Chipotle

2016 ANNUAL REPORT 

AND PROXY STATEMENT

Dear fellow shareholders:

As we enter 2017, we do so with a broader mission – to ensure that better food, made with whole, unprocessed
ingredients, is accessible to everyone — and with an unwavering commitment to delivering an excellent guest experience 
in every restaurant, every day. 

While we still have work to do to fully restore our reputation and our economic model, we are well on our way to
dramatically simplifying our business and perfecting the customer experience in our restaurants.

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strengthen our company and delight our customers. 

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year stronger than ever before. We are cooking for more than one million customers daily; preparing burritos, tacos
and salads from simple, high-quality ingredients.  And we will continue to advocate for food that is grown, raised, and
prepared responsibly.

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• Made meaningful changes to our leadership structure to strengthen our culture, improve
   governance, and sharpen our focus on the customer;

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• Renewed our focus on the customer and the restaurant experience we are providing;

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As many great leaders have attested throughout history, by overcoming adversity you become stronger. We have faced 
greater challenges over the last year than at any time in our history, but we have responded to these challenges with an
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focused on the right priorities: improving the guest experience, marketing our restaurants to build sales, and restoring 
our economic model. With our compelling mission, our newly strengthened clarity of focus, and a team that is more 
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shareholder value. I look forward to the next phase of growth and to building upon what we have already achieved for
our customers, our employees, our farm and supplier partners, and our shareholders.

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(cid:54)(cid:87)(cid:72)(cid:89)(cid:72)(cid:3)(cid:40)(cid:79)(cid:79)(cid:86)
(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:15)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:40)(cid:50)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

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

For the fiscal year ended December 31, 2016
or

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
(State or other jurisdiction of
incorporation or organization)

1401 Wynkoop Street, Suite 500 Denver, CO
(Address of Principal Executive Offices)

84-1219301
(IRS Employer
Identification No.)

80202
(Zip Code)

Registrant’s telephone number, including area code: (303) 595-4000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common stock, par value $0.01 per share

New York Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). È Yes ‘ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (check one):
‘ Accelerated filer
È Large accelerated filer

‘ Smaller reporting company

‘ Non-accelerated filer
(do not check if a
smaller reporting
company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
As of June 30, 2016, the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was
$6.6 billion, based on the closing price of the registrant’s common stock on such date, the last trading day of the
registrant’s most recently completed second fiscal quarter. For purposes of this calculation, shares of common stock held
by each executive officer and director and by holders of 5% or more of the outstanding common stock have been excluded
since those persons may under certain circumstances be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of January 31, 2017, there were 28,772,830 shares of the registrant’s common stock, par value of $0.01 per share
outstanding.

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2017 annual
meeting of shareholders, which will be filed no later than 120 days after the close of the registrant’s fiscal year ended
December 31, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

PART I

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director
Independence

Item 14. Principal Accounting Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

Signatures

1

6

22

23

23

23

24

26

27

35

37

57

57

59

60

60

60

60

60

61

61

62

PART I

Cautionary Note Regarding Forward-Looking
Statements
This report includes statements of our expectations,
intentions, plans and beliefs that constitute “forward-
looking statements” within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are intended to come within the
safe harbor protection provided by those sections. These
statements, which involve risks and uncertainties, relate to
the discussion of our business strategies and our
expectations concerning future operations, margins,
profitability, trends, liquidity and capital resources and to
analyses and other information that are based on forecasts
of future results and estimates of amounts not yet
determinable. Forward-looking statements include
statements regarding the effectiveness of enhanced food
safety procedures we have implemented; the impact of
catering and delivery offerings and technology initiatives;
the expected impact of food safety enhancements on our
restaurant operating costs; projections of comparable
restaurant sales increases and sales trends we expect for
2017; forecasts of trends in food, beverage and packaging
costs, other operating costs, general and administrative
expenses and other cost items for 2017; forecasts of the
number of restaurants we expect to open in 2017; expected
effective tax rates for the year; statements about possible
repurchases of our common stock; projections of restaurant
development costs; and other statements of our
expectations and plans. We have used words such as “may,”
“will,” “should,” “expect,” “intend,” “plan,” “anticipate,”
“believe,” “think,” “estimate,” “seek,” “expect,” “predict,”
“could,” “project,” “potential” and other similar terms and
phrases, including references to assumptions, in this report
to identify forward-looking statements. These forward-
looking statements are made based on expectations and
beliefs concerning future events affecting us and are
subject to uncertainties, risks and factors relating to our
operations and business environments, all of which are
difficult to predict and many of which are beyond our
control, that could cause our actual results to differ
materially from those matters expressed or implied by
these forward-looking statements. Such risks and other
factors include those listed in Item 1A. “Risk Factors,” and
elsewhere in this report.

When considering forward-looking statements in this report
or that we make in other reports or statements, you should
keep in mind the cautionary statements in this report and
future reports we file with the SEC. New risks and
uncertainties arise from time to time, and we cannot predict
when they may arise or how they may affect us. We assume
no obligation to update any forward-looking statements

after the date of this report as a result of new information,
future events or other developments, except as required by
applicable laws and regulations.

