries. All intercompany balances and transactions have been eliminated.

Management Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.

Revenue Recognition

The Company recognizes revenue, net of discounts and incentives, when payment is tendered at the point of sale.  The Company recognizes 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.   These costs are recognized in other operating costs in the consolidated statement of income and comprehensive income and in accrued liabilities in the consolidated balance sheet.  The Company reports revenue net of sales-related taxes collected from customers and remitted to governmental taxing authorities.

During the year ended December 31, 2016, the Company introduced a limited-time frequency program that awarded free food or merchandise to customers based on frequency of monthly visits. The Company deferred revenue reflecting the portion of original sales allocated to the rewards that were earned by program participants and not redeemed at the end of the year, and recorded a corresponding liability in accrued liabilities on its consolidated balance sheet. The portion of revenue allocated to the rewards was based on the estimated value of the award earned and takes into consideration company-specific historical redemption patterns for similar promotions.  Rewards expire according to the loyalty awards terms and conditions. The Company recognizes revenue when awards are redeemed or expire.

The Company sells gift cards which do not have an expiration date and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when: (i) the gift card is redeemed by the customer; or (ii) the Company determines 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. The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. Gift card breakage is recognized in revenue as the gift cards are used on a pro rata basis over a six-month period beginning at the date of the gift card sale and is included in revenue in the consolidated statement of income and comprehensive income. The Company has determined that 4% of gift card sales will not be redeemed and will be retained by the Company. Breakage recognized during the years ended December 31, 2016, 2015 and 2014 was $3,624, $4,226 and $3,146, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally-insured limits.  The Company has not experienced any losses related to these balances and believes the risk to be minimal.

Accounts Receivable

Accounts receivable primarily consists of receivables from third party gift card distributors, tenant improvement receivables, vendor rebates, receivables arising from the normal course of business, and payroll-related tax receivables. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable based on a specific review of account balances. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recoverability is considered remote.

Inventory

Inventory, consisting principally of food, beverages, and supplies, is valued at the lower of first-in, first-out cost or net realizable value. Certain key ingredients (beef, pork, chicken, beans, rice, sour cream, cheese, and tortillas) are purchased from a small number of suppliers.

Investments

Investments classified as “trading” securities are carried at fair value with any unrealized gain or loss being recorded in the consolidated statement of income and comprehensive income. Investments classified as “available-for-sale” are carried at fair market value with unrealized gains and losses, net of tax, included as a component of other comprehensive income (loss). Held-to-maturity securities are carried at amortized cost. The Company recognizes impairment charges on its investments in the consolidated statement of income and comprehensive income when management believes the decline in the fair value of the investment is other-than-temporary.

Leasehold Improvements, Property and Equipment

Leasehold improvements, property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and construction of a restaurant are capitalized and were $8,076, $9,554 and $7,756 for the years ended December 31, 2016, 2015 and 2014, respectively. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives of leasehold improvements, property and equipment. The changes in estimated useful lives did not have a material impact on depreciation in any period. The estimated useful lives are:

Leasehold improvements and buildings	3-20 years
Furniture and fixtures	4-7 years
Equipment	3-10 years

Goodwill

Goodwill represents the excess of cost over fair value of net assets of the business acquired. Goodwill is not subject to amortization, but instead is tested for impairment at least annually, and the Company is required to record any necessary impairment adjustments. Impairment is measured as the excess of the carrying value over the fair value of the goodwill. Based on the Company’s analysis, no impairment charges were recognized on goodwill for the years ended December 31, 2016, 2015 and 2014.

Other Assets

Other assets consist primarily of restricted cash assets of $28,490 and $22,572 as of December 31, 2016 and 2015, respectively, a rabbi trust as described further in Note 7. “Employee Benefit Plans,” transferable liquor licenses which are carried at the lower of fair value or cost, and rental deposits related to leased properties. Restricted cash assets are primarily insurance-related restricted trust assets.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of reviewing restaurant assets to be held and used for potential impairment, assets are grouped together at the market level, or in the case of a potential relocation or closure, at the restaurant level. The Company manages its restaurants as a group with significant common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the years ended December 31, 2016, 2015 and 2014, an aggregate impairment charge of $17,394, $6,675 and $0, respectively, was recognized in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

Impairment charges recognized during the year ended December 31, 2016 resulted primarily from the Company’s determination that its ShopHouse Southeast Asian Kitchen restaurants were impaired and the recognition of a non-cash impairment charge of $14,505  ($8,014 net of tax), representing substantially all of the value of long-lived assets of ShopHouse. The decision to impair the assets was based on an analysis of each restaurant’s past and present operating performance, including a significant change from comparable restaurant sales increases to decreases, and projected future cash flows expected to be generated by the restaurant assets.  The Company has decided not to invest further in developing and growing the ShopHouse brand and is pursuing strategic alternatives. During the year ended December 31, 2015, the impairment charges resulted from an internally developed software program that the Company chose not to implement and the related hardware, the discontinued use of certain kitchen equipment from the Company’s restaurants, as well as restaurant relocations. The fair value of restaurants, including ShopHouse, was determined using level 3 inputs (unobservable inputs) based on a discounted cash flows method.

Income Taxes

The Company recognizes deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of its assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impacts of investment tax credits are recognized as an immediate adjustment to income tax expense. When it is more likely than not that a portion or all of a deferred tax asset will not be realized in the future, the Company provides a corresponding valuation allowance against the deferred tax asset. When it is more likely than not that a position will be sustained upon examination by a tax authority that has full knowledge of all relevant information, the Company measures the amount of tax benefit from the position and records the largest amount of tax benefit that is greater than 50% likely of being realized after settlement with a tax authority. The Company’s policy is to recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in the provision for income taxes in the consolidated statement of income and comprehensive income.

Restaurant Pre-Opening Costs

Pre-opening costs, including rent, wages, benefits and travel for training and opening teams, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business.

Insurance Liability

The Company maintains various insurance policies including workers’ compensation, employee health, general liability, automobile, and property damage. Pursuant to these policies, the Company is responsible for losses up to certain limits and is required to estimate a liability that represents the ultimate exposure for aggregate losses below those limits. This liability is based on management’s estimates of the ultimate costs to be incurred to settle known claims and, where applicable, claims not reported as of the balance sheet date. The estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions, and economic conditions. If actual trends differ from the estimates, the financial results could be impacted. As of December 31, 2016 and 2015, $35,550 and $28,391, respectively, of the estimated liability was included in accrued payroll and benefits and $13,881 and $11,898, respectively, was included in accrued liabilities in the consolidated balance sheet.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred and totaled $102,969, $69,257 and $57,290 for the years ended December 31, 2016, 2015 and 2014, respectively. Advertising and marketing costs are included in other operating costs in the consolidated statement of income and comprehensive income.

Rent

Rent expense for the Company’s leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The lease term is the lesser of 20 years inclusive of reasonably assured renewal periods, or the lease term. The lease term begins when the Company has 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 in the consolidated balance sheet. Pre-opening rent is included in pre-opening costs in the consolidated statement of income and comprehensive 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 of the Company’s operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified target amounts. The Company recognizes contingent rent expense provided the achievement of that target is considered probable.

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short-term nature.

Fair Value Measurements

Fair value is the price the Company would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For assets and liabilities recorded or disclosed at fair value on a recurring basis, the Company determines fair value based on the following:

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Foreign Currency Translation

The Company’s international operations generally use the local currency as the functional currency. Assets and liabilities are translated at exchange rates in effect as of the balance sheet date. Income and expense accounts are translated at the average monthly exchange rates during the year. Resulting translation adjustments are recorded as a separate component of other comprehensive income (loss) in the consolidated statement of income and comprehensive income.

Recently Issued Accounting Standards and Adoption of Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, “Statement of Cash Flows (Topic 230)”, which provides guidance on the classification of restricted cash to be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2017 using a retrospective adoption method and early adoption is permitted. For the years ended December 31, 2016, 2015 and 2014, $28,490,  $22,572 and $19,889, respectively, of restricted cash would have been included in cash and cash equivalents and changes in the balance excluded from net cash provided by operating activities in the consolidated statement of cash flows if this new guidance had been adopted as of the respective dates.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718).” The pronouncement was issued to simplify the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016.  The guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Upon adoption, any future excess tax benefits or deficiencies will be recorded to the provision for income taxes in the consolidated statement of income, instead of additional paid-in capital in the consolidated balance sheet. For the years ended December 31, 2016, 2015 and 2014, $1,320,  $74,442 and $21,667, respectively, of excess tax benefits were recorded to additional paid-in capital that would have been recorded as a reduction to the provision for income taxes if this new guidance had been adopted as of the respective dates.  Additionally, excess tax benefits will be classified as operating activities in the consolidated statement of cash flow instead of in financing activities as required under the current guidance. The Company has not selected a transition method, and except as described above, does not expect the provisions of ASU 2016-09 to have an impact on the Company’s consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The pronouncement requires the recognition of a liability for lease obligations and a corresponding right-of-use asset on the balance sheet and disclosure of key information about leasing arrangements. This pronouncement is effective for reporting periods beginning after December 15, 2018 using a modified retrospective adoption method.  The Company’s adoption of ASU No. 2016-02 will have a significant impact on its consolidated balance sheet as it will record material assets and obligations for current operating leases. The Company is evaluating the impact that adoption will have on its consolidated statement of income.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” as amended by multiple standards updates. The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The pronouncement is effective for reporting periods beginning after December 15, 2017. The expected adoption methodof ASU 2014-09is being evaluated by the Company, andthe adoption is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. 

