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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________

FORM 10-Q

______________________________

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

For the quarterly period ended September 30, 2023

¨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<br><br>incorporation or organization)	(IRS Employer<br><br>Identification No.)
610 Newport Center Drive, Suite 1100 Newport Beach, CA	92660
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 524-4000

______________________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	CMG	New York Stock Exchange

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. x Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). x Yes ¨ No

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

 Large accelerated filer	 Accelerated filer	 Non-accelerated filer	 Smaller reporting company	 Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

As of October 24, 2023, there were 27,444,660 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

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	PART I
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income and Comprehensive Income	2
	Condensed Consolidated Statements of Shareholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
	Note 1 - Basis of Presentation and Update to Accounting Policies	5
	Note 2 - Recently Issued Accounting Standards	5
	Note 3 - Revenue Recognition	5
	Note 4 - Fair Value of Financial Instruments	6
	Note 5 – Equity Investments	8
	Note 6 - Shareholders' Equity	9
	Note 7 - Stock-Based Compensation	9
	Note 8 - Income Taxes	9
	Note 9 - Leases	9
	Note 10 - Earnings Per Share	10
	Note 11 - Commitments and Contingencies	10
	Note 12 - Debt	11
	Note 13 - Related Party Transactions	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
	PART II
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3	Defaults upon Senior Securities	19
Item 4	Mine Safety Disclosures	19
Item 5	Other Information	19
Item 6.	Exhibits	20
	Signatures	21

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PART I

ITEM 1. FINANCIAL STATEMENTS

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

		December 31,
		2022

Assets
Current assets:
Cash and cash equivalents	602,307	$	384,000
Accounts receivable, net	71,122		106,880
Inventory	40,177		35,668
Prepaid expenses and other current assets	104,038		86,412
Income tax receivable	-		47,741
Investments	851,699		515,136
Total current assets	1,669,343		1,175,837
Leasehold improvements, property and equipment, net	2,093,011		1,951,147
Long-term investments	473,247		388,055
Restricted cash	25,315		24,966
Operating lease assets	3,555,808		3,302,402
Other assets	72,830		63,158
Goodwill	21,939		21,939
Total assets	7,911,493	$	6,927,504
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	207,541	$	184,566
Accrued payroll and benefits	155,015		170,456
Accrued liabilities	151,148		147,539
Unearned revenue	156,320		183,071
Current operating lease liabilities	244,994		236,248
Income tax payable	172,689		-
Total current liabilities	1,087,707		921,880
Commitments and contingencies (Note 11)
Long-term operating lease liabilities	3,773,087		3,495,162
Deferred income tax liabilities	111,089		98,623
Other liabilities	53,296		43,816
Total liabilities	5,025,179		4,559,481
Shareholders' equity:
Preferred stock, 0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2023 and December 31, 2022, respectively	-		-
Common stock, 0.01 par value, 230,000 shares authorized, 37,467 and 37,320 shares issued as of September 30, 2023 and December 31, 2022, respectively	375		373
Additional paid-in capital	1,917,868		1,829,304
Treasury stock, at cost, 9,982 and 9,693 common shares as of September 30, 2023 and December 31, 2022, respectively	(4,798,748)		(4,282,014)
Accumulated other comprehensive loss	(8,080)		(7,888)
Retained earnings	5,774,899		4,828,248
Total shareholders' equity	2,886,314		2,368,023
Total liabilities and shareholders' equity	7,911,493	$	6,927,504

All values are in US Dollars.

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Food and beverage revenue	$	2,456,039	$	2,202,336	$	7,304,557	$	6,394,094
Delivery service revenue		15,909		17,839		50,772		59,959
Total revenue		2,471,948		2,220,175		7,355,329		6,454,053
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		734,186		662,540		2,165,409		1,963,394
Labor		616,282		557,178		1,811,754		1,639,044
Occupancy		126,269		115,826		372,097		341,777
Other operating costs		345,368		322,085		1,058,281		970,261
General and administrative expenses		159,501		140,896		464,337		429,118
Depreciation and amortization		78,546		71,416		233,902		212,814
Pre-opening costs		9,605		7,618		23,341		18,219
Impairment, closure costs, and asset disposals		7,241		6,363		31,842		15,354
Total operating expenses		2,076,998		1,883,922		6,160,963		5,589,981
Income from operations		394,950		336,253		1,194,366		864,072
Interest and other income, net		18,392		3,712		43,787		14,071
Income before income taxes		413,342		339,965		1,238,153		878,143
Provision for income taxes		(100,125)		(82,827)		(291,502)		(202,769)
Net income	$	313,217	$	257,138	$	946,651	$	675,374
Earnings per share:
Basic	$	11.37	$	9.26	$	34.31	$	24.20
Diluted	$	11.32	$	9.20	$	34.13	$	24.02
Weighted-average common shares outstanding:
Basic		27,550		27,773		27,593		27,907
Diluted		27,681		27,956		27,739		28,116
Other comprehensive income/(loss), net of income taxes:
Foreign currency translation adjustments	$	(1,128)	$	(2,257)	$	(192)	$	(3,542)
Comprehensive income	$	312,089	$	254,881	$	946,459	$	671,832

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Common Stock					Treasury Stock
	Shares	Amount		Additional <br>‎Paid-In<br>‎Capital		Shares	Amount		Retained<br>‎Earnings		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2021	37,132	$	371	$	1,729,312	9,052	$	(3,356,102)	$	3,929,147	$	(5,354)	$	2,297,374
Stock-based compensation	-		-		24,077	-		-		-		-		24,077
Stock plan transactions and other	134		2		(61)	-		-		-		-		(59)
Acquisition of treasury stock	-		-		-	230		(345,921)		-		-		(345,921)
Net income	-		-		-	-		-		158,294		-		158,294
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		195		195
Balance, March 31, 2022	37,266	$	373	$	1,753,328	9,282	$	(3,702,023)	$	4,087,441	$	(5,159)	$	2,133,960
Stock-based compensation	-		-		29,142	-		-		-		-		29,142
Stock plan transactions and other	18		-		(167)	-		-		-		-		(167)
Acquisition of treasury stock	-		-		-	198		(267,198)		-		-		(267,198)
Net income	-		-		-	-		-		259,942		-		259,942
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		(1,480)		(1,480)
Balance, June 30, 2022	37,284	$	373	$	1,782,303	9,480	$	(3,969,221)	$	4,347,383	$	(6,639)	$	2,154,199
Stock-based compensation	-		-		25,587	-		-		-		-		25,587
Stock plan transactions and other	22		-		48	-		-		-		-		48
Acquisition of treasury stock	-		-		-	75		(107,334)		-		-		(107,334)
Net income	-		-		-	-		-		257,138		-		257,138
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		(2,257)		(2,257)
Balance, September 30, 2022	37,306	$	373	$	1,807,938	9,555	$	(4,076,555)	$	4,604,521	$	(8,896)	$	2,327,381
Balance, December 31, 2022	37,320	$	373	$	1,829,304	9,693	$	(4,282,014)	$	4,828,248	$	(7,888)	$	2,368,023
Stock-based compensation	-		-		20,670	-		-		-		-		20,670
Stock plan transactions and other	99		1		(291)	-		-		-		-		(290)
Acquisition of treasury stock	-		-		-	125		(198,819)		-		-		(198,819)
Net income	-		-		-	-		-		291,644		-		291,644
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		457		457
Balance, March 31, 2023	37,419	$	374	$	1,849,683	9,818	$	(4,480,833)	$	5,119,892	$	(7,431)	$	2,481,685
Stock-based compensation	-		-		31,467	-		-		-		-		31,467
Stock plan transactions and other	40		1		(217)	-		-		-		-		(216)
Acquisition of treasury stock	-		-		-	45		(88,319)		-		-		(88,319)
Net income	-		-		-	-		-		341,790		-		341,790
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		479		479
Balance, June 30, 2023	37,459	$	375	$	1,880,933	9,863	$	(4,569,152)	$	5,461,682	$	(6,952)	$	2,766,886
Stock-based compensation	-		-		36,614	-		-		-		-		36,614
Stock plan transactions and other	8		-		321	-		-		-		-		321
Acquisition of treasury stock	-		-		-	119		(229,596)		-		-		(229,596)
Net income	-		-		-	-		-		313,217		-		313,217
Other comprehensive income (loss), net of income taxes	-		-		-	-		-		-		(1,128)		(1,128)
Balance, September 30, 2023	37,467	$	375	$	1,917,868	9,982	$	(4,798,748)	$	5,774,899	$	(8,080)	$	2,886,314