ITEM 1. BUSINESS

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

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

We manage our operations and restaurants based on 11
regions that aggregate into one reportable segment.
Financial information about our operations, including our
revenues and net income for the years ended December 31,
2016, 2015, and 2014, and our total assets as of
December 31, 2016 and 2015, is included in our consolidated
financial statements and accompanying notes in Item 8.
“Financial Statements and Supplementary Data.”
Substantially all of our revenues are generated and assets

2016 Annual Report

1

PART I
(continued)

are located in the U.S. For a discussion of risks related to
our international operations, see Risks Related to Our Plans
to Return to Sales and Profitability Growth and Restore Our
Economic Model — Our expansion into international markets
may present increased risks due to lower customer
awareness of our brand… ” in Item 1A. “Risk Factors.”

focused, we can concentrate on the sources of each
ingredient, and this has become a cornerstone of our
continuous effort to improve the food we serve. We’re all
about simple, fresh food without artificial flavors or fillers —
just genuine raw ingredients and their individual, delectable
flavors.

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

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

Better Food. Serving high quality food while still charging
reasonable prices is critical to our mission to ensure that
better food is accessible to everyone. We believe that
purchasing fresh ingredients and preparing them from
scratch in our restaurants is not enough, so we spend time
on farms and in the field to understand where our food
comes from and how it is raised. Because our menu is so

2 2016 Annual Report

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

We also seek to use more responsibly grown produce, by
which we mean produce grown by suppliers whose
practices conform to our priorities with respect to
environmental considerations and employee welfare. A
portion of our beans is organically grown and a portion is
grown using conservation tillage methods that improve soil
conditions, reduce erosion, and help preserve the
environment in which the beans are grown. A portion of
some of the other produce items we serve is organically
grown as well. Our commitment to better ingredients also
extends to the dairy products we serve. We started 2017
with all the sour cream and cheese we buy for our U.S.
Chipotle restaurants made with milk that comes from cows
that are not given rBGH (recombinant bovine growth
hormone) and sourced from pasture-based dairies that
provide an even higher standard of animal welfare by
providing outdoor access for their cows.

In addition, none of the ingredients in our food (not
including beverages) in U.S. Chipotle restaurants contain
genetically modified organisms, or GMOs. While the meat
and poultry we serve is not genetically modified, the

PART I
(continued)

animals are likely fed a diet of grains containing GMOs. Due
to the prevalence of GMOs in a number of important feed
crops, the vast majority of the grains used as animal feed in
the U.S. are genetically modified. Additionally, some of the
beverages we serve are sweetened with corn-based
sweeteners, which are typically made with genetically
modified corn.

Close Relationships with Suppliers. Maintaining the high
levels of quality and safety we expect in our restaurants
depends in part on our ability to acquire high-quality, fresh
ingredients and other necessary supplies that meet our
specifications from reliable suppliers. Our 24 independently
owned and operated regional distribution centers purchase
from various suppliers we carefully select based on quality
and the suppliers’ understanding of our mission. We work
closely with our suppliers and seek to develop mutually
beneficial long-term relationships with them. We use a mix
of forward, fixed and formula pricing protocols, and our
distribution centers purchase within the pricing guidelines
and protocols we have established with the suppliers. We’ve
also tried to increase, where necessary, the number of
suppliers for our ingredients, which we believe can help
mitigate pricing volatility and supply shortages, and we
follow industry news, trade tariffs and other issues,
weather, exchange rates, foreign demand, crises and other
world events that may affect our ingredient prices. Certain
key ingredients (including beef, pork, chicken, beans, rice,
sour cream, cheese, and tortillas) are purchased from a
small number of suppliers. For a discussion of risks related
to our supply chain, see “Risks Related to Operating in the
Restaurant Industry — Failure to receive frequent deliveries
of higher-quality food ingredients and other supplies
meeting our specifications could harm our operations” and
“Risks Related to our Unique Business Strategy — Our Food
With Integrity philosophy subjects us to risks” in Item 1A.
“Risk Factors.”

Quality Assurance and Food Safety. Our business was
severely impacted beginning in the fourth quarter of 2015
by food safety incidents that were associated with a
number of our restaurants. More discussion of these
incidents can be found in “Risks Related to Our Plans to
Return to Sales and Profitability Growth and Restore Our
Economic Model — We may continue to be negatively
impacted by food safety incidents associated with our
restaurants beginning in the fourth quarter of 2015. . . ” in
Item 1A. “Risk Factors.” In the wake of these incidents,
strengthening trust among our customers and in our brand
has become essential to restoring our business results and
achieving our mission. This begins with our commitment to
serving safe, high quality food. Quality and food safety

measures are integrated throughout our supply chain, from
the farms that supply our food all the way through to our
front line and into our customers’ hands. We maintain a
limited list of approved suppliers, many of which are among
the top suppliers in the industry. Our quality assurance
department establishes and monitors our quality and food
safety programs, and works closely with our suppliers to
ensure our high standards are met throughout the supply
chain. Our training, operations, and risk management
departments develop and implement operating standards
for food quality, preparation, cleanliness, employee health
protocols, and safety in the restaurants. Our food safety
programs are also designed to ensure that we not only
continue to comply with applicable federal, state and local
food safety regulations, but establish Chipotle as an
industry leader in food safety.