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements. Additionally, the adoption of accounting pronouncements during 2016 did not have an impact on the Company’s consolidated financial position or results of operations.

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Supplemental Financial Information

12 Months Ended

Dec. 31, 2016

Supplemental Financial Information [Abstract]

Supplemental Financial Information

2. Supplemental Financial Information

Leasehold improvements, property and equipment were as follows:

	December 31,
	2016		2015
Land	$	12,943	$	13,052
Leasehold improvements and buildings		1,572,606		1,419,418
Furniture and fixtures		157,541		142,825
Equipment		405,937		362,800
Leasehold improvements, property and equipment		2,149,027		1,938,095
Accumulated depreciation		(845,469)		(720,875)
Leasehold improvements, property and equipment, net	$	1,303,558	$	1,217,220

Accrued payroll and benefits were as follows:

	December 31,
	2016		2015
Worker's compensation liability	$	33,038	$	26,408
Accrued payroll		22,338		13,780
Other accrued payroll and benefits		20,925		24,770
Accrued payroll and benefits	$	76,301	$	64,958

Accrued liabilities were as follows:

	December 31,
	2016		2015
Gift card liability	$	59,438	$	51,055
Transaction tax payable		20,435		15,634
Treasury stock liability		2,300		25,178
Other accrued expenses		44,956		37,408
Accrued liabilities	$	127,129	$	129,275

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2016

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

3.  Investments

As of December 31, 2016 and 2015, the Company’s investments consisted of U.S. treasury notes with maturities up to approximatelytwo years and were classified as available-for-sale.  Fair market value of U.S. treasury notes is measured on a recurring basis based on Level 1 inputs (level inputs are described in Note 1 under “Fair Value Measurements”).

The Company designates the appropriate classification of its investments at the time of purchase based upon the intended holding period. During the year ended December 31, 2015, the Company transferred the classification of its investments from held-to-maturity to available-for-sale due to anticipated liquidity needs related to increased repurchases of shares of the Company’s common stock.The carrying value of held-to-maturity securities transferred to available-for-sale during the year ended December 31, 2015 was $1,040,850 and the fair market value of those securities was determined to be $1,038,138, resulting in an unrealized holding loss of $2,712.  As a result, the Company recorded $2,468  ($1,522, net of tax) of unrealized holding losses in other comprehensive income (loss), and an other-than-temporary impairment charge of $244 in interest and other income (expense), in the consolidated statement of income and comprehensive income.

The following is a summary of available-for-sale securities:

	December 31,
	2016		2015
Amortized cost	$	455,109	$	1,040,850
Unrealized gains (losses)		(218)		(2,712)
Fair market value	$	454,891	$	1,038,138

The following is a summary of unrealized gains (losses) of available-for-sale securities recorded in other comprehensive income (loss):

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on available-for-sale securities	$	2,251	$	(2,468)	$	-
Unrealized gains (losses) on available-for-sale securities, net of tax	$	1,402	$	(1,522)	$	-

The following is a summary of available-for-sale securities activity recorded in interest and other income (expense) in the consolidated statement of income and comprehensive income:

	Year ended December 31,
	2016		2015		2014
Realized gains (losses) from sale of available-for-sale securities	$	547	$	-	$	-
Other-than-temporary impairment	$	-	$	244	$	-

The Company has elected to fund certain deferred compensation obligations through a rabbi trust, the assets of which are designated as trading securities, as described further in Note 7. “Employee Benefit Plans.”

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Taxes [Abstract]

Income Taxes

4. Income Taxes

The components of the provision for income taxes are as follows:

	Year ended December 31,
	2016		2015		2014
Current tax:
U.S. Federal	$	20,765	$	244,470	$	248,219
U.S. State		8,687		37,957		41,225
Foreign		556		172		156
		30,008		282,599		289,600
Deferred tax:
U.S. Federal		(11,596)		11,000		(13,890)
U.S. State		(2,546)		699		(6,740)
Foreign		(2,470)		(2,288)		(3,075)
		(16,612)		9,411		(23,705)
Valuation allowance		2,405		2,255		3,034
Provision for income taxes	$	15,801	$	294,265	$	268,929

Actual taxes paid for each tax period were less than the current tax expense due to the excess tax benefit on stock-based compensation of $1,320, $74,442, and $21,667 during the years ended December 31, 2016, 2015, and 2014, respectively.

The effective tax rate differs from the statutory tax rates as follows:

	Year ended December 31,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of related federal income tax benefit	13.3		3.6		3.7
Federal credits	(10.1)		(0.4)		(0.5)
Enhanced deduction for food donation	(2.4)		(0.2)		(0.1)
Valuation allowance	6.0		0.3		0.4
Other	6.2		-		0.1
Return to provision and other discrete items	(7.2)		(0.1)		(1.0)
Effective income tax rate	40.8	%	38.2	%	37.6	%

The 2016 effective tax rate was higher due to a higher state tax rate, not qualifying for the federal research and development tax credit in 2016, and non-deductible items on overall lower pre-tax operating income. Additionally, 2014 included a benefit from filing the 2013 tax returns, which included a non-recurring change in the estimate of usable employer credits resulting in a lower effective tax rate than 2015.

Deferred income tax liabilities are taxes the Company expects to pay in future periods. Similarly, deferred income tax assets are recorded for expected reductions in taxes payable in future periods. Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax liabilities and assets consist of the following:  

	December 31,
	2016		2015
Deferred income tax liability:
Leasehold improvements, property and equipment	$	204,640	$	192,125
Goodwill and other assets		1,856		1,696
Prepaid assets and other		6,012		8,297
Total deferred income tax liability		212,508		202,118
Deferred income tax asset:
Deferred rent		63,159		57,716
Gift card liability		5,563		3,171
Capitalized transaction costs		500		502
Stock-based compensation and other employee benefits		101,628		83,058
Foreign net operating loss carry-forwards		9,580		11,407
State credits		4,595		4,783
Allowances, reserves and other		19,359		18,577
Valuation allowance		(10,820)		(9,401)
Total deferred income tax asset		193,564		169,813
Net deferred income tax liability	$	18,944	$	32,305

The unrecognized tax benefits are as follows:

	2016		2015		2014
Beginning of year	$	3,776	$	1,342	$	-
Increase resulting from prior year tax position		-		402		-
Increase resulting from current year tax position		435		2,032		1,342
End of year	$	4,211	$	3,776	$	1,342

During the year ending December 31, 2016, $430 of interest was accrued for uncertain tax positions. The Company is open to federal and state tax audits until the applicable statutes of limitations expire. Tax audits by their very nature are often complex and can require several years to complete. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2013. For the majority of states where the Company has a significant presence, it is no longer subject to tax examinations by tax authorities for tax years before 2013.   As of December 31, 2016, the Company had cumulative gross foreign net operating losses of $36,464, which have no expiration date.

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Shareholders' Equity

12 Months Ended

Dec. 31, 2016

Shareholders’ Equity [Abstract]

Shareholder's Equity

5. Shareholders’ Equity

Through December 31, 2016, the Company announced authorizations by its Board of Directors of the expenditure of an aggregate of up to $2,100,000to repurchase shares of the Company’s common stock. On January 10, 2017, the Company announced that its Board of Directors authorized the expenditure of up to an additional $100,000to repurchase shares of its common stock. Under the remaining repurchase authorization, shares may be purchased from time to time in open market transactions, subject to market conditions.

The shares of common stock repurchased under authorized programs were 1,811during the year ended December 31, 2016, 839during the year ended December 31, 2015 and 154 during the year ended December 31, 2014, for a total cost of $813,881, $485,841and $87,996 during 2016, 2015 and 2014, respectively. As of December 31, 2016, $102,568was available to be repurchased under the authorized programs. The shares repurchased are being held in treasury until such time as they are reissued or retired, at the discretion of the Board of Directors.

During 2016, 2015, and 2014, shares of common stock were netted and surrendered as payment for minimum statutory tax withholding obligations in connection with the exercise and vesting of outstanding stock awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by the Company but are not part of publicly announced share repurchase programs.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation

6. Stock Based Compensation

The Company issues shares pursuant to the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the “2011 Incentive Plan”), approved at the annual shareholders’ meeting on May 13, 2015. Shares issued pursuant to awards granted prior to the 2011 Incentive Plan were issued subject to previous stock plans that were also approved by shareholders. For purposes of counting the shares remaining available under the 2011 Incentive Plan, each share issuable pursuant to outstanding full value awards, such as restricted stock units and performance shares, count as two shares used, whereas each share underlying a stock appreciation right or stock option count as one share used. Under the 2011 Incentive Plan, 5,560 shares of common stock have been authorized and reserved for issuance to eligible participants, of which 2,165 represent shares that were authorized for issuance but not issued or subject to outstanding awards at December 31, 2016. The 2011 Incentive Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to select the individuals to whom awards will be granted or to delegate its authority under the plan to make grants (subject to certain legal and regulatory restrictions), to determine the type of awards and when the awards are to be granted, the number of shares to be covered by each award, the vesting schedule and all other terms and conditions of the awards. The exercise price for stock awards granted under the 2011 Incentive Plan cannot be less than fair market value at the date of grant.