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine months ended
	September 30,
	2023		2022
Operating activities
Net income	$	946,651	$	675,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		233,902		212,814
Deferred income tax provision		12,465		(8,567)
Impairment, closure costs, and asset disposals		30,536		15,127
Provision for credit losses		565		(969)
Stock-based compensation expense		86,557		77,371
Other		(17,272)		(13,045)
Changes in operating assets and liabilities:
Accounts receivable		33,666		22,891
Inventory		(4,508)		(1,056)
Prepaid expenses and other current assets		(23,494)		(3,169)
Operating lease assets		185,056		171,464
Other assets		(6,939)		(1,537)
Accounts payable		4,886		10,774
Accrued payroll and benefits		(14,902)		(32,861)
Accrued liabilities		1,882		(16,562)
Unearned revenue		(21,190)		(18,141)
Income tax payable/receivable		220,427		(18,070)
Operating lease liabilities		(156,180)		(153,200)
Other long-term liabilities		5,910		2,968
Net cash provided by operating activities		1,518,018		921,606
Investing activities
Purchases of leasehold improvements, property and equipment		(388,801)		(335,518)
Purchases of investments		(845,981)		(513,813)
Maturities of investments		440,788		202,997
Net cash used in investing activities		(793,994)		(646,334)
Financing activities
Acquisition of treasury stock		(437,305)		(629,775)
Tax withholding on stock-based compensation awards		(68,613)		(92,374)
Other financing activities		546		(586)
Net cash used in financing activities		(505,372)		(722,735)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		4		(1,170)
Net change in cash, cash equivalents, and restricted cash		218,656		(448,633)
Cash, cash equivalents, and restricted cash at beginning of period		408,966		846,230
Cash, cash equivalents, and restricted cash at end of period	$	627,622	$	397,597
Supplemental disclosures of cash flow information
Income taxes paid	$	54,615	$	227,452
Purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities	$	81,724	$	58,127
Acquisition of treasury stock accrued in accounts payable and accrued liabilities	$	15,312	$	5,999

See accompanying notes to condensed consolidated financial statements.

‎

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CHIPOTLE MEXICAN GRILL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

1. Basis of Presentation and Update to Accounting Policies

In this quarterly report on Form 10-Q, Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries, is collectively referred to as “Chipotle,” “we,” “us,” or “our.”

We develop and operate restaurants that serve a relevant menu of burritos, burrito bowls, quesadillas, tacos, and salads, made using fresh, high-quality ingredients. As of September 30, 2023, we operated 3,321 restaurants including 3,260 Chipotle restaurants within the United States and 61 international Chipotle restaurants. In the current quarter we closed all non-Chipotle restaurants. We manage our U.S. operations based on eight regions and have aggregated our operations to one reportable segment.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements, footnotes and management’s discussion and analysis included in our annual report on Form 10-K for the year ended December 31, 2022.

2. Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2024. We do not expect the transition from LIBOR to alternative reference rates to have a significant impact to our consolidated financial statements.

We 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 condensed consolidated financial statements.

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, 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 (“gift card breakage rate”). The gift card breakage rate is 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 gift card 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,
	2023		2022
Gift card liability	$	115,244	$	145,014

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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,
	2023		2022		2023		2022
Revenue recognized from gift card liability balance at the beginning of the year	$	6,481	$	6,311	$	56,402	$	54,780

Chipotle Rewards

We have a loyalty program called Chipotle Rewards. Eligible customers who enroll in the program generally earn points for every dollar spent. We may also periodically offer promotions, which typically provide the customer with the opportunity to earn bonus points or other rewards. Customers may redeem earned points for various rewards, which are primarily comprised of free food and beverage items. Earned rewards generally expire one month 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 rewards earned by customers as each point or reward is earned, net of points or rewards we do not expect to be redeemed. The estimated selling price of each point or reward earned is based on the estimated value of the product for which the reward is expected to be redeemed. Our estimate of points and rewards we expect to be redeemed is based on historical and other company specific data. The costs associated with rewards redeemed are primarily included in food, beverage, and packaging on our condensed consolidated statements of income and comprehensive income. We evaluate Chipotle Rewards point breakage annually, or more frequently as circumstances warrant.

We recognize revenue associated with Chipotle Rewards within food and beverage revenue on the condensed consolidated statements of income and comprehensive 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,
	2023		2022		2023		2022
Chipotle Rewards liability, beginning balance	$	40,923	$	29,381	$	38,057	$	25,572
Revenue deferred		32,947		32,621		95,672		92,495
Revenue recognized		(32,794)		(30,191)		(92,653)		(86,256)
Chipotle Rewards liability, ending balance	$	41,076	$	31,811	$	41,076	$	31,811

4. Fair Value of Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying value of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of their short-term nature.

Our held-to-maturity investments are comprised of U.S. Treasury securities and a corporate debt security, which are held at amortized cost. We also have investments in convertible notes receivable which are held at fair value. Additionally, we maintain a deferred compensation plan with related assets held in a rabbi trust.

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The following tables show our cash, cash equivalents, and debt investments by significant investment category as of September 30, 2023 and December 31, 2022:

	September 30, 2023
	Adjusted cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Investments		Long-term Investments
Cash	$	86,629	$	-	$	-	$	86,629	$	86,629	$	-	$	-
Level 1^(1)^
Money market funds		439,176		-		-		439,176		439,176		-		-
Time deposits		76,502		-		-		76,502		76,502		-		-
U.S. Treasury securities		1,259,791		520		8,512		1,251,799		-		850,900		408,891
Subtotal		1,775,469		520		8,512		1,767,477		515,678		850,900		408,891
Level 3
Corporate debt security^(2)^		17,600		-		118		17,482		-		799		16,801
Notes receivable^(3)^		6,860		284		-		7,144		-		-		7,144
Subtotal		24,460		284		118		24,626		-		799		23,945
Total	$	1,886,558	$	804	$	8,630	$	1,878,732	$	602,307	$	851,699	$	432,836
	December 31, 2022
	Adjusted cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Investments		Long-term Investments
Cash	$	75,829	$	-	$	-	$	75,829	$	75,829	$	-	$	-
Level 1^(1)^
Money market funds		232,477		-		-		232,477		232,477		-		-
Time deposits		75,694		-		-		75,694		75,694		-		-
U.S. Treasury securities		847,354		63		14,355		833,062		-		515,136		332,218
Subtotal		1,155,525		63		14,355		1,141,233		308,171		515,136		332,218
Level 3
Corporate debt security^(2)^		17,900		-		700		17,200		-		-		17,900
Note receivable^(3)^		4,860		222		-		5,082		-		-		5,082
Subtotal		22,760		222		700		22,282		-		-		22,982
Total	$	1,254,114	$	285	$	15,055	$	1,239,344	$	384,000	$	515,136	$	355,200

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

^(2)^ The fair value of the corporate debt security is measured using Level 3 (unobservable) inputs. We determined the fair value for the corporate debt security using an internally-developed valuation model and unobservable inputs include credit and liquidity spreads and effective maturity.

^(3)^ We have elected to measure our investment in convertible notes receivable of private companies at fair value under the fair value option. The fair value of the notes receivable are measured using Level 3 (unobservable) inputs. We determined the fair value for the notes receivable using an internally-developed valuation model and unobservable inputs include estimates of the equity value of the underlying business and the timing and probability of future financing events.

Rabbi Trust

We have elected to fund certain deferred compensation plan obligations through a rabbi trust, the assets of which are designated as trading securities. 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, carried at fair value and are included in other assets on the condensed consolidated balance sheets. We record trading gains and losses, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect our exposure to liabilities for payment under the deferred plan in general and administrative expenses on the condensed consolidated statements of income and comprehensive income.

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as leasehold improvements, property and equipment, certain long-term investments, operating lease assets, other assets, and goodwill. These assets are measured at fair value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if there has been an observable price change of a non-marketable equity security.