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

• supplier interventions (steps to avoid food safety risks

before ingredients reach Chipotle);

• advanced technology (tools that eliminate pathogens

while maintaining food quality);

• farmer support and training;
• enhanced restaurant procedures (protocols for handling
ingredients and sanitizing surfaces in our restaurants);

• food safety certification;
• internal and third party restaurant inspections; and
• ingredient traceability.

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

Delivering an Excellent Guest Experience
There is nothing more important than treating our guests
to an excellent experience every time they visit one of our
restaurants. We believe that restaurants that deliver a

2016 Annual Report 3

PART I
(continued)

consistently great experience attract customers more
frequently and engender greater customer loyalty. Creating
an excellent guest experience starts with hiring great
people, training them on our high standards, and creating
great teams in our restaurants. We have identified 13
characteristics of top performing employees, and use these
characteristics as a guide to help us identify the very best
people for our restaurants. Then, we invest in properly
training each employee so that they can seamlessly deliver
an excellent experience that our guests will enjoy. Our
restaurant training focuses on the guest experience by
ensuring we are serving safe and delicious food quickly, in a
clean and hospitable environment.

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

Innovation. We are prioritizing the development of
technological and other innovations, such as digital/mobile
ordering platforms, and delivery and catering choices, that
allow our guests to engage with Chipotle in whatever
fashion is most convenient for them. By allowing our
customers to order and receive their food in a variety of
ways, we believe we can attract more customers and help
encourage customers to choose us more frequently. In
order to successfully deliver a great experience for
customers, we are emphasizing the optimization of our
second make-lines, which allow us to fulfill catering or
online orders without disrupting throughput on our main
service line. We are also integrating technology into our
applications that provides customers with more precise and
earlier pick-up times, which help our restaurants fill digital

4 2016 Annual Report

orders more quickly and accurately, improving the
experience for customers who use these platforms.
Technological innovations also improve the experience of
other guests by helping to improve throughput for those
who choose to dine in our restaurants. Additionally, we
have enhanced our data capabilities to allow us to better
identify individual customers and their unique frequency
patterns, and to target our marketing and promotional
efforts at the individual level. We believe the advancements
we have made in this area will help us as we continue to
target lapsed customers, and seek to build frequency
among newer customers.

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

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

Alongside our excellent restaurant teams, these efforts
have helped us create considerable word-of-mouth publicity
as our customers learn more about us and share with
others. This approach allows us to build awareness and

PART I
(continued)

loyalty with relatively low advertising expenditures, even in
a competitive category, and to differentiate Chipotle as a
company that is committed to doing the right thing in every
facet of our business.

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

Moreover, we may also compete with companies outside
the fast-casual, quick-service, and casual dining segments
of the restaurant industry. For example, competitive
pressures can come from deli sections and in-store cafés of
major grocery store chains, including those targeted at
customers who seek higher-quality food, as well as from
convenience stores, cafeterias, and other dining outlets.
For more information, see “Risks Related to Operating in
the Restaurant Industry — Competition could adversely
affect us” in Item 1A. “Risk Factors.” We also compete with
other restaurants and retail establishments for site
locations and restaurant employees.

Restaurant Site Selection
We believe restaurant site selection is critical to our
success and growth strategy and thus we devote
substantial time and effort to evaluating each potential
restaurant location. Our site selection process is led by our
internal team of real estate managers and also includes the
use of external real estate brokers with expertise in specific
markets, as well as support from an internal real estate
strategy and research group. We study the surrounding
trade area, demographic and business information within
that area, and available information on competitors and
other restaurants. Based on this analysis, including
utilization of predictive modeling using proprietary
formulas, we determine projected sales and targeted return
on investment for each potential restaurant site. We have

been successful in a number of different types of locations,
such as in-line or end-cap locations in strip or power
centers, in regional malls and downtown business districts,
free-standing buildings, food courts, outlet centers,
airports, military bases and train stations.

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

In 2017, our focus will remain

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

2016 Annual Report 5

PART I
(continued)

make investments in our information technology networks
and infrastructure, specifically in our physical and
technological security measures to anticipate cyber-attacks
and prevent breaches, and to provide improved control,
security and scalability. Enhancing the security of our
financial data, customer information and other personal
information remains a priority for us.