Stock only stock appreciation rights (“SOSARs”) generally vest equally over two and three years and expire after seven years. Stock-based compensation expense is generally recognized on a straight-line basis for each separate vesting portion. Compensation expense related to employees eligible to retire and retain full rights to the awards is recognized over six months which coincides with the notice period. The Company has also granted SOSARs and stock awards with performance vesting conditions and/or market vesting conditions. Compensation expense on SOSARs subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period. Compensation expense on stock awards subject to performance conditions, which is based on the quantity of awards the Company has determined are probable of vesting, is recognized over the longer of the estimated performance goal attainment period or time vesting period. Compensation expense is recognized ratably for awards subject to market conditions regardless of whether the market condition is satisfied, provided that the requisite service has been provided. Some stock-based compensation awards are made to employees involved in the Company’s new restaurant development activities, and expense for these awards is recognized as capitalized development and included in leasehold improvements, property and equipment in the consolidated balance sheet.

The following table sets forth stock-based compensation expense, including SOSARs and stock awards:

	Year ended December 31,
	2016		2015		2014
Stock-based compensation expense	$	65,112	$	59,465	$	97,618
Stock-based compensation expense, net of tax		35,974		36,666		60,084
Stock-based compensation expense recognized as capitalized development		946		1,554		1,178

The tables below summarize the option and SOSAR activity under the stock incentive plans (in thousands, except years and per share data):

	2016			2015			2014
	Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share
Outstanding, beginning of year	1,694	$	490.70	2,087	$	395.46	1,690	$	312.44
Granted	460	$	457.77	379	$	659.12	764	$	545.66
Exercised	(124)	$	315.87	(716)	$	297.25	(315)	$	310.32
Forfeited or cancelled	(113)	$	559.25	(56)	$	554.73	(52)	$	419.74
Outstanding, end of year	1,917	$	490.06	1,694	$	490.70	2,087	$	395.46

	Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	1,917	$	490.06	4.4	$	22,040
Vested and expected to vest as of December 31, 2016	1,851	$	489.18	4.3	$	22,040
Exercisable as of December 31, 2016	846	$	422.32	3.3	$	22,040

During the year ended December 31, 2014 the Company granted 220SOSARs that include performance conditions. No SOSARs that include performance conditions were granted during 2015 or 2016. As of December 31, 2016, 388 SOSARs that include performance conditions were outstanding, of which 278 awards had met the performance conditions. In addition to time vesting described above, the shares vest upon achieving a targeted cumulative cash flow from operations. The total intrinsic value of options and SOSARs exercised during the years ended December 31, 2016, 2015 and 2014 was $15,946, $260,466 and $88,245. Unearned compensation as of December 31, 2016 was $34,862 for SOSAR awards, and is expected to be recognized over a weighted average period of 1.5 years.

The following table reflects the average assumptions utilized in the Black-Scholes option-pricing model to value SOSAR awards granted for each year:

	2016			2015			2014
Risk-free interest rate		1.0	%		1.1	%		0.8	%
Expected life (years)		3.5			3.4			3.4
Expected dividend yield		0.0	%		0.0	%		0.0	%
Volatility		32.2	%		30.8	%		33.3	%
Weighted-average Black-Scholes fair value per share at date of grant	$	117.48		$	156.32		$	136.18

The risk-free interest rate is based upon U.S. Treasury rates for instruments with similar terms and the expected life assumptions were based on the Company’s historical data. The Company has not paid dividends to date and does not plan to pay dividends in the near future. The volatility assumption was based on the Company’s historical data and implied volatility.

A summary of non-vested stock award activity under the stock incentive plans is as follows (in thousands, except per share data):

	2016			2015			2014
	Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share
Outstanding, beginning of year	116	$	511.88	70	$	525.60	71	$	520.27
Granted	90	$	509.05	47	$	785.32	2	$	495.92
Vested	(7)	$	605.83	(1)	$	413.07	(2)	$	284.11
Forfeited or cancelled	(74)	$	529.54	-	$	534.55	(1)	$	410.55
Outstanding, end of year	125	$	606.24	116	$	511.88	70	$	525.60

At December 31, 2016, 116 of the outstanding non-vested stock awards were subject to performance and/or market conditions, in addition to service vesting conditions. During the first quarter of 2016, the Company awarded 73 shares, net of cancellations, that are subject to both service and market vesting conditions. The quantity of shares that will vest may range from 0% to 400% of a targeted number of shares, and will be determined based on the price of the Company’s common stock reaching certain targets for a consecutive number of days during the three year period starting on the grant date.  If the minimum defined stock price target is not met, then no shares will vest.

During the year ended December 31, 2015, the Company awarded 40 performance shares that were subject to service, performance, and market vesting conditions (“the 2015 stock awards”). The quantity of shares that will ultimately vest is determined based on the Company’s relative performance versus a restaurant industry peer group in the annual average of: revenue growth, net income growth, and total shareholder return. The quantity of shares awarded ranges from 0% to 200% based on the level of achievement of the performance and market conditions. If minimum targets are not met, then no shares will vest. Each performance and market measure will be weighted equally, and performance is calculated over a three year period beginning January 1, 2015 through December 31, 2017.

During the year ended December 31, 2013, the Company granted 66 stock awards that were subject to both service and performance vesting conditions (“the 2013 stock awards”). The performance conditions for the grant required achievement of specific targets for cumulative cash flow from operations during a three year period. Targets were not met and none of the stock awards vested.

During the year ended December 31, 2016, the Company adjusted its estimate of 2015 stock awards expected to vest as well as reduced its expense for the 2013 stock awards that did not vest. The impact of these changes resulted in a cumulative reduction to expense of $6,031  ($3,332 net of tax as well as $0.11to basic and diluted earnings per share) in the year ended December 31, 2016.  

The Company’s measurement of the grant date fair value of the 2015 and 2016 stock awards included using a Monte Carlo simulation model, which incorporates into the fair-value determination the possibility that the market condition may not be satisfied, using the following assumptions:

	2016			2015
Risk-free interest rate		0.9	%		1.0	%
Expected life (years)		3.0			2.9
Expected dividend yield		0.0	%		0.0	%
Volatility		31.4	%		33.7	%

The assumptions are based on the same factors as those described for SOSARs, except that the expected life is based on the contractual performance period for stock awards.

Unearned compensation as of December 31, 2016 was $39,758 for non-vested stock awards the Company has determined are probable of vesting, and is expected to be recognized over a weighted average period of 1.7years. The fair value of shares earned as of the vesting date during the year ended December 31, 2016, 2015, and 2014 was $2,787,  $634, and $783, respectively.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2016

Employee Benefit Plans [Abstract]

Employee Benefit Plans

7. Employee Benefit Plans

The Company maintains the Chipotle Mexican Grill 401(k) Plan (the “401(k) Plan”).The Company matches 100% of the first 3%  of pay contributed by each eligible employee and 50% on the next 2% of pay contributed. Employees become eligible to receive matching contributions after one year of service with the Company. For the years ended December 31, 2016, 2015, and 2014, Company matching contributions totaled approximately $5,939, $4,995 and $3,881, respectively. In addition to the traditional pre-tax deferral options, during 2016 the 401(k) Plan began offering a Roth after-tax deferral option.

The Company also maintains the Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan (the “Deferred Plan”) which covers eligible employees of the Company. The Deferred Plan is a non-qualified plan that allows participants to make tax-deferred contributions that cannot be made under the 401(k) Plan because of Internal Revenue Service limitations. Participants’ earnings on contributions made to the Deferred Plan fluctuate with the actual earnings and losses of a variety of available investment choices selected by the participant. Total liabilities under the Deferred Plan as of December 31, 2016 and 2015 were $17,843 and $18,331, respectively, and are included in other long-term liabilities in the consolidated balance sheet. The Company matches 100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed once the 401(k) contribution limits are reached. For the years ended December 31, 2016, 2015, and 2014, the Company made deferred compensation matches of $225, $617, and $536 respectively, to the Deferred Plan.

The Company has elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in mutual funds, consistent with the investment choices selected by participants in their Deferred Plan accounts, which are designated as trading securities and carried at fair value, and are included in other assets in the consolidated balance sheet. Fair value of mutual funds is measured using Level 1 inputs (quoted prices for identical assets in active markets), and the fair values of the investments in the rabbi trust were $17,843and $18,331 as of December 31, 2016 and 2015, respectively. The Company records trading gains and losses in general and administrative expenses in the consolidated statement of income and comprehensive income, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure of the Deferred Plan liability.

The following table sets forth unrealized gains and losses on investments held in the rabbi trust:

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on investments held in rabbi trust	$	586	$	(571)	$	184

The Company offers an employee stock purchase plan (“ESPP”). Employees become eligible to participate after one year of service with the Company and may contribute up to 15% of their base earnings, subject to an annual maximum dollar amount, toward the monthly purchase of the Company’s common stock. Under the ESPP, 250 shares of common stock have been authorized and reserved for issuances to eligible employees, of which 247represent shares that were authorized for issuance but not issued at December 31, 2016.  For each of the years ended December 31, 2016, 2015, and 2014, the number of shares issued under the ESPP were less than 1.

