Revenue Recognition

9 Months Ended

Sep. 30, 2020

Revenue Recognition [Abstract]

Revenue Recognition

3. Revenue Recognition

Gift Cards

We sell gift cards, which do not have expiration dates and we do not deduct non-usage fees from outstanding gift card balances. Gift card balances are initially recorded as unearned revenue. We recognize revenue from gift cards when the gift card is redeemed by the customer. Historically, the majority of gift cards are redeemed within one year. In addition, based on historical redemption rates, a portion of gift cards are not expected to be redeemed and will be recognized as breakage over time in proportion to gift card redemptions. The breakage rates are based on company and program specific information, including historical redemption patterns, and expected remittance to government agencies under unclaimed property laws, if applicable. We evaluate our breakage rate estimate annually, or more frequently as circumstances warrant, and apply that rate to gift card redemptions. Gift card liability balances are typically highest at the end of each calendar year following increased gift card sales during the holiday season; accordingly, revenue recognized from gift card liability balances is highest in the first quarter of each calendar year.

The gift card liability included in unearned revenue on the condensed consolidated balance sheets was as follows:

	September 30,		December 31,
	2020		2019
Gift card liability	$	68,569	$	84,611

Revenue recognized from the redemption of gift cards that was included in unearned revenue at the beginning of the year was as follows:

	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue recognized from gift card liability balance at the beginning of the year	$	3,990	$	3,556	$	36,124	$	34,874

Chipotle Rewards

During the first quarter of 2019, we launched a national loyalty program called Chipotle Rewards. Eligible customers who enroll in the program generally earn points for every dollar spent. After accumulating a certain number of points, the customer earns a reward that can be redeemed for a free entrée. We may also periodically offer promotions, which provide the customer with the opportunity to earn bonus points or free food vouchers (“Bonus Vouchers”). Earned rewards generally expire one to two months after they are issued, and points generally expire if an account is inactive for a period of six months.

We defer revenue associated with the estimated selling price of points or Bonus Vouchers earned by customers as each point or Bonus Voucher is earned, net of points we do not expect to be redeemed. The estimated selling price of each point or Bonus Voucher earned is based on the estimated value of product for which the reward is expected to be redeemed. Our estimate of points and Bonus Vouchers we expect to be redeemed is based on historical company specific data. The cost associated with rewards and Bonus Vouchers redeemed are included in food, beverage, and packaging expense on our condensed consolidated statements of income.

We recognize loyalty revenue within food and beverage revenue on the condensed consolidated statements of income when a customer redeems an earned reward. Deferred revenue associated with Chipotle Rewards is included in unearned revenue on our condensed consolidated balance sheets.

Changes in our Chipotle Rewards liability included in unearned revenue on the condensed consolidated balance sheets were as follows:

	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Chipotle Rewards liability, beginning balance	$	20,012	$	8,577	$	10,584	$	-
Revenue deferred		22,302		12,354		62,745		32,081
Revenue recognized		(19,416)		(11,130)		(50,431)		(22,280)
Chipotle Rewards liability, ending balance	$	22,898	$	9,801	$	22,898	$	9,801