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

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

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

Our Intellectual Property and Trademarks
“Chipotle,” “Chipotle Mexican Grill,” “Unburritable,” “Food
With Integrity,” “Fresh Is Not Enough, Anymore,” “The
Gourmet Restaurant Where You Eat With Your Hands,”
“Responsibly Raised,” and a number of related designs and
logos are U.S. registered trademarks of Chipotle. We have
filed trademark applications for a number of other marks in
the U.S. In addition to our U.S. registrations, we have
registered trademarks for “Chipotle” and a number of other
marks in Canada, the European Union and various other
countries, and have filed trademark applications for
“Chipotle Mexican Grill,” “Chipotle” and a number of other
marks in various countries as well. We also believe that the
design of our restaurants is our proprietary trade dress and
have registered elements of our restaurant design for trade
dress protection in the U.S. as well.

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

6 2016 Annual Report

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

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

ITEM 1A. RISK FACTORS
Risks Related to our Plans to Return to Sales
and Profitability Growth and Restore our
Economic Model

Our sales and profitability will continue to fall well
short of our past results unless we can significantly
increase comparable restaurant sales, and there are
material risks to our ability to do so.
In 2016 we experienced lower sales than the preceding year
for the first time in our history as a public company and our
average restaurant volumes have declined from
$2.532 million as of September 30, 2015 to $1.868 million
as of December 31, 2016. In order to increase our sales, one
of our primary goals is to increase comparable restaurant
sales. Comparable restaurant sales represent the change in
period-over-period sales for restaurants beginning in their
13th full calendar month of operation. Changes in
comparable restaurant sales are also a critical factor
affecting our profitability, because the profit margin on
incremental comparable restaurant sales is generally
higher due to the sales increases being applied against a
partially fixed cost base. Conversely, declines in

PART I
(continued)

p

comparable restaurant sales, as we saw throughout the
majority of 2016, have a significant adverse effect on
profitability due to the loss of the positive impact on profit
margins associated with comparable restaurant sales
increases, while we continue to incur a certain level of fixed
costs.

Our ability to increase comparable restaurant sales
depends on many factors, including:

• perceptions of the Chipotle brand and the safety and

quality of our food, which may continue to be adversely
impacted by food safety incidents described below
under “— We may continue to be negatively impacted by
food safety incidents associated with our restaurants…”;

• competition, especially from an increasing number of

competitors in the fast casual segment of the
restaurant industry and from other restaurant concepts
whose strategies overlap with elements of our Food
With Integrity philosophy, as well as from grocery stores
and other dining options;

• executing our strategies effectively, including our

marketing and branding strategies, our initiatives to
expand the use of online and other digital ordering and
increase sales from our catering options, our efforts to
improve the overall quality of our customers’
experience and increase the speed at which our crews
serve each customer, and our potential introduction of
new menu items, each of which we may not be able to
accomplish or which may not have the impact we
expect;

• changes in consumer preferences and discretionary

spending, including weaker consumer spending during
periods of economic difficulty or uncertainty;

• initial sales performance of new restaurants, and the

impact of new Chipotle restaurants in the event
customers who frequent one of our restaurants begin to
visit one of our new restaurants instead, as further
described below under “— Our new restaurants, once
opened, may not be profitable…”;

• our ability to increase menu prices without adversely

impacting transaction counts to such a degree that the
impact from lower transactions equals or exceeds the
benefit of the menu price increase, and without “trade
down” by customers or other reductions in average
check in response to price increases;

• weather, road construction and other factors limiting

access to our restaurants; and

• changes in government regulation that may impact

customer perceptions of our food, including initiatives
regarding menu labeling and marketing claims about the
origin or makeup of some of the ingredients we serve.

These factors, most of which are described in more detail in
additional Risk Factors below, are beyond our control to at
least some degree. As a result, it is possible that we will
experience future declines in comparable restaurant sales
or that we otherwise will not achieve our targeted or
expected comparable restaurant sales. Any future declines
in comparable restaurant sales or failure to meet market
expectations for comparable restaurant sales increases
would likely result in a significant adverse impact on the
price of our common stock. Additionally, if we fail to
significantly increase comparable restaurant sales in 2017
and beyond, the price of our common stock is likely to be
adversely impacted.

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

Because of customer perceptions in the wake of these food
safety incidents, any future occurrence of food-borne
illness associated with our restaurants — even incidents
that may be considered minor at other restaurants — would
likely have an even more significant negative impact on our
sales and our ability to regain customers. Although we have

2016 Annual Report

7

PART I
(continued)

followed industry standard food safety protocols in the
past, and over the past year have enhanced our food safety
procedures to ensure that our food is as safe as it can
possibly be, we may still be at a higher risk for food-borne
illness occurrences than some competitors due to our
greater use of fresh, unprocessed produce and meats, our
reliance on employees cooking with traditional methods
rather than automation, and our avoiding frozen
ingredients. Additionally, no food safety protocols can
completely eliminate the risk of food-borne illness in any
restaurant, so our enhanced food safety protocols may not
be successful in preventing an illness incident in the
future. The risk of illnesses associated with our food might
also increase in connection with an expansion of our
catering business or other situations in which our food is
served in conditions we cannot control. Furthermore, we
have seen instances of unsubstantiated reports linking
illnesses to Chipotle, and these reports have negatively
impacted us. Even if food-borne illnesses are attributed to
us erroneously or arise from conditions outside of our
control, the negative impact from any such illnesses is likely
to be significant.