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Leases

12 Months Ended

Dec. 31, 2016

Leases [Abstract]

Leases

8. Leases

The Company generally operates its restaurants in leased premises. Lease terms for traditional shopping center or building leases generally include combined initial and option terms of 20-25 years. Ground leases generally include combined initial and option terms of 30-40 years. The option terms in each of these leases are typically in five-year increments. Typically, the lease includes rent escalation terms every five years including fixed rent escalations, escalations based on inflation indexes, and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. The leases generally provide for the payment of common area maintenance, property taxes, insurance and various other use and occupancy costs by the Company. In addition, the Company is the lessee under non-cancelable leases covering certain offices.

Contractually required future minimum cash lease payments under existing operating leases as of December 31, 2016 are as follows:

2017	$	264,911
2018		268,862
2019		269,133
2020		263,732
2021		257,400
Thereafter		2,358,941
Total minimum lease payments	$	3,682,979

Minimum lease payments have not been reduced by minimum sublease rentals of $5,342 due in the future under non-cancelable subleases.

Rental expense consists of the following:

	Year ended December 31,
	2016		2015		2014
Minimum rentals	$	255,955	$	227,602	$	200,575
Contingent rentals	$	1,811	$	4,542	$	4,616
Sublease rental income	$	(2,074)	$	(1,879)	$	(1,838)

The Company has six sales and leaseback transactions. These transactions do not qualify for sale leaseback accounting because of the Company’s deemed continuing involvement with the buyer-lessor due to fixed price renewal options, which results in the transaction being recorded under the financing method. Under the financing method, the assets remain on the consolidated balance sheet and the proceeds from the transactions are recorded as a financing liability.  A portion of lease payments are applied as payments of deemed principal and imputed interest. The deemed landlord financing liability was $2,854 and $3,060 as of December 31, 2016, and 2015, respectively, with the current portion of the liability included in accrued liabilities, and the remaining portion included in other liabilities in the consolidated balance sheet.

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

9. Earnings Per Share

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying SOSARs and non-vested stock awards (collectively “stock awards”). Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Stock awards are excluded from the calculation of diluted EPS in the event they are subject to performance conditions or antidilutive. The following stock awards were excluded from the calculation of diluted EPS:

	Year ended December 31,
	2016		2015		2014
Stock awards subject to performance conditions		263		266		385
Stock awards that were antidilutive		1,316		289		232
Total stock awards excluded from diluted earnings per share		1,579		555		617

The following table sets forth the computations of basic and diluted earnings per share:

	Year ended December 31,
	2016		2015		2014
Net income	$	22,938	$	475,602	$	445,374
Shares:
Weighted average number of common shares outstanding		29,265		31,092		31,038
Dilutive stock awards		505		402		474
Diluted weighted average number of common shares outstanding		29,770		31,494		31,512
Basic earnings per share	$	0.78	$	15.30	$	14.35
Diluted earnings per share	$	0.77	$	15.10	$	14.13

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Purchase Obligations

The Company enters into various purchase obligations in the ordinary course of business, generally of a short term nature. Those that are binding primarily relate to commitments for food purchases and supplies, amounts owed under contractor and subcontractor agreements, orders submitted for equipment for restaurants under construction, and marketing initiatives and corporate sponsorships.

Litigation

Receipt of Grand Jury Subpoenas

On January 28, 2016, the Company was served with a Federal Grand Jury Subpoena from the U.S. District Court for the Central District of California in connection with an official criminal investigation being conducted by the U.S. Attorney’s Office for the Central District of California, in conjunction with the U.S. Food and Drug Administration’s Office of Criminal Investigations.  The subpoena requires the production of documents and information related to company-wide food safety matters dating back to January 1, 2013.  The Company intends to continue to fully cooperate in the investigation.  It is not possible at this time to determine whether the Company will incur, or to reasonably estimate the amount of, any fines or penalties in connection with the investigation pursuant to which the subpoena was issued.

Shareholder Class Action

On January 8, 2016, Susie Ong filed a complaint in the U.S. District Court for the Southern District of New York on behalf of a purported class of purchasers of shares of the Company’s common stock between February 4, 2015 and January 5, 2016.  The complaint purports to state claims against the Company, each of its co-Chief Executive Officers and its Chief Financial Officer under Sections 10(b) and 20(a) of the Exchange Act and related rules, based on the Company’s alleged failure during the claimed class period to disclose material information about the Company’s quality controls and safeguards in relation to consumer and employee health. The complaint asserts that those failures and related public statements were false and misleading and that, as a result, the market price of the Company’s stock was artificially inflated during the claimed class period. The complaint seeks damages on behalf of the purported class in an unspecified amount, interest, and an award of reasonable attorneys’ fees, expert fees and other costs.  The Company intends to defend this case vigorously, but it is not possible at this time to reasonably estimate the outcome of or any potential liability from the case.

Shareholder Derivative Actions

On March 21, 2016, Jessica Oldfather filed a shareholder derivative action in the Court of Chancery of the State of Delaware alleging that the Company’s Board of Directors and officers breached their fiduciary duties in connection with allegedly excessive compensation awarded from 2011 to 2015 under the Company’s stock incentive plan. On December 8, 2016, the Court of Chancery dismissed the complaint, with prejudice.

On April 6, 2016, Uri Skorski filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Oldfather complaint and also alleging that the Company’s Board of Directors and officers breached their fiduciary duties in connection with the Company’s alleged failure to disclose material information about the Company’s food safety policies and procedures. On April 14, 2016, Mark Arnold and Zachary Arata filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Skorski complaint. On May 26, 2016, the court issued an order consolidating the Skorski and Arnold/Arata actions into a single case. On August 8, 2016, Sean Gubricky filed a shareholder derivative action the U.S. District Court for the District of Colorado, alleging that the Company’s Board of Directors and certain officers failed to institute proper food safety controls and policies, issued materially false and misleading statements in violation of federal securities laws, and otherwise breached their fiduciary duties to the Company.  On September 1, 2016, Ross Weintraub filed a shareholder derivative action in Colorado state court in Denver, Colorado, making largely the same allegations as the Gubricky complaint.On December 27, 2016, Cyrus Lashkari filed a shareholder derivative action the U.S. District Court for the District of Colorado, making largely the same allegations as the foregoing shareholder derivative complaints.  Each of these actions purports to state a claim for damages on behalf of the Company, and is based on statements in the Company’s SEC filings and related public disclosures, as well as media reports and Company records. The Company intends to defend these cases vigorously, but it is not possible at this time to reasonably estimate the outcome of or any potential liability from these cases.

Notices of Inspection of Work Authorization Documents and Related Civil and Criminal Investigations

Following an inspection during 2010 by the U.S. Department of Homeland Security, or DHS, of the work authorization documents of the Company’s restaurant employees in Minnesota, the Immigration and Customs Enforcement arm of DHS, or ICE, issued to the Company a Notice of Suspect Documents identifying a large number of employees who, according to ICE and notwithstanding the Company’s review of work authorization documents for each employee at the time they were hired, appeared not to be authorized to work in the U.S. The Company approached each of the named employees to explain ICE’s determination and afforded each employee an opportunity to confirm the validity of their original work eligibility documents, or provide valid work eligibility documents. Employees who were unable to provide valid work eligibility documents were terminated in accordance with the law. In December 2010, the Company was also requested by DHS to provide the work authorization documents of restaurant employees in the District of Columbia and Virginia, and the Company provided the requested documents in January 2011. The Company subsequently received requests from the office of the U.S. Attorney for the District of Columbia for work authorization documents covering all of the Company’s employees since 2007, plus employee lists and other documents concerning work authorization. In May 2012, the U.S. Securities and Exchange Commission notified the Company that it was conducting a civil investigation of the Company’s compliance with employee work authorization verification requirements and its related disclosures and statements, and the office of the U.S. Attorney for the District of Columbia advised the Company that its investigation had broadened to include a parallel criminal and civil investigation of the Company’s compliance with federal securities laws. During the fourth quarter of 2016, the Company entered into an agreement with the office of the U.S. Attorney for the District of Columbia to resolve the DHS and ICE investigations.

Miscellaneous

The Company is involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity or capital resources. However, a significant increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially and adversely affect the Company’s business, financial condition, results of operations and cash flows.

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Quarterly Financial Data

12 Months Ended

Dec. 31, 2016

Quarterly Financial Data [Abstract]

Quarterly Financial Data

11. Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data:

	2016
	March 31		June 30		September 30		December 31
Revenue	$	834,459	$	998,383	$	1,036,982	$	1,034,560
Operating income (loss)	$	(46,604)	$	40,895	$	9,726	$	30,550
Net income (loss)	$	(26,432)	$	25,596	$	7,799	$	15,975
Basic earnings (loss) per share	$	(0.88)	$	0.88	$	0.27	$	0.55
Diluted earnings (loss) per share	$	(0.88)	$	0.87	$	0.27	$	0.55
	2015
	March 31		June 30		September 30		December 31
Revenue	$	1,089,043	$	1,197,783	$	1,216,890	$	997,507
Operating income	$	197,801	$	227,416	$	234,759	$	103,613
Net income	$	122,641	$	140,204	$	144,883	$	67,874
Basic earnings per share	$	3.95	$	4.51	$	4.65	$	2.19
Diluted earnings per share	$	3.88	$	4.45	$	4.59	$	2.17

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Description Of Business And Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2016

Description Of Business And Summary Of Significant Accounting Policies [Abstract]

Principles Of Consolidation

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, including wholly and majority owned subsidiaries. All intercompany balances and transactions have been eliminated.