The following table summarizes our restaurant and office assets measured at fair value by hierarchy level on a nonrecurring basis:

		Carrying Value
		September 30,
	Level	2023		2022
Leasehold improvements, property and equipment, net	3	$	2,033	$	194
Operating lease assets	3		4,321		551
Total		$	6,354	$	745

Fair value of these assets was measured using Level 3 inputs (unobservable inputs for the asset or liability). Unobservable inputs include the discount rate, projected restaurant revenues and expenses, and sublease income if we are closing and intend to sublease the restaurant or office space. During the three months ended September 30, 2023 and 2022, we recorded asset impairments related to restaurants and offices of $1,611 and $698, respectively. During the nine months ended September 30, 2023 and 2022, we recorded asset impairments related to restaurants and offices of $10,726 and $1,796, respectively. Costs are recorded within impairment, closure costs, and asset disposals on the condensed consolidated statements of income and comprehensive income. Carrying value after the impairment charges approximates fair value.

5. Equity Investments

	September 30,		December 31,
	2023		2022
Equity method investments	$	9,717	$	11,697
Other investments		40,411		32,855
Total	$	50,128	$	44,552

Equity Method Investments

As of September 30, 2023, we owned 4,325 shares of common stock of Tractor Beverages, Inc. (“Tractor”). Our investment represents ownership of approximately 10.2% of Tractor, and we have invested total cash consideration of $10,000. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. There were no impairment charges for the nine months ended September 30, 2023 or 2022 associated with this equity method investment. The investment in common stock is included within other assets on the condensed consolidated balance sheets with a carrying value of $9,717 and $11,697 as of September 30, 2023 and December 31, 2022, respectively. Refer to Note 13. “Related Party Transactions” for related party disclosures.

Other Investments

As of September 30, 2023, we hold warrants (the “Tractor Warrants”) to purchase 3,772 shares of common stock of Tractor. Tractor is a privately held company, and as such, the Tractor Warrants represent non-marketable equity securities. The investment is included within long-term investments on the condensed consolidated balance sheets with a carrying value of $10,747 as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, we own 766 shares of the Series C Preferred Stock of Nuro, Inc. (“Nuro”). Our investment represents a minority interest and we have determined that we do not have significant influence over Nuro. Nuro is a privately held company, and as such, the preferred shares comprising our investment are illiquid and fair value is not readily determinable. As of September 30, 2023, we have recognized a cumulative gain of $5,968 related to our investment in Nuro due to observable transactions in prior periods. The investment is included within long-term investments on the condensed consolidated balance sheets with a carrying value of $15,968 as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, we held additional investments in other entities through the Cultivate Next Fund. These additional investments are included within long-term investments on the condensed consolidated balance sheets with a carrying value of $13,696 and $6,140 as of September 30, 2023 and December 31, 2022, respectively.

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6. Shareholders’ Equity

We have had a stock repurchase program in place since 2008. As of September 30, 2023, we had $368,369 authorized for repurchasing shares of our common stock, which includes $300,000 additional authorization approved by our Board of Directors on September 13, 2023. Shares we repurchased are being held in treasury stock until they are reissued or retired at the discretion of our Board of Directors.

During the nine months ended September 30, 2023, 41 shares of common stock at a total cost of $68,613 were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by us but are not part of publicly announced share repurchase programs.

7. Stock-Based Compensation

For the nine months ended September 30, 2023, we granted stock only stock appreciation rights (“SOSARs”) on 72 shares of our common stock to eligible employees. The weighted-average grant date fair value of the SOSARs was $521.66 per share with a weighted-average exercise price of $1,615.39 per share. The SOSARs vest in two equal installments on the second and third anniversary of the grant date. For the nine months ended September 30, 2023, 94 SOSARs were exercised, and 18 SOSARs were forfeited.

For the nine months ended September 30, 2023, we granted restricted stock units (“RSUs”) on 35 shares of our common stock to eligible employees. The weighted-average grant date fair value of the RSUs was $1,647.04 per share. The RSUs generally vest in two equal installments on the second and third anniversary of the grant date. For the nine months ended September 30, 2023, 22 RSUs vested and 8 RSUs were forfeited.

For the nine months ended September 30, 2023, we awarded performance share units (“PSUs”) on 24 shares of our common stock at target performance to eligible employees. These PSUs are subject to service, market and performance vesting conditions. The weighted-average grant date fair value of the PSUs was $1,606.91 per share, and the quantity of shares that will vest range from 0% to 300% of the targeted number of shares. If the defined minimum targets are not met, then no shares will vest. Further, in no event may more than 100% of the target number of PSUs vest if our 3-year total shareholder return is below the 25^th^ percentile of the constituent companies comprising the S&P 500 on the day of grant. For the nine months ended September 30, 2023, 49 PSUs vested, and 3 PSUs were forfeited.

The following table sets forth total stock-based compensation expense:

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Stock-based compensation	$	36,614	$	25,587	$	88,751	$	78,806
Stock-based compensation, net of income taxes	$	31,065	$	22,067	$	74,966	$	67,541
Total capitalized stock-based compensation included in leasehold improvements, property and equipment, net on the condensed consolidated balance sheets	$	813	$	437	$	2,194	$	1,435
Excess tax benefit on stock-based compensation recognized in Provision for income taxes on the condensed consolidated statements of income and comprehensive income	$	994	$	3,711	$	23,004	$	24,383

8. Income Taxes

The effective income tax rate for the three months ended September 30, 2023, was 24.2%, a decrease from an effective income tax rate of 24.4% for the three months ended September 30, 2022. The decrease is primarily due to a decrease in uncertain tax position reserves and higher income tax credits, mostly offset by a decrease in tax benefits from option exercises and equity vesting.

The effective income tax rate for the nine months ended September 30, 2023, was 23.5%, an increase from an effective income tax rate of 23.1% for the nine months ended September 30, 2022. The increase is primarily due to fewer tax benefits related to option exercises and equity vesting, partially offset by higher income tax credits.

9. Leases

The majority of our operating leases consist of restaurant locations and office space. We determine if a contract contains a lease at inception. Our leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods. Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years.

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Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Cash paid for operating lease liabilities	$	105,416	$	97,627	$	312,214	$	287,048
Operating lease assets obtained in exchange for operating lease liabilities	$	185,519	$	163,916	$	438,510	$	373,971
Derecognition of operating lease assets due to terminations or impairment	$	1,232	$	6,112	$	6,391	$	12,585

10. Earnings Per Share

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income	$	313,217	$	257,138	$	946,651	$	675,374
Shares:
Weighted-average number of common shares outstanding (for basic calculation)		27,550		27,773		27,593		27,907
Dilutive stock awards		131		183		146		209
Weighted-average number of common shares outstanding (for diluted calculation)		27,681		27,956		27,739		28,116
Basic earnings per share	$	11.37	$	9.26	$	34.31	$	24.20
Diluted earnings per share	$	11.32	$	9.20	$	34.13	$	24.02

The following stock awards were excluded from the calculation of diluted earnings per share:

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Stock awards subject to performance conditions		56		61		54		60
Stock awards that were antidilutive		61		167		93		164
Total stock awards excluded from diluted earnings per share		117		228		147		224

11. Commitments and Contingencies

Purchase Obligations

We enter 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, capital projects, corporate assets, information technology, marketing initiatives and corporate sponsorships, and other miscellaneous items.

Litigation

We are involved in various claims and legal actions, such as wage and hour, wrongful termination and other employment-related claims, slip and fall and other personal injury claims, advertising and consumer claims, privacy claims, and lease, construction and other commercial disputes, that arise in the ordinary course of business, some of which may be covered by insurance. The outcomes of these actions are not predictable, but we do not believe that the ultimate resolution of any pending or threatened actions of these types will have a material adverse effect on our financial position, results of operations, liquidity, or capital resources. However, if there is a significant increase in the number of these claims, or if we incur greater liabilities than we currently anticipate under one or more claims, it could materially and adversely affect our business, financial condition, results of operations and cash flows.

Accrual for Estimated Liability

In relation to various legal matters, we had an accrued legal liability balance of $7,382 and $15,227 included within accrued liabilities on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.

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12. Debt

As of September 30, 2023, we had a $500,000 revolving credit facility with JPMorgan Chase Bank (“JPMorgan”) as administrative agent. Borrowings on the credit facility bear interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.475%, which is subject to increase due to changes in our total leverage ratio as defined in the credit agreement. We are also obligated to pay a commitment fee of 0.175% per year for unused amounts under the credit facility, which also may increase due to changes in our total leverage ratio. Further, we are subject to certain covenants defined in the credit agreement, which include maintaining a total leverage ratio of less than 3.0x, maintaining a consolidated fixed charge coverage ratio of greater than 1.5x, and limiting us from incurring additional indebtedness in certain circumstances. We had no outstanding borrowings under the credit facility and were in compliance with all covenants as of September 30, 2023 and December 31, 2022.