Increasing our sales and profits depends in part on
our ability to open new restaurants in sites and on
terms attractive to us, which is subject to many
unpredictable factors.
We had 2,250 restaurants in operation as of December 31,
2016. We plan to increase the number of our restaurants
significantly, and plan to open between 195 and 210 new
restaurants in 2017. However, we have in the past
experienced delays in opening some restaurants and that
could happen again as a result of any one or more of the
following factors:

• our potential inability to locate and secure new

restaurant sites in locations that we believe to be
attractive;

• obstacles to hiring and training top performing

employees in the local market;

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

• delay or cancellation of new site development by
developers and landlords, which may become
increasingly common during periods of economic
uncertainty, tight credit, and/or higher interest rates;
• difficulty ramping up the growth of our international

business or new restaurant concepts, including for the
reasons described below under “— Our expansion into
international markets may present increased risks …”
and “— Pizzeria Locale, Tasty Made and other new
restaurant concepts may not contribute to our growth”;

8 2016 Annual Report

• difficulty negotiating leases with acceptable terms;
• any shortages of construction labor or materials;
• failures or delays in securing required governmental
approvals (including construction, parking and other
permits);

• lack of availability of, or inability to obtain, adequate

supplies of ingredients that meet our quality standards;
and

• the impact of inclement weather, natural disasters and

other calamities.

One of our biggest challenges in opening new restaurants is
staffing. We seek to hire only top-performing employees
and to promote general managers from our crew, which
may make it more difficult for us to staff all the restaurants
we intend to open. Constraints on our hiring new
employees are described further below under “Risks
Related to Operating in the Restaurant Industry — Our
business could be adversely affected by increased labor
costs…”

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

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

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

PART I
(continued)

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

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

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

restaurant sales and profitability. Existing restaurants
could also make it more difficult to build the customer base
for newly-opened restaurants in the same market.

Our marketing and advertising strategies may not
be successful, or may pose risks that could
adversely impact our business.
In an effort to reverse the downturn in our business results
that began in late 2015, we significantly increased
marketing and promotional expense in 2016. For the year
ended December 31, 2016, our marketing and promotional
expense was 5.1% of revenue, significantly higher than the
2.1% of revenue it had averaged over the preceding three
years. In 2017 we expect to return marketing and
promotional expense to levels closer to our historical
practice as a percent of revenue, and doing so may
adversely impact the number of customers visiting our
restaurants. If so, we may be forced to engage in additional
promotional activities, including further offers for free or
discounted food, which may hamper our sales and
profitability.

As part of our marketing plans for 2017, we have hired a
new advertising agency and media buyer, and are also
introducing a new advertising campaign and media
strategies, including the possibility of television advertising,
which we began testing for the first time in 2016. If our
advertising campaign and new media strategies do not
resonate with customers in the manner we hope, they may
not result in increased sales, but would still increase our
expenses. Additionally, we will also continue to invest in
marketing and advertising strategies that we believe will
increase customers’ connection with our brand. If these
marketing and advertising investments do not drive
increased restaurant sales, the expense associated with
these programs will adversely impact our financial results,
and we may not generate the levels of comparable
restaurant sales we expect.

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

In addition, some of our marketing has incorporated
elements intended to encourage customers to question

2016 Annual Report 9

PART I
(continued)

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

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

We may also find it more difficult in international markets
to hire, train and keep top performing employees who can
successfully deliver excellent customer experiences, and
labor costs may be higher in international markets due to

10 2016 Annual Report

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

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

PART I
(continued)

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

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

Risks Related to Operating in the Restaurant
Industry

Competition could adversely affect us.
The fast-casual, quick-service and casual dining segments
of the restaurant industry are highly competitive with
respect to, among other things, taste, price, food quality
and presentation, service, location, brand reputation, and
the ambience and condition of each restaurant. Our

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

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

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

Moreover, we may also compete with companies outside
the fast casual and quick service and casual dining

2016 Annual Report

11

PART I
(continued)

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

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

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

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

12 2016 Annual Report

find and keep enough high-caliber employees could also
delay planned restaurant openings, which would slow our
growth.

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

PART I
(continued)

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

Changes in food and supply costs could adversely
affect our results of operations.
Our profitability depends in part on our ability to anticipate
and react to changes in food and supply costs. Like all
restaurant companies, we are susceptible to increases in
food costs as a result of factors beyond our control, such as
general economic conditions, seasonal fluctuations,
weather conditions, global demand, food safety concerns,
generalized infectious diseases, fluctuations of the U.S.
dollar, product recalls and government regulations. The
cost of many basic foods for humans and animals, including
corn, wheat, rice and cooking oils, has increased markedly
in some years, resulting in upward pricing pressures on
almost all of our raw ingredients including chicken, beef,
tortillas and rice. In 2016, a significant spike in avocado
prices from September to November adversely impacted
our food costs for the third and fourth quarters, and there
could be similar or greater pricing pressure on key
ingredients during 2017. Costs have increased from the
enhanced food safety procedures described elsewhere in
this report. Additionally, a substantial volume of produce
items are grown in Mexico and other countries, and some of
our meats and restaurant supplies are sourced from
outside the U.S. as well. Any new or increased import
duties, tariffs or taxes, or other changes in U.S. trade or tax
policy, could result in higher food and supply costs that
would adversely impact our financial results.