Management Estimates

Management Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue, net of discounts and incentives, when payment is tendered at the point of sale.  The Company recognizes 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.   These costs are recognized in other operating costs in the consolidated statement of income and comprehensive income and in accrued liabilities in the consolidated balance sheet.  The Company reports revenue net of sales-related taxes collected from customers and remitted to governmental taxing authorities.

During the year ended December 31, 2016, the Company introduced a limited-time frequency program that awarded free food or merchandise to customers based on frequency of monthly visits. The Company deferred revenue reflecting the portion of original sales allocated to the rewards that were earned by program participants and not redeemed at the end of the year, and recorded a corresponding liability in accrued liabilities on its consolidated balance sheet. The portion of revenue allocated to the rewards was based on the estimated value of the award earned and takes into consideration company-specific historical redemption patterns for similar promotions.  Rewards expire according to the loyalty awards terms and conditions. The Company recognizes revenue when awards are redeemed or expire.

The Company sells gift cards which do not have an expiration date and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when: (i) the gift card is redeemed by the customer; or (ii) the Company determines 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. The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. Gift card breakage is recognized in revenue as the gift cards are used on a pro rata basis over a six-month period beginning at the date of the gift card sale and is included in revenue in the consolidated statement of income and comprehensive income. The Company has determined that 4% of gift card sales will not be redeemed and will be retained by the Company. Breakage recognized during the years ended December 31, 2016, 2015 and 2014 was $3,624, $4,226 and $3,146, respectively.

Cash And Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally-insured limits.  The Company has not experienced any losses related to these balances and believes the risk to be minimal.

Accounts Receivable

Accounts Receivable

Accounts receivable primarily consists of receivables from third party gift card distributors, tenant improvement receivables, vendor rebates, receivables arising from the normal course of business, and payroll-related tax receivables. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable based on a specific review of account balances. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recoverability is considered remote.

Inventory

Inventory

Inventory, consisting principally of food, beverages, and supplies, is valued at the lower of first-in, first-out cost or net realizable value. Certain key ingredients (beef, pork, chicken, beans, rice, sour cream, cheese, and tortillas) are purchased from a small number of suppliers.

Investments

Investments

Investments classified as “trading” securities are carried at fair value with any unrealized gain or loss being recorded in the consolidated statement of income and comprehensive income. Investments classified as “available-for-sale” are carried at fair market value with unrealized gains and losses, net of tax, included as a component of other comprehensive income (loss). Held-to-maturity securities are carried at amortized cost. The Company recognizes impairment charges on its investments in the consolidated statement of income and comprehensive income when management believes the decline in the fair value of the investment is other-than-temporary.

Leasehold Improvements, Property And Equipment

Leasehold Improvements, Property and Equipment

Leasehold improvements, property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and construction of a restaurant are capitalized and were $8,076, $9,554 and $7,756 for the years ended December 31, 2016, 2015 and 2014, respectively. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives of leasehold improvements, property and equipment. The changes in estimated useful lives did not have a material impact on depreciation in any period. The estimated useful lives are:

Leasehold improvements and buildings	3-20 years
Furniture and fixtures	4-7 years
Equipment	3-10 years

Goodwill

Goodwill

Goodwill represents the excess of cost over fair value of net assets of the business acquired. Goodwill is not subject to amortization, but instead is tested for impairment at least annually, and the Company is required to record any necessary impairment adjustments. Impairment is measured as the excess of the carrying value over the fair value of the goodwill. Based on the Company’s analysis, no impairment charges were recognized on goodwill for the years ended December 31, 2016, 2015 and 2014.

Other Assets

Other Assets

Other assets consist primarily of restricted cash assets of $28,490 and $22,572 as of December 31, 2016 and 2015, respectively, a rabbi trust as described further in Note 7. “Employee Benefit Plans,” transferable liquor licenses which are carried at the lower of fair value or cost, and rental deposits related to leased properties. Restricted cash assets are primarily insurance-related restricted trust assets.

Impairment Of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of reviewing restaurant assets to be held and used for potential impairment, assets are grouped together at the market level, or in the case of a potential relocation or closure, at the restaurant level. The Company manages its restaurants as a group with significant common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the years ended December 31, 2016, 2015 and 2014, an aggregate impairment charge of $17,394, $6,675 and $0, respectively, was recognized in loss on disposal and impairment of assets in the consolidated statement of income and comprehensive income.

Impairment charges recognized during the year ended December 31, 2016 resulted primarily from the Company’s determination that its ShopHouse Southeast Asian Kitchen restaurants were impaired and the recognition of a non-cash impairment charge of $14,505  ($8,014 net of tax), representing substantially all of the value of long-lived assets of ShopHouse. The decision to impair the assets was based on an analysis of each restaurant’s past and present operating performance, including a significant change from comparable restaurant sales increases to decreases, and projected future cash flows expected to be generated by the restaurant assets.  The Company has decided not to invest further in developing and growing the ShopHouse brand and is pursuing strategic alternatives. During the year ended December 31, 2015, the impairment charges resulted from an internally developed software program that the Company chose not to implement and the related hardware, the discontinued use of certain kitchen equipment from the Company’s restaurants, as well as restaurant relocations. The fair value of restaurants, including ShopHouse, was determined using level 3 inputs (unobservable inputs) based on a discounted cash flows method.

Income Taxes

Income Taxes

The Company recognizes deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of its assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impacts of investment tax credits are recognized as an immediate adjustment to income tax expense. When it is more likely than not that a portion or all of a deferred tax asset will not be realized in the future, the Company provides a corresponding valuation allowance against the deferred tax asset. When it is more likely than not that a position will be sustained upon examination by a tax authority that has full knowledge of all relevant information, the Company measures the amount of tax benefit from the position and records the largest amount of tax benefit that is greater than 50% likely of being realized after settlement with a tax authority. The Company’s policy is to recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in the provision for income taxes in the consolidated statement of income and comprehensive income.

Restaurant Pre-Opening Costs

Restaurant Pre-Opening Costs

Pre-opening costs, including rent, wages, benefits and travel for training and opening teams, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business.

Insurance Liability

Insurance Liability

The Company maintains various insurance policies including workers’ compensation, employee health, general liability, automobile, and property damage. Pursuant to these policies, the Company is responsible for losses up to certain limits and is required to estimate a liability that represents the ultimate exposure for aggregate losses below those limits. This liability is based on management’s estimates of the ultimate costs to be incurred to settle known claims and, where applicable, claims not reported as of the balance sheet date. The estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions, and economic conditions. If actual trends differ from the estimates, the financial results could be impacted. As of December 31, 2016 and 2015, $35,550 and $28,391, respectively, of the estimated liability was included in accrued payroll and benefits and $13,881 and $11,898, respectively, was included in accrued liabilities in the consolidated balance sheet.

Advertising And Marketing Costs

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred and totaled $102,969, $69,257 and $57,290 for the years ended December 31, 2016, 2015 and 2014, respectively. Advertising and marketing costs are included in other operating costs in the consolidated statement of income and comprehensive income.

Rent

Rent

Rent expense for the Company’s leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The lease term is the lesser of 20 years inclusive of reasonably assured renewal periods, or the lease term. The lease term begins when the Company has 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 in the consolidated balance sheet. Pre-opening rent is included in pre-opening costs in the consolidated statement of income and comprehensive 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 of the Company’s operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified target amounts. The Company recognizes contingent rent expense provided the achievement of that target is considered probable.

Fair Value Of Financial Instruments

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short-term nature.

Fair Value Measurements

Fair Value Measurements

Fair value is the price the Company would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For assets and liabilities recorded or disclosed at fair value on a recurring basis, the Company determines fair value based on the following:

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Foreign Currency Translation

Foreign Currency Translation

The Company’s international operations generally use the local currency as the functional currency. Assets and liabilities are translated at exchange rates in effect as of the balance sheet date. Income and expense accounts are translated at the average monthly exchange rates during the year. Resulting translation adjustments are recorded as a separate component of other comprehensive income (loss) in the consolidated statement of income and comprehensive income.

Recently Adopted Accounting Standards

Recently Issued Accounting Standards and Adoption of Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, “Statement of Cash Flows (Topic 230)”, which provides guidance on the classification of restricted cash to be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2017 using a retrospective adoption method and early adoption is permitted. For the years ended December 31, 2016, 2015 and 2014, $28,490,  $22,572 and $19,889, respectively, of restricted cash would have been included in cash and cash equivalents and changes in the balance excluded from net cash provided by operating activities in the consolidated statement of cash flows if this new guidance had been adopted as of the respective dates.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718).” The pronouncement was issued to simplify the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016.  The guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Upon adoption, any future excess tax benefits or deficiencies will be recorded to the provision for income taxes in the consolidated statement of income, instead of additional paid-in capital in the consolidated balance sheet. For the years ended December 31, 2016, 2015 and 2014, $1,320,  $74,442 and $21,667, respectively, of excess tax benefits were recorded to additional paid-in capital that would have been recorded as a reduction to the provision for income taxes if this new guidance had been adopted as of the respective dates.  Additionally, excess tax benefits will be classified as operating activities in the consolidated statement of cash flow instead of in financing activities as required under the current guidance. The Company has not selected a transition method, and except as described above, does not expect the provisions of ASU 2016-09 to have an impact on the Company’s consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The pronouncement requires the recognition of a liability for lease obligations and a corresponding right-of-use asset on the balance sheet and disclosure of key information about leasing arrangements. This pronouncement is effective for reporting periods beginning after December 15, 2018 using a modified retrospective adoption method.  The Company’s adoption of ASU No. 2016-02 will have a significant impact on its consolidated balance sheet as it will record material assets and obligations for current operating leases. The Company is evaluating the impact that adoption will have on its consolidated statement of income.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” as amended by multiple standards updates. The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The pronouncement is effective for reporting periods beginning after December 15, 2017. The expected adoption methodof ASU 2014-09is being evaluated by the Company, andthe adoption is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. 