13. Related Party Transactions

As of September 30, 2023, we owned approximately 10.2% of the common stock outstanding of Tractor. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. Accordingly, we have identified Tractor as a related party. We purchase product from the supplier for sale to customers in our restaurants. During the three months ended September 30, 2023 and September 30, 2022, purchases from the supplier were $12,509 and $11,506, respectively. During the nine months ended September 30, 2023 and September 30, 2022, purchases from the supplier were $32,682 and $28,330, respectively.

During the second quarter of 2023, we made an investment in the Series A preferred shares of Vebu Inc. (“Vebu”), a developer of restaurant automation technology. As we are a significant customer of Vebu and maintain board representation, we have determined that we maintain significant influence over Vebu. During the three months ended September 30, 2023 and September 30, 2022, purchases from Vebu were $248 and $502, respectively. During the nine months ended September 30, 2023 and September 30, 2022, purchases from the supplier were $991 and $612, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open and the number with Chipotlanes, our expectation to generate positive cash flow for the foreseeable future, our ability to manage risks in our supply chain, our plans for continuing stock buybacks and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial and competitive information available to us as of the date of this filing and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: increasing wage inflation and the competitive labor market, including as a result of regulations such as California AB 1228, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs (including beef, tortillas, queso, salsa, beans and rice); risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification or destruction of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors and the expected costs to accelerate our international expansion through franchise restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions and supply shortages; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers' perceptions of our brand, including as a result of actual or rumored food safety concerns or other negative publicity, decreased consumer spending (including as a result of higher inflation, mass layoffs, fear of possible recession and higher energy prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions and potential class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims or other matters; and other risk factors described from time to time in our SEC reports, including our Annual Report on Form 10-K for the year ended December 31, 2022, and in other reports filed with the SEC, all of which are available on the investor relations page of our website at ir.Chipotle.com.

As of September 30, 2023, we operated 3,260 Chipotle restaurants throughout the United States and 61 international Chipotle restaurants. We manage our U.S. operations based on eight regions and have aggregated our operations to one reportable segment.

Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we commonly discuss the following key operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:

Comparable restaurant sales

Restaurant operating costs as a percentage of total revenue

New restaurant openings

Third Quarter 2023 Financial Highlights, year-over-year:

Total revenue increased 11.3% to $2.5 billion

Comparable restaurant sales increased 5.0%

Diluted earnings per share was $11.32, a 23.0% increase from $9.20, which includes a $0.04 after-tax impact from expenses related to corporate restructuring.

Sales Trends. Comparable restaurant sales increased 5.0% for the three months ended September 30, 2023. The increase is primarily attributable to higher transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 36.6% of total food and beverage revenue.

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Restaurant Operating Costs. During the three months ended September 30, 2023, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 73.7% of total revenue, a decrease from 74.7% during the three months ended September 30, 2022. The decrease was driven primarily by sales leverage, partially offset by inflation across several food costs and, to a lesser extent, wage inflation.

Restaurant Development. During the three months ended September 30, 2023, we opened 62 new restaurants, which included 54 restaurants with a Chipotlane. We remain on track to open approximately 255-285 new restaurants in 2023 (including 10 to 15 relocations) and expect to open approximately 285 to 315 new restaurants in 2024, which assumes utility, construction, permit and inspection delays do not worsen. We expect that at least 80% of our new restaurants will include a Chipotlane.

Cultivate Next Fund. Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The Fund has an initial size of $50.0 million and will be financed almost entirely by Chipotle. During the three months ended September 30, 2023 we made a $2.0 million investment in a convertible note receivable issued by a developer of agriculture related robotic technologies. As of September 30, 2023, we have made $20.5 million in investments through this Fund.

Restaurant Activity

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

	Three months ended		Nine months ended
	September 30,		September 30,
	2023	2022	2023	2022
Beginning of period	3,268	3,052	3,187	2,966
Chipotle openings	62	43	149	136
Non-Chipotle openings	-	-	1	-
Chipotle permanent closures	(1)	(1)	(1)	(3)
Chipotle relocations	(2)	(4)	(9)	(9)
Non-Chipotle permanent closures	(6)	-	(6)	-
Total restaurants at end of period	3,321	3,090	3,321	3,090

Results of Operations

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

Revenue

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Food and beverage revenue	$	2,456.0	$	2,202.3	11.5%	$	7,304.6	$	6,394.1	14.2%
Delivery service revenue		15.9		17.8	(10.8%)		50.8		60.0	(15.3%)
Total revenue	$	2,471.9	$	2,220.2	11.3%	$	7,355.3	$	6,454.1	14.0%
Average restaurant sales ^(1)^	$	3.0	$	2.8	6.3%	$	3.0	$	2.8	6.3%
Comparable restaurant sales increase		5.0%		7.6%			7.7%		8.9%
^(1)^ Average restaurant sales refer to the average trailing 12-month food and beverage sales for restaurants in operation for at least 12 full calendar months.

The significant factors contributing to the total revenue increase for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, were new restaurant openings and comparable restaurant sales increases. Total revenue increased due to restaurants not yet in the comparable base of $150.3 million, of which $73.4 million was due to restaurants opened in 2023 and comparable restaurant sales increases of $101.5 million. Comparable restaurant sales increased 5.0% as a result of an increase in transactions of 4.1% and an increase in average check of 0.9%. The increase in average check was driven by a 2.8% benefit from menu price increases, which was partially offset by a decrease in check mix.

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The significant factors contributing to the total revenue increase for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, were comparable restaurant sales increases and new restaurant openings. Total revenue increased due to comparable restaurant sales increases of $462.8 million and restaurants not yet in the comparable base of $438.6 million, of which $124.0 million was due to restaurants opened in 2023. Comparable restaurant sales increased 7.7% as a result of an increase in transactions of 4.3% and an increase in average check of 3.4%. The increase in average check was driven by a 6.0% benefit from menu price increases, which was partially offset by a decrease in check mix.

Food, Beverage and Packaging Costs

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Food, beverage and packaging	$	734.2	$	662.5	10.8%	$	2,165.4	$	1,963.4	10.3%
As a percentage of total revenue		29.7%		29.8%	(0.1%)		29.4%		30.4%	(1.0%)

Food, beverage and packaging costs decreased 0.1% as a percentage of total revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, including 0.8% benefit from menu price increases, partially offset by 0.7% from inflation on beef and queso.

Food, beverage and packaging costs decreased 1.0% as a percentage of total revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, including 1.9% from menu price increases and 0.8% from lower avocado costs, partially offset by 1.7% due to inflation across several food costs, primarily beef and tortillas.

Labor Costs

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Labor costs	$	616.3	$	557.2	10.6%	$	1,811.8	$	1,639.0	10.5%
As a percentage of total revenue		24.9%		25.1%	(0.2%)		24.6%		25.4%	(0.8%)

Labor costs decreased 0.2% as a percentage of total revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, including 0.8% from sales leverage, partially offset by 0.6% due to restaurant wage inflation.

Labor costs decreased 0.8% as a percentage of total revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, including 1.5% from sales leverage, partially offset by 0.9% due to restaurant wage inflation.

Occupancy Costs

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Occupancy costs	$	126.3	$	115.8	9.0%	$	372.1	$	341.8	8.9%
As a percentage of total revenue		5.1%		5.2%	(0.1%)		5.1%		5.3%	(0.2%)

Occupancy costs decreased 0.1% and 0.2% as a percentage of total revenue for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively, primarily due to sales leverage, partially offset by increased rent expense associated with new restaurants.

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Other Operating Costs

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Other operating costs	$	345.4	$	322.1	7.2%	$	1,058.3	$	970.3	9.1%
As a percentage of total revenue		14.0%		14.5%	(0.5%)		14.4%		15.0%	(0.6%)

Other operating costs include, among other items, marketing and promotional costs, delivery expense, bank and credit card processing fees, restaurant utilities, technology costs, and maintenance costs.

Other operating costs decreased 0.5% as a percentage of total revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, including 0.4% of sales leverage and 0.1% of lower marketing and promotional expenses, partially offset by 0.1% of higher maintenance costs.