We could also be adversely impacted by price increases
specific to meats raised in accordance with our
sustainability and animal welfare criteria or other food
items we buy as part of our Food With Integrity focus, the
markets for which are generally smaller and more
concentrated than the markets for food products that are
conventionally raised and grown. Weather related issues,
such as freezes or drought, may also lead to temporary
spikes in the prices of some ingredients such as produce or
meats. For instance, drought conditions in parts of the U.S.
resulted in significant increases in beef prices during 2014
and 2015. Increasing weather volatility or other long-term
changes in global weather patterns, including any changes

associated with global climate change, could have a
significant impact on the price or availability of some of our
ingredients. Any increase in the prices of the ingredients
most critical to our menu, such as chicken, beef, cheese,
avocados, beans, rice, tomatoes and pork, would adversely
affect our operating results. Alternatively, in the event of
cost increases with respect to one or more of our raw
ingredients, we may choose to temporarily suspend serving
menu items, such as guacamole or one or more of our
salsas, rather than paying the increased cost for the
ingredients. Any such changes to our available menu may
negatively impact our restaurant traffic and comparable
restaurant sales, and could also have an adverse impact on
our brand.

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

2016 Annual Report

13

PART I
(continued)

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

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

Failure to receive frequent deliveries of higher-
quality food ingredients and other supplies meeting
our specifications could harm our operations.
Our ability to maintain our menu depends in part on our
ability to acquire ingredients that meet our specifications
from reliable suppliers. Shortages or interruptions in the
supply of ingredients caused by unanticipated demand,
problems in production or distribution, food contamination
(which we may detect more frequently under the
microbiological testing protocols we’ve recently
introduced), inclement weather, a supplier ceasing
operations or deciding not to follow our required protocols,
or other conditions could adversely affect the availability,
quality and cost of our ingredients, which could harm our
operations. In particular, shortages of one or more of our
menu items could force our restaurants to remove items
from their menus, which may result in customers choosing
to eat elsewhere. If that happens, our affected restaurants

14 2016 Annual Report

could experience significant reductions in sales during the
menu item shortage, and potentially thereafter if
customers do not return to us after the shortage is
resolved. Our focus on a limited menu would make the
consequences of a shortage of a key ingredient more
severe to us than at other restaurants.

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

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

PART I
(continued)

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

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

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

to open suitable replacement restaurants. Conversely,
substantial increases in rents associated with lease
renewals would increase our occupancy costs, reducing our
restaurant margins.

Risks Related to our Unique Business
Strategy

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

Our Food With Integrity philosophy subjects us to
risks.
The principle of Food With Integrity constitutes a significant
part of our business strategy. We use a substantial amount
of ingredients grown or raised with an emphasis on
practices we believe to be more sustainable or responsible
than some conventional practices, and we try to make our
food as fresh as we can. We do, however, face challenges
associated with pursuing Food With Integrity philosophy.
There are higher costs and other risks associated with
purchasing ingredients grown or raised with an emphasis
on quality, sustainability and other responsible practices.
Growth rate and weight gain can be lower for chickens,
cattle and pigs that are not fed sub-therapeutic antibiotics
and for cattle that are not given growth hormones. Crops
grown organically or using other responsible practices can
take longer to grow and crop yields can be lower. It can
take longer to identify and secure relationships with
suppliers that are able to meet our criteria for meat, dairy
and produce ingredients. Given the costs associated with
what we believe are more responsible farming practices, as

2016 Annual Report

15

PART I
(continued)

well as uncertainty regarding demand due to changing
customer perceptions, economic trends and other factors,
many large suppliers have not found it economical to
pursue business in this area. Although all of our restaurants
generally serve meat from animals raised in accordance
with criteria we’ve established in an effort to improve
sustainability and promote animal welfare, we may
experience shortages of meat meeting these criteria due to
suppliers suspending production, market conditions, or
other forces beyond our control. In the first quarter of
2015, through our ongoing auditing of suppliers, we
identified a pork supplier that was not meeting our
standards and suspended purchases of pork from this
supplier. Without this supply, we did not have enough pork
meeting our specifications for all of our restaurants and a
large number of our restaurants were not serving carnitas
for a number of months during 2015. We believe our
comparable restaurant sales were adversely impacted as a
result. We have experienced shortages of beef or chicken
meeting our protocols on a periodic basis over the past
several years as well, resulting in our serving commodity
beef and chicken, which may have a negative impact on
customer perceptions of our brand.

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

16 2016 Annual Report

as customers who believe we failed to uphold our own
standards may decline to return to our restaurants as
frequently or at all.