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements. Additionally, the adoption of accounting pronouncements during 2016 did not have an impact on the Company’s consolidated financial position or results of operations.

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Description Of Business And Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Description Of Business And Summary Of Significant Accounting Policies [Abstract]

Estimated Useful Lives Of Leasehold Improvements, Property And Equipment

Leasehold improvements and buildings	3-20 years
Furniture and fixtures	4-7 years
Equipment	3-10 years

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Supplemental Financial Information (Tables)

12 Months Ended

Dec. 31, 2016

Supplemental Financial Information [Abstract]

Leasehold Improvements, Property, And Equipment

	December 31,
	2016		2015
Land	$	12,943	$	13,052
Leasehold improvements and buildings		1,572,606		1,419,418
Furniture and fixtures		157,541		142,825
Equipment		405,937		362,800
Leasehold improvements, property and equipment		2,149,027		1,938,095
Accumulated depreciation		(845,469)		(720,875)
Leasehold improvements, property and equipment, net	$	1,303,558	$	1,217,220

Schedule Of Accrued Payroll And Benefits

	December 31,
	2016		2015
Worker's compensation liability	$	33,038	$	26,408
Accrued payroll		22,338		13,780
Other accrued payroll and benefits		20,925		24,770
Accrued payroll and benefits	$	76,301	$	64,958

Schedule Of Accrued Liabilities

	December 31,
	2016		2015
Gift card liability	$	59,438	$	51,055
Transaction tax payable		20,435		15,634
Treasury stock liability		2,300		25,178
Other accrued expenses		44,956		37,408
Accrued liabilities	$	127,129	$	129,275

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value of Financial Instruments [Abstract]

Available-for-sale Securities

	December 31,
	2016		2015
Amortized cost	$	455,109	$	1,040,850
Unrealized gains (losses)		(218)		(2,712)
Fair market value	$	454,891	$	1,038,138

Unrealized gain (loss) on available-for-sale securities

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on available-for-sale securities	$	2,251	$	(2,468)	$	-
Unrealized gains (losses) on available-for-sale securities, net of tax	$	1,402	$	(1,522)	$	-

Schedule of realized gain (loss) on available-for-sale securities

	Year ended December 31,
	2016		2015		2014
Realized gains (losses) from sale of available-for-sale securities	$	547	$	-	$	-
Other-than-temporary impairment	$	-	$	244	$	-

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Taxes [Abstract]

Schedule Of Components Of Provision For Income Taxes

	Year ended December 31,
	2016		2015		2014
Current tax:
U.S. Federal	$	20,765	$	244,470	$	248,219
U.S. State		8,687		37,957		41,225
Foreign		556		172		156
		30,008		282,599		289,600
Deferred tax:
U.S. Federal		(11,596)		11,000		(13,890)
U.S. State		(2,546)		699		(6,740)
Foreign		(2,470)		(2,288)		(3,075)
		(16,612)		9,411		(23,705)
Valuation allowance		2,405		2,255		3,034
Provision for income taxes	$	15,801	$	294,265	$	268,929

Schedule Of Effective Tax Rate

	Year ended December 31,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of related federal income tax benefit	13.3		3.6		3.7
Federal credits	(10.1)		(0.4)		(0.5)
Enhanced deduction for food donation	(2.4)		(0.2)		(0.1)
Valuation allowance	6.0		0.3		0.4
Other	6.2		-		0.1
Return to provision and other discrete items	(7.2)		(0.1)		(1.0)
Effective income tax rate	40.8	%	38.2	%	37.6	%

Schedule Of Deferred Income Tax Liabilities And Assets

	December 31,
	2016		2015
Deferred income tax liability:
Leasehold improvements, property and equipment	$	204,640	$	192,125
Goodwill and other assets		1,856		1,696
Prepaid assets and other		6,012		8,297
Total deferred income tax liability		212,508		202,118
Deferred income tax asset:
Deferred rent		63,159		57,716
Gift card liability		5,563		3,171
Capitalized transaction costs		500		502
Stock-based compensation and other employee benefits		101,628		83,058
Foreign net operating loss carry-forwards		9,580		11,407
State credits		4,595		4,783
Allowances, reserves and other		19,359		18,577
Valuation allowance		(10,820)		(9,401)
Total deferred income tax asset		193,564		169,813
Net deferred income tax liability	$	18,944	$	32,305

Schedule of Unrecognized Tax Benefits Roll Forward

	2016		2015		2014
Beginning of year	$	3,776	$	1,342	$	-
Increase resulting from prior year tax position		-		402		-
Increase resulting from current year tax position		435		2,032		1,342
End of year	$	4,211	$	3,776	$	1,342

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Stock Based Compensation Expense

	Year ended December 31,
	2016		2015		2014
Stock-based compensation expense	$	65,112	$	59,465	$	97,618
Stock-based compensation expense, net of tax		35,974		36,666		60,084
Stock-based compensation expense recognized as capitalized development		946		1,554		1,178

Summary Of Option And SOSAR Activity Under Incentive Plan

	2016			2015			2014
	Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share		Shares	Weighted-Average Exercise Price Per Share
Outstanding, beginning of year	1,694	$	490.70	2,087	$	395.46	1,690	$	312.44
Granted	460	$	457.77	379	$	659.12	764	$	545.66
Exercised	(124)	$	315.87	(716)	$	297.25	(315)	$	310.32
Forfeited or cancelled	(113)	$	559.25	(56)	$	554.73	(52)	$	419.74
Outstanding, end of year	1,917	$	490.06	1,694	$	490.70	2,087	$	395.46

	Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	1,917	$	490.06	4.4	$	22,040
Vested and expected to vest as of December 31, 2016	1,851	$	489.18	4.3	$	22,040
Exercisable as of December 31, 2016	846	$	422.32	3.3	$	22,040

Summary Of Non-Vested Stock Award Activity Under Incentive Plan

	2016			2015			2014
	Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share		Shares	Grant Date Fair Value Per Share
Outstanding, beginning of year	116	$	511.88	70	$	525.60	71	$	520.27
Granted	90	$	509.05	47	$	785.32	2	$	495.92
Vested	(7)	$	605.83	(1)	$	413.07	(2)	$	284.11
Forfeited or cancelled	(74)	$	529.54	-	$	534.55	(1)	$	410.55
Outstanding, end of year	125	$	606.24	116	$	511.88	70	$	525.60

Performance Shares [Member]

Schedule Of Assumptions to Value SOSAR or Stock Awards Granted

	2016			2015
Risk-free interest rate		0.9	%		1.0	%
Expected life (years)		3.0			2.9
Expected dividend yield		0.0	%		0.0	%
Volatility		31.4	%		33.7	%

SOSARS [Member]

Schedule Of Assumptions to Value SOSAR or Stock Awards Granted

	2016			2015			2014
Risk-free interest rate		1.0	%		1.1	%		0.8	%
Expected life (years)		3.5			3.4			3.4
Expected dividend yield		0.0	%		0.0	%		0.0	%
Volatility		32.2	%		30.8	%		33.3	%
Weighted-average Black-Scholes fair value per share at date of grant	$	117.48		$	156.32		$	136.18

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Employee Benefit Plan (Tables)

12 Months Ended

Dec. 31, 2016

Employee Benefit Plans [Abstract]

Unrealized Gains (Losses) on Investments held in Rabbi Trust

	Year ended December 31,
	2016		2015		2014
Unrealized gains (losses) on investments held in rabbi trust	$	586	$	(571)	$	184

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Leases (Tables)

12 Months Ended

Dec. 31, 2016

Leases [Abstract]

Schedule Of Future Minimum Lease Payments Under Operating Leases

2017	$	264,911
2018		268,862
2019		269,133
2020		263,732
2021		257,400
Thereafter		2,358,941
Total minimum lease payments	$	3,682,979

Schedule Of Rental Expense

	Year ended December 31,
	2016		2015		2014
Minimum rentals	$	255,955	$	227,602	$	200,575
Contingent rentals	$	1,811	$	4,542	$	4,616
Sublease rental income	$	(2,074)	$	(1,879)	$	(1,838)

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Stock awards excluded from the calculation of diluted EPS

	Year ended December 31,
	2016		2015		2014
Stock awards subject to performance conditions		263		266		385
Stock awards that were antidilutive		1,316		289		232
Total stock awards excluded from diluted earnings per share		1,579		555		617

Earnings Per Share

	Year ended December 31,
	2016		2015		2014
Net income	$	22,938	$	475,602	$	445,374
Shares:
Weighted average number of common shares outstanding		29,265		31,092		31,038
Dilutive stock awards		505		402		474
Diluted weighted average number of common shares outstanding		29,770		31,494		31,512
Basic earnings per share	$	0.78	$	15.30	$	14.35
Diluted earnings per share	$	0.77	$	15.10	$	14.13

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Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Data [Abstract]