Other operating costs decreased 0.6% as a percentage of total revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, including 0.6% of sales leverage and 0.3% of lower delivery expenses, partially offset by 0.1% of higher maintenance costs.

General and Administrative Expenses

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
General and administrative expense	$	159.5	$	140.9	13.2%	$	464.3	$	429.1	8.2%
As a percentage of total revenue		6.5%		6.3%	0.2%		6.3%		6.6%	(0.3%)

General and administrative expenses increased in dollar terms for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to a $10.2 million increase in stock-based compensation performance awards, a $5.1 million increase in performance bonuses, a $3.5 million increase in conference expense, primarily associated with our upcoming biennial All Managers’ Conference which is scheduled for March 2024, and a $2.9 million increase in outside services expense related to corporate initiatives.

General and administrative expenses increased in dollar terms for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to a $13.5 million increase in performance bonuses, an $11.5 million increase in outside services expense related to corporate initiatives, a $9.5 million increase in employee wages primarily due to headcount growth, an $8.0 million increase in stock-based compensation performance awards, and a $6.5 million increase in restructuring costs. These increases were slightly offset by a $10.8 million decrease in conference expense, primarily associated with our biennial All Managers’ Conference held in the 2022 comparable period, and a $3.2 million decrease in recruitment expense.

Depreciation and Amortization

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Depreciation and amortization	$	78.5	$	71.4	10.0%	$	233.9	$	212.8	9.9%
As a percentage of total revenue		3.2%		3.2%	0.0%		3.2%		3.3%	(0.1%)

Depreciation and amortization remained flat as a percentage of total revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to sales leverage offset by increased depreciation expense associated with new restaurants.

Depreciation and amortization decreased 0.1% as a percentage of total revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.

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Impairment, Closure Costs, and Asset Disposals

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Impairment, closure costs, and asset disposals	$	7.2	$	6.4	13.8%	$	31.8	$	15.4	107.4%
As a percentage of total revenue		0.3%		0.3%	0.0%		0.4%		0.2%	0.2%

Impairment, closure costs, and asset disposals increased in dollar terms for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to higher charges related to the replacement of certain leasehold improvements and, to a lesser extent, the replacement of certain kitchen equipment.

Impairment, closure costs, and asset disposals increased in dollar terms for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to elevated impairment of operating lease assets and leasehold improvements and higher charges related to the replacement of certain leasehold improvements and, to a lesser extent, the replacement of certain kitchen equipment. These elevated impairments include the impact of Pizzeria Locale closing.

Interest and Other Income, net

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Interest and other income, net	$	18.4	$	3.7	395.5%	$	43.8	$	14.1	211.2%
As a percentage of total revenue		0.7%		0.2%	0.5%		0.6%		0.2%	0.4%

Interest and other income, net increased in dollar terms for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to increased interest rates and a higher average investment balance.

Interest and other income, net increased in dollar terms for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to increased interest rates and a higher average investment balance, partially offset by a gain on our investments in Tractor Beverages, Inc. in the prior year.

Provision for Income Taxes

	Three months ended					Nine months ended
	September 30,				Percentage	September 30,				Percentage
	2023		2022		change	2023		2022		change
	(dollars in millions)					(dollars in millions)
Provision for income taxes	$	(100.1)	$	(82.8)	20.9%	$	(291.5)	$	(202.8)	43.8%
Effective income tax rate		24.2%		24.4%	n/m*		23.5%		23.1%	n/m*
*Not meaningful

The effective income tax rate decreased 0.2% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, including 0.5% from a decrease in uncertain tax position reserves, 0.4% from higher income tax credits, mostly offset by a 0.8% from a decrease in tax benefits from option exercises and equity vesting.

The effective income tax rate increased 0.4% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, including 0.9% from a decrease in tax benefits from option exercises and equity vesting, partially offset by 0.4% from higher income tax credits.

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Seasonality

Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales and net income are lower in the first and fourth quarters due, in part, to the holiday season and because fewer people eat out during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For example, restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way, worldwide health pandemics, impact of inflation on consumer spending, fluctuations in food or packaging costs, or the timing of menu price increases or promotional activities and other marketing initiatives. The number of trading days in a quarter can also affect our results, although, on an overall annual basis, changes in trading days do not have a significant impact.

Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based compensation expense and related tax rate impacts, litigation, settlement costs and related legal expenses, impairment charges and non-operating costs, timing of marketing or promotional expenses, the number and timing of new restaurants opened in a quarter, and closure of restaurants. New restaurants typically have higher operating costs following opening because of the expenses associated with their opening and operating inefficiencies in the months immediately following opening. Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.

Liquidity and Capital Resources

As of September 30, 2023, we had a cash and marketable investments balance of $1.9 billion, excluding non-marketable investments of $64.4 million and restricted cash of $25.3 million. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of September 30, 2023, $368.4 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions. Additionally, as of September 30, 2023, we had $500.0 million of undrawn borrowing capacity under a line of credit facility.

We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future. Assuming no significant declines in comparable restaurant sales, we expect we will generate positive cash flow for the foreseeable future. Should our business deteriorate due to changing conditions, there are actions we can take to further conserve liquidity.

We have not 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, beverages and supplies sometime after the receipt of those items, within ten days, thereby reducing the need for incremental working capital to support our growth.

Cash Flows

Cash provided by operating activities was $1.5 billion for the nine months ended September 30, 2023, compared to $921.6 million for the nine months ended September 30, 2022. The increase was primarily due to higher net earnings, timing of tax-related payments and receipts and, to a lesser extent, net cash changes in non-tax operating assets and liabilities.

Cash used in investing activities was $794.0 million for the nine months ended September 30, 2023, compared to $646.3 million for the nine months ended September 30, 2022. The change was primarily associated with a $94.4 million increase in investment purchases net of investment maturities and increased capital expenditures of $53.3 million primarily related to costs associated with new restaurant development.

Cash used in financing activities was $505.4 million for the nine months ended September 30, 2023, compared to $722.7 million for the nine months ended September 30, 2022. The change was primarily due to decreased treasury stock repurchases of $192.5 million and, to a lesser extent, $23.8 million of lower payments of tax withholdings related to stock-based compensation.

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or factors. We had no significant changes to our critical accounting estimates as described in our annual report on Form 10-K for the year ended December 31, 2022.

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ITEM 3. 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, as well as our packaging materials and utilities to run our restaurants, are ingredients or commodities 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, 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 or based on changes in industry indices, and range forward protocols under which we agree on a price range for the duration of that protocol. 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 some cases, we have minimum purchase obligations. We have tried to increase, where practical, 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. We also could experience shortages of key ingredients for many unforeseen reasons, such as crop damage due to inclement weather, if our suppliers need to close or restrict operations, or due to industry-wide shipping and freight delays.

Changing Interest Rates

We are exposed to interest rate risk through fluctuations of interest rates on our investments. As of September 30, 2023, we had $2.0 billion in cash and cash equivalents, current and long-term investments, and restricted cash, nearly all of which are interest bearing. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.

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.

ITEM 4. 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 and Administrative Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Administrative 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 and Administrative Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter ended September 30, 2023, 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.

PART II

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 11. “Commitments and Contingencies” in our condensed consolidated financial statements included in Item 1. “Financial Statements.”

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ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The table below reflects shares of common stock we repurchased during the third quarter of 2023.

		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
July		18,784	$	2,025.80	18,784	$	256,641,653
	Purchased 7/1 through 7/31
August		57,489	$	1,885.59	57,489	$	148,240,948
	Purchased 8/1 through 8/31
September		41,976	$	1,902.81	41,976	$	368,368,641
	Purchased 9/1 through 9/30
Total		118,249	$	1,913.98	118,249

(1) Shares were repurchased pursuant to repurchase programs announced on February 7, 2023 and July 26, 2023.

(2) The September total includes an additional $300 million in authorized repurchases approved on September 13, 2023 and announced October 26, 2023. There is no expiration date for this program. The authorization to repurchase shares will end when we have repurchased the maximum amount of shares authorized, or we have determined to discontinue such repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None. ‎

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ITEM 6. EXHIBITS

EXHIBIT INDEX

		Description of Exhibit Incorporated Herein by Reference
Exhibit Number	Exhibit Description	Form	File No.	Filing Date	Exhibit Number	Filed Herewith
10.1†	Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan, Amended August 2023	-	-	-	-	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	Certificate of Chief Financial and Administrative 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 and Administrative Officer of Chipotle Mexican Grill, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)	-	-	-	-	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	-	-	-	-	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	-	-	-	-	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	-	-	-	-	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	-	-	-	-	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	-	-	-	-	X
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	-	-	-	-	X

†- Management contracts and compensatory plans or arrangements required to be filed as exhibits.