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

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

PART I
(continued)

years. If our company culture or operations were to
deteriorate following this or other changes in leadership, or
if a new management team were to be unsuccessful in
executing our strategy or were to change important
elements of our current strategy, our growth prospects or
future operating results may be adversely impacted.

Regulatory and Legal Risks

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

Employment and Immigration Regulations
We are subject to various federal and state laws governing
our relationship with and other matters pertaining to our
employees, including wage and hour laws, requirements to
provide meal and rest periods or other benefits, family
leave mandates, requirements regarding working
conditions and accommodations to certain employees,
citizenship or work authorization and related requirements,
insurance and workers’ compensation rules and anti-
discrimination laws. Complying with these rules subjects us
to substantial expense and can be cumbersome, and can
also expose us to liabilities from claims for non-compliance.
For example, a number of lawsuits have been filed against
us alleging violations of federal and state laws regarding
employee wages and payment of overtime, meal and rest
breaks, employee classification, employee record-keeping
and related practices with respect to our employees. We
incur legal costs to defend, and we could suffer losses from,
these and similar cases, and the amount of such losses or
costs could be significant. In addition, several states and
localities in which we operate and the federal government
have from time to time enacted minimum wage increases,
changes to eligibility for overtime pay, paid sick leave and
mandatory vacation accruals, and similar requirements and
these changes could increase our labor costs. In addition,
see “— The effect of recent changes to U.S. healthcare laws
may increase our healthcare costs…” below for a discussion
of risks related to recent changes in U.S. healthcare laws.

We also are audited from time to time for compliance with
work authorization requirements, and audit activity and
federal criminal and civil investigations in this area are
described in more detail above under “Risks Related to
Operating in the Restaurant Industry — Our business could
be adversely affected by increased labor costs or difficulties
in finding and retaining top-performing employees,” as well
as in Note 10. “Commitments and Contingencies” in our
consolidated financial statements included in Item 8.

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

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

Americans with Disabilities Act and Similar State Laws
We are subject to the U.S. Americans with Disabilities Act,
or ADA, and similar state laws that give civil rights
protections to individuals with disabilities in the context of
employment, public accommodations and other areas. We
have incurred substantial legal fees in connection with
ADA-related complaints in the past, and we may in the

2016 Annual Report

17

PART I
(continued)

future have to modify restaurants, for example by adding
access ramps or redesigning certain architectural features,
to provide service to or make reasonable accommodations
for disabled persons under these laws. The expenses
associated with these modifications, or any damages, legal
fees and costs associated with litigating or resolving claims
under the ADA or similar state laws, could be material.

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

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

18 2016 Annual Report

described below under “General Business Risks — We may
be harmed by security risks we face in connection with our
electronic processing and transmission of confidential
customer and employee information.”

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

Environmental Laws
We are subject to federal, state and local environmental
laws and regulations concerning the discharge, storage,
handling, release and disposal of hazardous or toxic
substances, as well as local ordinances restricting the types
of packaging we can use in our restaurants. We have not
conducted a comprehensive environmental review of our
properties or operations. We have, however, conducted
investigations of some of our properties and identified
contamination caused by third-party operations. We believe
any such contamination has been or should be addressed
by the third party. If the relevant third party does not
address or has not addressed the identified contamination
properly or completely, then under certain environmental
laws, we could be held liable as an owner or operator to
address any remaining contamination, sometimes without
regard to whether we knew of, or were responsible for, the
release or presence of hazardous or toxic substances. Any
such liability could be material. Further, we may not have
identified all of the potential environmental liabilities at our
properties, and any such liabilities could have a material
adverse effect on our operations or results of operations.
We also cannot predict what environmental laws will be
enacted in the future, how existing or future environmental
laws will be administered or interpreted, or the amount of
future expenditures that we may need to make to comply
with, or to satisfy claims relating to, environmental laws.

Other Aspects of Regulatory Risk
From time to time we are the target of litigation in
connection with various laws and regulations that cover our
business. Much of this litigation occurs in California even
though currently only about 17% of our restaurants are
located there. As we continue to expand in California, or if
we are not able to effectively manage the increased

PART I
(continued)

litigation risks and expenses we have experienced in
California, our business may be adversely impacted to a
greater extent than if we did not operate in, or minimized
our operations in, California.

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

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

The effect of recent changes to U.S. healthcare laws
may increase our healthcare costs and negatively
impact our financial results.
We offer eligible full-time and part-time U.S. employees the
opportunity to enroll in healthcare coverage subsidized by
us. For various reasons, many of our eligible employees
currently choose not to participate in our healthcare plans.
However, under the comprehensive U.S. health care reform
law enacted in 2010, the Affordable Care Act, changes that
became effective in 2014, and especially the employer