Summary Of Quarterly Financial Data

	2016
	March 31		June 30		September 30		December 31
Revenue	$	834,459	$	998,383	$	1,036,982	$	1,034,560
Operating income (loss)	$	(46,604)	$	40,895	$	9,726	$	30,550
Net income (loss)	$	(26,432)	$	25,596	$	7,799	$	15,975
Basic earnings (loss) per share	$	(0.88)	$	0.88	$	0.27	$	0.55
Diluted earnings (loss) per share	$	(0.88)	$	0.87	$	0.27	$	0.55
	2015
	March 31		June 30		September 30		December 31
Revenue	$	1,089,043	$	1,197,783	$	1,216,890	$	997,507
Operating income	$	197,801	$	227,416	$	234,759	$	103,613
Net income	$	122,641	$	140,204	$	144,883	$	67,874
Basic earnings per share	$	3.95	$	4.51	$	4.65	$	2.19
Diluted earnings per share	$	3.88	$	4.45	$	4.59	$	2.17

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Description Of Business And Summary Of Significant Accounting Policies (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) segment region item	Dec. 31, 2015 USD ($) item	Dec. 31, 2014 USD ($)
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of regions	11	9
Number of reportable segments | segment	1
Unredeemed gift card sales percentage	4.00%	4.00%	4.00%
Gift card breakage recognized	$ 3,624	$ 4,226	$ 3,146
Acquisition, development and construction of restaurant capitalized costs	8,076	9,554	7,756
Goodwill impairment charges	0	0	0
Restricted cash asset	28,490	22,572	19,889
Aggregate impairment loss recognized on disposition of assets	17,394	6,675	0
Impairment of Long-Lived Assets Held-for-use	14,505
Impairment of Long-Lived Assets Held-for-use, Net	8,014
Advertising and marketing costs	$ 102,969	69,257	57,290
Maximum reasonably assured lease term	20 years
Excess tax benefit on stock-based compensation	$ 1,320	74,442	$ 21,667
Accrued Payroll And Benefits [Member]
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Estimated insurance liability	35,550	28,391
Accrued Liabilities [Member]
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Estimated insurance liability	$ 13,881	$ 11,898
United States [Member]
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants | item	2,198
International [Member]
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants | item	29
Non Chipotle Restaurants [Member]
Description Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of restaurants | item	23

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Description Of Business And Summary Of Significant Accounting Policies (Estimated Useful Lives Of Leasehold Improvements, Property And Equipment) (Details)	12 Months Ended
	Dec. 31, 2016
Leasehold Improvements And Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Leasehold Improvements And Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	20 years
Furniture And Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	4 years
Furniture And Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	7 years
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	10 years

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Supplemental Financial Information (Schedule Of Leasehold Improvements, Property And Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Supplemental Financial Information [Abstract]
Land	$ 12,943	$ 13,052
Leasehold improvements and buildings	1,572,606	1,419,418
Furniture and fixtures	157,541	142,825
Equipment	405,937	362,800
Leasehold improvements, property and equipment, gross	2,149,027	1,938,095
Accumulated depreciation	(845,469)	(720,875)
Leasehold improvements, property and equipment, net	$ 1,303,558	$ 1,217,220

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Supplemental Financial Information (Schedule of Accrued Payroll) (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Supplemental Financial Information [Abstract]
Workers compensation liability	$ 33,038	$ 26,408
Accrued payroll	22,338	13,780
Other accrued payroll and benefits	20,925	24,770
Accrued payroll and benefits, Current, Total	$ 76,301	$ 64,958

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Supplemental Financial Information (Schedule Of Accrued liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Supplemental Financial Information [Abstract]
Gift card liability	$ 59,438	$ 51,055
Transaction tax payable	20,435	15,634
Treasury stock liability	2,300	25,178
Other accrued expenses	44,956	37,408
Accrued liabilities, total	$ 127,129	$ 129,275

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Fair Value of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value of Financial Instruments [Abstract]
Investment maturity term	2 years	2 years
Amortized cost	$ 455,109	$ 1,040,850
Fair market value	454,891	1,038,138
Unrealized gains (losses) on available-for-sale securities	218	2,712
Unrealized gains (losses) in OCI on available-for-sale securities	2,251	(2,468)	$ 0
Unrealized gains (losses) in OCI on available-for-sale securities, net of tax	(1,402)	1,522	0
Impairment charge, Available-for-sale Securities	$ 0	$ 244	$ 0

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Fair Value of Financial Instruments (Available-for-sale securities) (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value of Financial Instruments [Abstract]
Amortized cost	$ 455,109	$ 1,040,850
Unrealized gains (losses) on available-for-sale securities	(218)	(2,712)
Fair market value	$ 454,891	$ 1,038,138

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Fair Value of Financial Intruments (Unrealized gain (loss) on available-for-sale securities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value of Financial Instruments [Abstract]
Unrealized gains (losses) in OCI on available-for-sale securities	$ (2,251)	$ 2,468	$ 0
Unrealized gains (losses) in OCI on available-for-sale securities, net of tax	$ 1,402	$ (1,522)	$ 0

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Fair Value of Financial Intruments (Realized gain (loss) on available-for-sale securities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value of Financial Instruments [Abstract]
Realized gains (losses) on available-for-sale securities	$ 547	$ 0	$ 0
Impairment charge, Available-for-sale Securities	$ 0	$ 244	$ 0

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Excess tax benefit on stock-based compensation	$ 1,320	$ 74,442	$ 21,667
Interest on Income Taxes Accrued	430
Deferred Tax Assets, Operating Loss Carryforwards, Not Subject to Expiration	$ 36,464

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Income Taxes (Schedule Of Components Of Provision For Income Taxes) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Current tax, U.S. Federal	$ 20,765	$ 244,470	$ 248,219
Current tax, U.S. State	8,687	37,957	41,225
Current tax, Foreign	556	172	156
Current tax, Total	30,008	282,599	289,600
Deferred tax, U.S. Federal	(11,596)	11,000	(13,890)
Deferred tax, U.S. State	(2,546)	699	(6,740)
Deferred tax, Foreign	(2,470)	(2,288)	(3,075)
Deferred tax, Total	(16,612)	9,411	(23,705)
Valuation allowance	2,405	2,255	3,034
Provision for income taxes	$ 15,801	$ 294,265	$ 268,929

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Income Taxes (Schedule Of Effective Tax Rate) (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Statutory U.S. federal income tax rate	35.00%	35.00%	35.00%
State income tax, net of related federal income tax benefit	13.30%	3.60%	3.70%
Federal credits	(10.10%)	(0.40%)	(0.50%)
Enhanced deduction for food donation	(2.40%)	(0.20%)	(0.10%)
Valuation allowance	6.00%	0.30%	0.40%
Other	6.20%	0.00%	0.10%
Return to provision and other discrete items	(7.20%)	(0.10%)	(1.00%)
Effective income tax rate	40.80%	38.20%	37.60%

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Income Taxes (Schedule Of Deferred Income Tax Liabilities And Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Abstract]
Leasehold improvements, property and equipment	$ 204,640	$ 192,125
Goodwill and other assets	1,856	1,696
Prepaid assets and other	6,012	8,297
Total long-term deferred income tax liability	212,508	202,118
Deferred rent	63,159	57,716
Gift card liability	5,563	3,171
Capitalized transaction costs	500	502
Stock-based compensation and other employee benefits	101,628	83,058
Foreign net operating loss carry-forwards	9,580	11,407
State credits	4,595	4,783
Allowances, reserves and other	19,359	18,577
Valuation allowance	(10,820)	(9,401)
Total long-term deferred income tax asset	193,564	169,813
Net long-term deferred income tax liability	$ 18,944	$ 32,305

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Income Taxes (Schedule of Unrecognized Tax Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Beginning of year	$ 3,776	$ 1,342	$ 0
Increase resulting from prior year tax position	0	402	0
Increase resulting from current year tax position	435	2,032	1,342
End of year	$ 4,211	$ 3,776	$ 1,342

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Shareholders' Equity (Narrative) (Details) - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jan. 10, 2017
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, authorized amount	$ 2,100,000
Acquisition of treasury stock (shares)	1,811
Acquisition of treasury stock (value), total	$ 814,777	$ 485,853	$ 88,338
Value of common shares remaining to be repurchased	$ 102,568
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, additional authorized amount				$ 100,000
Share Repurchase Plans [Member]
Equity, Class of Treasury Stock [Line Items]
Acquisition of treasury stock (shares)	1,811	839	154
Acquisition of treasury stock (value), total	$ 813,881	$ 485,841	$ 87,996

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized and reserved for issuances		5,560
Shares authorized but not issued		2,165
Compensation expense related to employees eligible to retire and retain full rights to the awards, recognition period		6 months
Total intrinsic value of options and SOSARs exercised		$ 15,946	$ 260,466	$ 88,245
Shares granted		460	379	764
Shares granted		90	47	2
Expiration period of SOSARs		7 years
SOSARs outstanding		1,917	1,694	2,087	1,690
Outstanding, end of year, shares		125	116	70	71
Shares vested, fair value		$ 2,787	$ 634	$ 783
Change in estimate expense non-vested stock awards		6,031
Change in estimate expense non-vested stock awards, net of tax		$ 3,332
Change in accounting estimate non vested stock awards earnings per share		$ 0.11
Stock Options And SOSARs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unearned compensation		$ 34,862
Weighted average period		1 year 6 months
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, end of year, shares		116
Performance Shares [Member] | 2016 Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted	73
Performance Shares [Member] | 2015 Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted			40
Performance and market measurement period			3 years
Performance Shares [Member] | 2013 Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted					66
Performance SOSARs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted		0	0	220
SOSARs outstanding		388
Performance SOSARs that have met Performance Conditions [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
SOSARs outstanding		278
Non-Vested Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unearned compensation		$ 39,758
Weighted average period		1 year 8 months 12 days
Alternative 2 [Member] | Stock Options And SOSARs [Member] | First Half Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for SOSARs		2 years
Alternative 2 [Member] | Stock Options And SOSARs [Member] | Second Half Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for SOSARs		3 years