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SIGNATURES

Pursuant to the requirements 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 and Administrative Officer (principal financial officer and duly authorized signatory for the registrant)

Date: October 26, 2023

		Exhibit 101

Exhibit 10.1

CHIPOTLE MEXICAN GRILL, INC.

AMENDED & RESTATED EMPLOYEE STOCK PURCHASE PLAN

1.Purpose. The purpose of the Chipotle Mexican Grill, Inc. Amended & Restated Employee Share Purchase Plan (this “Plan”) is to provide eligible employees of the Company and Participating Subsidiaries with a convenient means of acquiring an equity interest in the Company through payroll deductions or other contributions in order to enhance such employees’ sense of participation in the affairs of the Company.

This Plan includes two components: (a) a component intended to qualify as an “employee stock purchase plan” under Section 423 of the Code (the “423 Component”), the provisions of which shall be construed so as to extend and limit participation in a uniform and nondiscriminatory manner consistent with the requirements of Section 423 of the Code; and (b) a component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code (the “Non-423 Component”), under which options shall be granted pursuant to rules, procedures or sub-plans adopted by the Committee designed to achieve tax, securities laws or other objectives for eligible Employees, the Company and its Participating Subsidiaries. Except as otherwise provided in this Plan, the Non-423 Component will operate and be administered in the same manner as the 423 Component.

2.Definitions. As used herein, the terms set forth below have the meanings assigned to them in this Section 2 and shall include the plural as well as the singular.

“1933 Act” means the Securities Act of 1933, as amended.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“Board” means the Board of Directors of Chipotle Mexican Grill, Inc.

“Business Day” shall mean a day on which the NYSE is open for trading.

“Brokerage Account” means the account in which the Purchased Shares are held.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board, or the designee of the Compensation Committee.

“Company” means Chipotle Mexican Grill, Inc., a Delaware corporation.

“Compensation” means, except as otherwise determined by the Committee with respect to an Offering Period, the base pay received by a Participant, plus overtime and vacation, holiday and sick pay. Compensation does not include: (1) regular annual, quarterly and monthly cash bonuses, (2) commissions, (3) income related to stock option awards, stock grants and other equity incentive awards, (4) expense reimbursements, (5) relocation-related payments, (6) benefit plan payments (including but not limited to short-term disability pay, long-term disability pay, maternity pay, military pay, tuition reimbursement and adoption assistance), (7) accrued but unpaid compensation for a deceased Participant, (8) income from non-cash and fringe benefits, (9) severance payments, and (10) other forms of compensation not specifically listed herein.

“Employee” means any individual who is a common law employee of the Company or any other Participating Subsidiary. For purposes of the Plan, the employment relationship shall be treated as

continuing intact while the individual is on sick leave or other leave of absence approved by the Company or the Participating Subsidiary, as appropriate, and only to the extent permitted under Section 423 of the Code with respect to the 423 Component. For purposes of the Plan, an individual who performs services for the Company or a Participating Subsidiary pursuant to an agreement (written or oral) that classifies such individual’s relationship with the Company or a Participating Subsidiary as other than a common law employee shall not be considered an “employee” with respect to any period preceding the date on which a court or administrative agency issues a final determination that such individual is an “employee.”

“Enrollment Date” means the first Business Day of each Offering Period.

“Exercise Date” means the last Business Day of each Offering Period (or, if determined by the Committee, the Purchase Period if different from the Offering Period).

“Fair Market Value” on or as of any date means the official closing price for a Share as reported on the NYSE on the relevant valuation date or, if no official closing price is reported on such date, on the preceding day on which an official closing price is reported on the NYSE was reported; or, if the Shares are no longer listed on the NYSE, the closing price for Shares as reported on the official website for such other exchange on which the Shares are listed.

“Offering Period” means every three-month period beginning each March 1st, June 1st September 1st and December 1st or such other period designated by the Committee; provided that in no event shall an Offering Period exceed twenty-seven (27) months. The first Offering Period under the Plan shall commence on June 1, 2022 and shall end on August 31, 2022, subject to shareholder approval of the Plan at the 2022 annual meeting of shareholders. Notwithstanding anything herein to the contrary, the Committee may establish an Offering Period with multiple Purchase Periods within such Offering Period.

“Option” means an option granted under this Plan that entitles a Participant to purchase Shares.

“Participant” means an Employee who satisfies the requirements of Sections 3 and 5 of the Plan.

“Participating Subsidiary” means each Subsidiary other than those that the Committee or the Board has excluded from participation in the Plan, if any.

“Plan” means this Chipotle Mexican Grill, Inc. Amended & Restated Employee Stock Purchase Plan, as amended from time to time.

“Purchase Account” means the account used to purchase Shares through the exercise of Options under the Plan.

“Purchase Period” means the period designated by Committee during which payroll deductions or other contributions of the Participants are accumulated under the Plan. A Purchase Period may coincide with an entire Offering Period or there may be multiple Purchase Periods within an Offering Period, as determined by the Committee prior to the commencement of the applicable Offering Period.

“Purchase Price” shall be the lesser of: (i) 92.5% percent of the Fair Market Value of a Share on the applicable Enrollment Date for an Offering Period and (ii) 92.5% percent of the Fair Market Value of a Share on the applicable Exercise Date; provided, however, that the Committee may determine a different per share Purchase Price so long as such per share Purchase Price is communicated to Participants prior to the beginning of the Offering Period and provided that in no event shall such per share Purchase Price be less than the lesser of (i) 85% of the Fair Market Value of a Share on the applicable Enrollment Date or (ii) 85% of the Fair Market Value of a Share on the Exercise Date.

“Purchased Shares” means the full Shares issued or delivered pursuant to the exercise of Options under the Plan.

“Shares” means shares of the common stock of the Company.

“Subsidiary” means an entity, domestic or foreign, of which not less than 50% of the voting equity is held by the Company or a Subsidiary, whether or not such entity now exists or is hereafter organized or acquired by the Company or a Subsidiary; provided such entity is also a “subsidiary” within the meaning of Section 424 of the Code.

“Termination Date” means (i) the date on which a Participant terminates employment or on which the Participant ceases to provide services to the Company or a Subsidiary as an employee or as otherwise required under Section 423 with respect to the 423 Component or (ii) subject to Section 423 of the Code with respect to the 423 Component, the date on which the Participant’s employment is determined to have been terminated for purposes of the Plan by the Committee. The Termination Date specifically does not include any period following that date on which the Participant may be eligible for or in receipt of other payments from the Company, including in lieu of notice or termination or severance pay or as wrongful dismissal damages.

3.Eligibility.

(a)An Employee shall be eligible to participate on the first Enrollment Date that occurs at least twelve (12) full months (or such other time determined by the Committee and consistent with Section 423 of the Code with respect to the 423 Component) after such Employee’s first date of employment with the Company or a Participating Subsidiary. In no event may a Participant be granted an Option under the Plan following his or her Termination Date.

(b)Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an Option under the 423 Component of the Plan if (i) immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding Options or options to purchase capital stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any of its Subsidiaries or (ii) such Option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time each such Option is granted) for each calendar year in which such Option is outstanding at any time. Except as otherwise determined by the Committee prior to the commencement of an Offering Period, no Participant may purchase more than 5,000 Shares during any Offering Period.

4.Exercise of an Option. Options shall be exercised on behalf of Participants in the Plan every Exercise Date, using payroll deductions that have accumulated in the Participants’ Purchase Accounts during the immediately preceding Purchase Period or that have been retained from a prior Purchase Period pursuant to Section 8 hereof.

5.Participation.

(a)An eligible Employee may participate by properly completing and submitting an election form by the deadline prescribed by the Company.

(b)An Employee who does not become a Participant on the first Enrollment Date on which he or she is eligible may thereafter become a Participant on any subsequent Enrollment Date by properly completing and submitting an election form by the deadline prescribed by the Company.

(c)Payroll deductions for a Participant shall commence on the first payroll date following the Enrollment Date and shall end on the last payroll date in the Purchase Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 12 hereof.