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Stock-Based Compensation (Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock-Based Compensation [Abstract]
Stock-based compensation expense	$ 65,112	$ 59,465	$ 97,618
Stock-based compensation expense, net of tax	35,974	36,666	60,084
Stock-based compensation recognized as capitalized development	$ 946	$ 1,554	$ 1,178

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Stock Based Compensation (Summary Of Option And SOSAR Activity Under Incentive Plan) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock-Based Compensation [Abstract]
Outstanding, beginning of year, Shares	1,694	2,087	1,690
Outstanding, beginning of year, Weighted-Average Exercise Price	$ 490.70	$ 395.46	$ 312.44
Shares granted	460	379	764
Granted, Weighted-Average Exercise Price	$ 457.77	$ 659.12	$ 545.66
Stock option and SOSAR exercises (shares)	(124)	(716)	(315)
Exercised, Weighted-Average Exercise Price	$ 315.87	$ 297.25	$ 310.32
Forfeited, Shares	(113)	(56)	(52)
Forfeited, Weighted-Average Exercise Price	$ 559.25	$ 554.73	$ 419.74
Outstanding, end of year, Shares	1,917	1,694	2,087
Outstanding, end of year, Weighted-Average Exercise Price	$ 490.06	$ 490.70	$ 395.46
Outstanding, Weighted-Average Remaining Years of Contractual Life	4 years 4 months 24 days
Outstanding, Aggregate Intrinsic Value	$ 22,040
Vested and expected to vest, Shares	1,851
Vested and expected to vest, Weighted-Average Exercise Price	$ 489.18
Vested and expected to vest, Weighted-Average Remaining Years of Contractual Life	4 years 3 months 18 days
Vested and expected to vest, Aggregate Intrinsic Value	$ 22,040
Exercisable, Shares	846
Exercisable, Weighted-Average Exercise Price	$ 422.32
Exercisable, Weighted-Average Remaining Years of Contractual Life	3 years 3 months 18 days
Exercisable, Aggregate Intrinsic Value	$ 22,040

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Stock Based Compensation (Schedule Of Assumptions To Value SOSAR Awards Granted) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Performance Shares [Member]
Risk-free interest rate	0.90%	1.00%
Expected life	3 years	2 years 10 months 9 days
Expected dividend yield	0.00%	0.00%
Volatility	31.40%	33.70%
SOSARS [Member]
Risk-free interest rate	1.00%	1.10%	0.80%
Expected life	3 years 6 months	3 years 4 months 24 days	3 years 4 months 24 days
Expected dividend yield	0.00%	0.00%	0.00%
Volatility	32.20%	30.80%	33.30%
Weighted-average grant date fair value	$ 117.48	$ 156.32	$ 136.18

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Stock Based Compensation (Summary Of Non-Vested Stock Award Activity Under Incentive Plan) (Details) - $ / shares shares in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock-Based Compensation [Abstract]
Outstanding, beginning of year, Shares	116	70	71
Outstanding, beginning of year, Grant Date Fair Value	$ 511.88	$ 525.60	$ 520.27
Shares granted	90	47	2
Granted, Grant Date Fair Value	$ 509.05	$ 785.32	$ 495.92
Vested, Shares	(7)	(1)	(2)
Vested, Grant Date Fair Value	$ 605.83	$ 413.07	$ 284.11
Forfeited, Shares	(74)	0	(1)
Forfeited, Grant Date Fair Value	$ 529.54	$ 534.55	$ 410.55
Outstanding, end of year, Shares	125	116	70
Outstanding, end of year, Grant Date Fair Value	$ 606.24	$ 511.88	$ 525.60

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Employee Benefit Plans (Narrative) (Details) - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Period of service before an employee is eligible for contribution	1 year
Common stock authorized for issuance but not yet issued for ESPP	247
Common stock authorized and reserved for ESPP	250
ESPP employee contribution, percentage	15.00%
Shares issued under ESPP	1	1	1
Fair value of investments in rabbi trust	$ 17,843	$ 18,331
Deferred Plan [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Employer matching contribution, percentage on first 3%	100.00%
Employer matching contribution, percentage on next 2%	50.00%
Percentage of employees' gross pay for which the employer contributes a matching contribution of 100% under the Deferred Plan	3.00%
Percentage of employees' gross pay for which the employer contributes a matching contribution of 50% under the Deferred Plan	2.00%
Deferred compensation matching contributions	$ 225	617	$ 536
Total liabilities under Deferred Plan	$ 17,843	18,331
401(k) Plan [Member]
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Employer matching contribution, percentage on first 3%	100.00%
Employer matching contribution, percentage on next 2%	50.00%
Percentage of employees' gross pay for which the employer contributes a matching contribution of 100%	3.00%
Percentage of employees' gross pay for which the employer contributes a matching contribution of 50%	2.00%
Period of service before an employee is eligible for contribution	1 year
Company matching contributions	$ 5,939	$ 4,995	$ 3,881

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Employee Benefit Plans (Unrealized gain loss on investments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee Benefit Plans [Abstract]
Unrealized Gain (Loss) on investments held in rabbit trust	$ 586	$ (571)	$ 184

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Leases (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) item	Dec. 31, 2015 USD ($)
Operating Leased Assets [Line Items]
Option terms of lease	5 years
Minimum sublease rentals	$ 5,342
Number of sale leaseback transactions | item	6
Total deemed landlord financing	$ 2,854	$ 3,060
Shopping Center Or Building Leases [Member] | Minimum [Member]
Operating Leased Assets [Line Items]
Combined initial and option terms lease	20 years
Shopping Center Or Building Leases [Member] | Maximum [Member]
Operating Leased Assets [Line Items]
Combined initial and option terms lease	25 years
Ground Leases [Member] | Minimum [Member]
Operating Leased Assets [Line Items]
Combined initial and option terms lease	30 years
Ground Leases [Member] | Maximum [Member]
Operating Leased Assets [Line Items]
Combined initial and option terms lease	40 years

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Leases (Schedule Of Future Minimum Lease Payments Under Operating Leases) (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Leases [Abstract]
2017	$ 264,911
2018	268,862
2019	269,133
2020	263,732
2021	257,400
Thereafter	2,358,941
Total minimum lease payments	$ 3,682,979

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Leases (Schedule Of Rental Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Leases [Abstract]
Minimum rentals	$ 255,955	$ 227,602	$ 200,575
Contingent rentals	1,811	4,542	4,616
Sublease rental income	$ (2,074)	$ (1,879)	$ (1,838)

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Earnings per Share (Stock Awards Excluded From Calculation of Diluted EPS) (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Stock awards excluded, performance conditions	263	266	385
Stock awards excluded, anti-dilutive	1,316	289	232
Total stock awards excluded from diluted earnings per share	1,579	555	617

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Earnings Per Share (Basic and Diluted Earnings) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Net income	$ 15,975	$ 7,799	$ 25,596	$ (26,432)	$ 67,874	$ 144,883	$ 140,204	$ 122,641	$ 22,938	$ 475,602	$ 445,374
Weighted average number of common shares outstanding									29,265	31,092	31,038
Dilutive stock awards									505	402	474
Diluted weighted average number of common shares outstanding									29,770	31,494	31,512
Basic earnings (loss) per share	$ 0.55	$ 0.27	$ 0.88	$ (0.88)	$ 2.19	$ 4.65	$ 4.51	$ 3.95	$ 0.78	$ 15.30	$ 14.35
Diluted earnings (loss) per share	$ 0.55	$ 0.27	$ 0.87	$ (0.88)	$ 2.17	$ 4.59	$ 4.45	$ 3.88	$ 0.77	$ 15.10	$ 14.13

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Quarterly Financial Data (Summary Of Quarterly Financial Data) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Data [Abstract]
Revenue	$ 1,034,560	$ 1,036,982	$ 998,383	$ 834,459	$ 997,507	$ 1,216,890	$ 1,197,783	$ 1,089,043	$ 3,904,384	$ 4,501,223	$ 4,108,269
Operating income (loss)	30,550	9,726	40,895	(46,604)	103,613	234,759	227,416	197,801	34,567	763,589	710,800
Net income (loss)	$ 15,975	$ 7,799	$ 25,596	$ (26,432)	$ 67,874	$ 144,883	$ 140,204	$ 122,641	$ 22,938	$ 475,602	$ 445,374
Basic earnings (loss) per share	$ 0.55	$ 0.27	$ 0.88	$ (0.88)	$ 2.19	$ 4.65	$ 4.51	$ 3.95	$ 0.78	$ 15.30	$ 14.35
Diluted earnings (loss) per share	$ 0.55	$ 0.27	$ 0.87	$ (0.88)	$ 2.17	$ 4.59	$ 4.45	$ 3.88	$ 0.77	$ 15.10	$ 14.13