6.Payroll Deductions.

(a)A Participant shall elect to have payroll deductions made during a Purchase Period equal to no less than 1% of the Participant’s Compensation up to a maximum of 15% (or such greater amount as the Committee establishes from time to time). The amount of such payroll deductions shall be in whole percentages. All payroll deductions made by a Participant shall be credited to his or her Purchase Account. A Participant may not make any additional payments into his or her Purchase Account. Notwithstanding the foregoing or any provisions to the contrary in the Plan, the Committee may allow participants to make other contributions under the Plan via cash, check, or other means instead of payroll deductions if payroll deductions are not permitted under applicable local law, and for any Offering Period under the 423 Component, the Committee determines that such other contributions are permissible under Section 423 of the Code.

(b)Except as otherwise determined by the Committee prior to the commencement of an Offering Period, a Participant may not increase or decrease the rate of payroll deductions during an Offering Period. A Participant may change his or her payroll deduction percentage under subsection 6(a) above for any subsequent Offering Period by properly completing and submitting an election change form in accordance with the procedures prescribed by the Committee. The change in amount shall be effective as of the first Enrollment Date following the date of filing of the election change form. Unless otherwise determined by the Committee prior to the commencement of an Offering Period, a payroll deduction election will automatically apply to the next Offering Period, unless otherwise cancelled or changed by the Participant prior to the commencement of such Offering Period.

(c)Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant’s payroll deductions may be decreased to 0% at any time during an Offering Period. Payroll deductions shall recommence at the rate provided in such Participant’s election form at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 12 hereof.

Grant of Option. On the applicable Enrollment Date, each Participant in an Offering Period shall be granted an Option to purchase on the applicable Exercise Date a number of full Shares determined by dividing such Participant’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s Purchase Account as of the applicable Exercise Date by the applicable Purchase Price.

8.Exercise of Option. A Participant’s Option for the purchase of Shares shall be exercised automatically on the Exercise Date, and the maximum number of Shares subject to the Option shall be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in his or her Purchase Account. If the Fair Market Value of a Share on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value of a Share on the first day of any subsequent Offering Period, the Company may establish procedures to automatically enroll such participant in the subsequent Offering Period and any funds accumulated in a participant’s account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Exercise Date immediately prior to the first day of such subsequent Offering Period. A participant does not need to file any forms with the Company to be automatically enrolled in the subsequent Offering Period.

Participants shall be permitted to purchase fractional Shares under the Plan. All payroll deductions and other contributions accumulated in a Participant’s Purchase Account and not used to

purchase Shares on an Exercise Date shall be distributed to the Participant. During a Participant’s lifetime, a Participant’s Option is exercisable only by him or her. The Company shall satisfy the exercise of all Participants’ Options for the purchase of Shares through (a) the issuance of authorized but unissued Shares, (b) the transfer of treasury Shares, (c) the purchase of Shares on behalf of the applicable Participants on the open market through an independent broker and/or (d) a combination of the foregoing.

9.Issuance of Stock. The Shares purchased by each Participant shall be issued in book entry form and shall be considered to be issued and outstanding to such Participant’s credit as of the end of the last day of each Purchase Period. The Committee may permit or require that shares be deposited directly in a Brokerage Account with one or more brokers designated by the Committee or to one or more designated agents of the Company, and the Committee may use electronic or automated methods of share transfer. The Committee may require that Shares be retained with such brokers or agents for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares, and may also impose a transaction fee with respect to a sale of Shares issued to a Participant’s credit and held by such a broker or agent. The Committee may permit Shares purchased under the Plan to participate in a dividend reinvestment plan or program maintained by the Company and establish a default method for the payment of dividends.

10.Approval by Shareholders. Notwithstanding the above, the Plan is expressly made subject to the approval of the shareholders of the Company within 12 months before or after the date the Plan is adopted by the Board. Such shareholder approval shall be obtained in the manner and to the degree required under applicable federal and state law. If the Plan is not so approved by the shareholders within 12 months before or after the date the Plan is adopted by the Board, this Plan shall not come into effect.

11.Administration.

(a)Powers and Duties of the Committee. The Plan shall be administered by the Committee. Subject to the provisions of the Plan, Section 423 of the Code and the regulations thereunder with respect to the 423 Component, the Committee shall have the discretionary authority to determine the time and frequency of granting Options, the duration of Offering Periods and Purchase Periods, the terms and conditions of the Options and the number of Shares subject to each Option. The Committee shall also have the discretionary authority to do everything necessary and appropriate to administer the Plan, including, without limitation, interpreting the provisions of the Plan (but any such interpretation shall not be inconsistent with the provisions of Section 423 of the Code with respect to the 423 Component). All actions, decisions and determinations of, and interpretations by the Committee with respect to the Plan shall be final and binding upon all Participants and upon their executors, administrators, personal representatives, heirs and legatees. No member of the Board or the Committee shall be liable for any action, decision, determination or interpretation made in good faith with respect to the Plan or any Option granted hereunder. With respect to the 423 Component, an Offering Period shall be administered so as to ensure that all Participants have the same rights and privileges as provided by Section 423(b)(5) of the Code.

(b)Administrator. The Company, Board or the Committee may engage the services of a brokerage firm or financial institution to perform certain ministerial and procedural duties under the Plan including, but not limited to, mailing and receiving notices contemplated under the Plan, determining the number of Purchased Shares for each Participant, maintaining or causing to be maintained the Purchase Account and the Brokerage Account, disbursing funds maintained in the Purchase Account or proceeds from the sale of Shares through the Brokerage Account, and filing with the appropriate tax authorities proper tax returns and forms (including information returns) and providing to each Participant statements as required by law or regulation.

(c)Indemnification. Each person who is or shall have been (a) a member of the Board, (b) a member of the Committee, or (c) an officer or employee of the Company to whom authority was

delegated in relation to this Plan, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided, however, that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability or expense is a result of his or her own willful misconduct or except as expressly provided by statute.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate of incorporation or bylaws, any contract with the Company, as a matter of law, or otherwise, or of any power that the Company may have to indemnify them or hold them harmless.

12.Withdrawal. A Participant may withdraw from the Plan by properly completing and submitting to the Company a withdrawal form in accordance with the procedures prescribed by the Committee, which must be submitted prior to the date specified by the Committee before the last day of the applicable Offering Period. Upon withdrawal and as specified in the Participant’s withdrawal form, any payroll deductions and other accumulated contributions credited to the Participant’s Purchase Account prior to the effective date of the Participant’s withdrawal from the Plan will be either (a) returned to the Participant, or (b) used to purchase Shares for such Participant in accordance with Section 8; if the Participant did not specify an election, payroll deductions and other accumulated contributions will be returned to the Participant and no Shares will be purchased. No further payroll deductions for the purchase of Shares will be made during subsequent Offering Periods, unless the Participant properly completes and submits an election form, by the deadline prescribed by the Company. A Participant’s withdrawal from an offering will not have any effect upon his or her eligibility to participate in the Plan or in any similar plan that may hereafter be adopted by the Company.

13.Termination of Employment. On the Termination Date of a Participant for any reason prior to the applicable Exercise Date, whether voluntary or involuntary, and including termination of employment due to retirement, death or as a result of liquidation, dissolution, sale, merger or a similar event affecting the Company or a Participating Subsidiary, the corresponding payroll deductions and other contributions credited to his or her Purchase Account will be returned to him or her or, in the case of the Participant’s death, to the person or persons entitled thereto under Section 16, and his or her Option will be automatically terminated.

14.Interest. No interest shall accrue on the payroll deductions of a Participant in the Plan.

15.Stock.

(a) The stock subject to Options shall be common stock of the Company as traded on the NYSE or on such other exchange as the Shares may be listed.

(b) Subject to adjustment upon changes in capitalization of the Company as provided in Section 18 hereof, the maximum number of Shares which shall be made available for sale under the Plan shall be 250,000 Shares. If, on a given Exercise Date, the number of Shares with respect to which Options are to be exercised exceeds the number of Shares then available under the Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.

(c) A Participant shall have no interest or voting right in Shares covered by his or her Option until such Option has been exercised and the Participant has become a holder of record of Shares acquired pursuant to such exercise.

16.Designation of Beneficiary. The Committee may permit Participants to designate beneficiaries to receive any Purchased Shares or payroll deductions, if any, in the Participant’s accounts under the Plan in the event of such Participant’s death. Beneficiary designations shall be made in accordance with procedures prescribed by the Committee. If no properly designated beneficiary survives the Participant, the Purchased Shares and payroll deductions, if any, will be distributed to the Participant’s estate.

17.Assignability of Options. Neither payroll deductions credited to a Participant’s Purchase Account nor any rights with regard to the exercise of an Option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 16 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from an Offering Period in accordance with Section 12 hereof.

18.Adjustment of Number of Shares Subject to Options.

(a)Adjustment. Subject to any required action by the shareholders of the Company, the maximum number of securities available for purchase under the Plan, as well as the price per security and the number of securities covered by each Option under the Plan which has not yet been exercised shall be appropriately adjusted in the event of any a stock split, reverse stock split, stock dividend, extraordinary cash dividend, combination or reclassification of the common stock of the Company, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board or the Committee, whose determination in that respect shall be final, binding and conclusive. If any such adjustment would result in a fractional security being available under the Plan, such fractional security shall be disregarded. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. With respect to the 423 Component, the Options granted pursuant to the Plan shall not be adjusted in a manner that causes the Options to fail to qualify as options issued pursuant to an “employee stock purchase plan” within the meaning of Section 423 of the Code.

(b)Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board, and the Board may either provide for the purchase of Shares as of the date on which such Offering Period terminates or return to each Participant the payroll deductions credited to such Participant’s Purchase Account.

(c)Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation in which the Company is not the surviving entity, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the Board determines, in the exercise of its sole discretion, that in lieu of such assumption or substitution to either terminate all outstanding Options and return to each Participant the payroll deductions and other contributions credited to such Participant’s Purchase Account or to provide for the Offering Period in progress to end on a date prior to the consummation of such sale or merger.

19.Amendments or Termination of the Plan.

(a)The Board or the Committee may at any time and for any reason amend, modify, suspend, discontinue or terminate the Plan without notice; provided that no Participant’s existing rights in respect of existing Options are adversely affected thereby. To the extent necessary to comply with Section 423 of the Code (or any other applicable law, regulation or stock exchange rule), the Company shall obtain shareholder approval in such a manner and to such a degree as required.

(b)Without shareholder consent and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Board or the Committee shall be entitled to change the Purchase Price, Offering Periods, Purchase Periods, eligibility requirements, limit or increase the frequency and/or number of changes in the amount withheld during a Purchase Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in an amount less than or greater than the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board or the Committee determines in its sole discretion advisable which are consistent with the Plan; provided, however, that changes to (i) the Purchase Price, (ii) the Offering Period, (iii) the Purchase Period, (iv) the maximum percentage of Compensation that may be deducted pursuant to Section 6(a) or (v) the maximum number of Shares that may be purchased in a Purchase Period, shall not be effective until communicated to Participants in a reasonable manner, with the determination of such reasonable manner in the sole discretion of the Board or the Committee.

20.No Other Obligations. The receipt of an Option pursuant to the Plan shall impose no obligation upon the Participant to purchase any Shares covered by such Option. Nor shall the granting of an Option pursuant to the Plan constitute an agreement or an understanding, express or implied, on the part of the Company to employ the Participant for any specified period.

21.Notices and Communication. Any notice or other form of communication which the Company or a Participant may be required or permitted to give to the other shall be provided through such means as designated by the Committee, including but not limited to any paper or electronic method.

22.Condition upon Issuance of Shares.

(a)Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the 1933 Act and the 1934 Act and the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

23.General Compliance. The Plan will be administered, and Options will be exercised, in compliance with the 1933 Act, 1934 Act and all other applicable securities laws and Company policies, including without limitation, any insider trading policy of the Company.

24.Term of the Plan. The Plan shall become effective upon the earlier to occur of (i) its adoption by the Board and (ii) its approval by the shareholders of the Company (the earlier of such events, the “Effective Date”), and shall continue in effect until the earlier of (x) the termination of the Plan pursuant to Section 19 hereof or (y) the purchase of all Shares available for issuance under the Plan.

25.Governing Law. The Plan and all Options granted hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without reference to conflicts of law principles and subject in all cases to the Code and the regulations thereunder.

26.Non-U.S. Participants. To the extent permitted under Section 423 of the Code, without the amendment of the Plan, the Company may provide for the participation in the Plan by Employees who are subject to the laws of foreign countries or jurisdictions on such terms and conditions different from those specified in the Plan as may in the judgment of the Company be necessary or desirable to foster and promote achievement of the purposes of the Plan and, in furtherance of such purposes the Company may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws of other countries or jurisdictions in which the Company or the Participating Subsidiaries operate or have employees. Each subplan shall constitute a separate “offering” under this Plan in accordance with Treas. Reg. §1.423-2(a) and, to the extent inconsistent with the requirements of Section 423, any such subplan shall be considered part of the Non-423 Component, and rights granted thereunder shall not be required by the terms of the Plan to comply with Section 423 of the Code.

27.Section 409A. The 423 Component is exempt from the application of Section 409A of the Code, and any ambiguities herein shall be interpreted to so be exempt from Section 409A of the Code. The Non-423 Component is intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Section 409A of the Code or that any provision in the Plan would cause an option under the Plan to be subject to Section 409A, the Committee may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Committee determines is necessary or appropriate, in each case, without the participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Section 409A of the Code, but only to the extent any such amendments or action by the Committee would not violate Section 409A of the Code. Notwithstanding the foregoing, the Company shall have no liability to a participant or any other party if the option under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.

Amended August 2023

		Exhibit 311

Exhibit 31.1

CERTIFICATION

I, Brian R. Niccol, certify that: | 1. | I have reviewed this quarterly report on Form 10-Q 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: October 26, 2023

|  |

| --- | | | | | | /s/ Brian R. Niccol | | Brian R. Niccol | | Chairman and Chief Executive Officer (Principal Executive Officer) |

		Exhibit 312

Exhibit 31.2

CERTIFICATION

I, John R. Hartung, certify that: | 1. | I have reviewed this quarterly report on Form 10-Q 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: October 26, 2023

|  |

| --- | | | | | | /s/ John R. Hartung | | John R. Hartung | | Chief Financial and Administrative Officer (Principal Financial Officer) |

		Exhibit 321

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, Brian R. Niccol, the Chairman and Chief Executive Officer of Chipotle Mexican Grill, Inc. (the “Registrant”) and John R. Hartung, the Chief Financial and Administrative Officer of the Registrant, each hereby certifies that, to the best of his knowledge: | 1. | The Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2023, 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: October 26, 2023

|  |  |

| --- | --- | | | | | /s/ Brian R. Niccol | /s/ John R. Hartung | | Brian R. Niccol | John R. Hartung | | Chairman and Chief Executive Officer (Principal Executive Officer) | Chief Financial and Administrative Officer (Principal Financial Officer) | | | |

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

¨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.

Registrant’s telephone number, including area code: (949) 524-4000

TABLE OF CONTENTS

PART I

ITEM 1. FINANCIAL STATEMENTS

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

See accompanying notes to condensed consolidated financial statements.

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

See accompanying notes to condensed consolidated financial statements.

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to condensed consolidated financial statements.

CHIPOTLE MEXICAN GRILL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Update to Accounting Policies

2. Recently Issued Accounting Standards

3. Revenue Recognition

Gift Cards

Chipotle Rewards

4. Fair Value of Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Rabbi Trust

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

5. Equity Investments

Equity Method Investments

Other Investments

6. Shareholders’ Equity

7. Stock-Based Compensation

8. Income Taxes

9. Leases

10. Earnings Per Share

11. Commitments and Contingencies

Purchase Obligations

Litigation

Accrual for Estimated Liability

12. Debt

13. Related Party Transactions

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Third Quarter 2023 Financial Highlights, year-over-year:

Restaurant Activity

Results of Operations

Revenue

Food, Beverage and Packaging Costs

Labor Costs

Occupancy Costs

Other Operating Costs

General and Administrative Expenses

Depreciation and Amortization

Impairment, Closure Costs, and Asset Disposals

Interest and Other Income, net

Provision for Income Taxes

Seasonality

Liquidity and Capital Resources

Cash Flows

Critical Accounting Estimates

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Price Risks

Changing Interest Rates

Foreign Currency Exchange Risk

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Changes in Internal Control over Financial Reporting

PART II

ITEM 1. LEGAL PROCEEDINGS