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

We could be party to litigation that could adversely
affect us by distracting management, increasing our
expenses or subjecting us to material money
damages and other remedies.
We’re subject to numerous claims alleging violations of
federal and state laws regarding workplace and
employment matters, including wages, work hours,
overtime, vacation and family leave, discrimination,
wrongful termination, and similar matters, and we could
become subject to class action or other lawsuits related to
these or different matters in the future. Our customers also
occasionally file complaints or lawsuits against us alleging
that we’re responsible for some illness or injury they
suffered at or after a visit to our restaurants, or that we
have problems with food quality, operations or our food
related disclosure or advertising practices. See
“— Governmental regulation in one or more of the following
areas may adversely affect our existing and future
operations and results, including by harming our ability to
open new restaurants or increasing our operating costs”
above, for additional discussion of these types of claims.
From time to time, we also face claims alleging that
technology we use in our business infringes patents held by
third parties. In addition, the restaurant industry has been
subject to a growing number of claims based on the
nutritional content of food products sold and disclosure and
advertising practices. We have been subject to a number of
these actions and may be subject to additional actions of
this type in the future. We are also undergoing government

2016 Annual Report

19

PART I
(continued)

investigations and have been sued in a shareholder class
action lawsuit, each as described elsewhere in this report,
including in Note 10. “Commitments and Contingencies” in
our consolidated financial statements included in Item 8.
“Financial Statements and Supplementary Data,” and these
matters may be particularly expensive to defend and/or
resolve.

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

General Business Risks

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

We may in the future become subject to additional claims
for purportedly fraudulent transactions arising out of the
actual or alleged theft of credit or debit card information,
and we may also be subject to lawsuits or other
proceedings in the future relating to these types of
incidents. Proceedings related to theft of credit or debit
card information may be brought by payment card
providers, banks and credit unions that issue cards,
cardholders (either individually or as part of a class action

20 2016 Annual Report

lawsuit) and federal and state regulators. Any such
proceedings could distract our management from running
our business and cause us to incur significant unplanned
losses and expenses. Consumer perception of our brand
could also be negatively affected by these events, which
could further adversely affect our results and prospects.
The liabilities resulting from any of the foregoing would
likely be far greater than the losses we recorded in
connection with the data breach incident in 2004.

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

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

PART I
(continued)

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

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

Our insurance coverage and self-insurance reserves
may not cover future claims.
We maintain various insurance policies for employee
health, worker’s compensation, general liability, property
damage and auto liability. We are self-insured for our
employee health plans but have third party insurance
coverage to limit exposure for both individual and
aggregate claim costs. We are also responsible for losses
up to a certain limit for worker’s compensation, general
liability, property damage, employment practices liability
and auto liability insurance.

For policies under which we are responsible for losses, we
record a liability that represents our estimated cost of
claims incurred and unpaid as of the balance sheet date.
Our estimated liability is not discounted and is based on a
number of assumptions and factors, including historical
trends, actuarial assumptions and economic conditions, and
is closely monitored and adjusted when warranted by
changing circumstances. Our history of claims experience is
relatively short and our significant growth during most of
our operating history could affect the accuracy of

estimates based on historical experience. If a greater
amount of claims occurs compared to what we estimated,
or if medical costs increase beyond what we expected, our
accrued liabilities might not be sufficient and we may be
required to record additional expense. Unanticipated
changes may also produce materially different amounts of
expense than reported under these programs, which could
adversely impact our results of operations. It is also
possible that losses covered under one or more of our
insurance policies may exceed the applicable policy limits,
which would subject us to unexpected additional liabilities
in an amount that could be significant enough to have a
material adverse effect on our financial position.

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

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

• changes in comparable restaurant sales and customer
visits, including as a result of perceptions about our
brand, competition, changes in consumer confidence or
discretionary spending, and other factors listed in these
Risk Factors;

2016 Annual Report 21

PART I
(continued)

• additional negative publicity about the occurrence of
food-borne illnesses, the ingredients we use, or other
problems at our restaurants;

• fluctuations in supply costs, particularly for our most
significant food items, including increased ingredient
costs as a result of changes we’ve made to enhance the
safety of our food;

• labor availability and wages of restaurant management
and crew, as well as temporary fluctuations in labor
costs as a result of large-scale changes in workforce;
• increases in marketing or promotional expenses as we
introduce new marketing programs and strategies, or
increased spending on existing marketing programs in
an effort to drive sales;

• our ability to raise menu prices without adversely

impacting customer traffic, particularly if food and labor
costs were to increase;

• the timing of new restaurant openings and related

revenues and expenses;

• operating costs at newly opened restaurants, which are
often materially greater during the first several months
of operation;

• the impact of inclement weather, natural disasters and
other calamities, such as freezes that have impacted
produce crops and droughts that have impacted
livestock and the supply of certain meats;

• variations in general economic conditions, including the

impact of declining interest rates on our interest
income;

• increases in infrastructure costs;
• litigation, settlement costs and related legal expense;
• tax expenses, impairment charges and non-operating

costs; and

• potential distraction or unusual expenses associated

with our expansion into international markets or
initiatives to expand new concepts.

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

As a result of these factors, results for any one quarter are
not necessarily indicative of results to be expected for any
other quarter or for any year. Average restaurant sales or
comparable restaurant sales in any particular future period
may decrease. In the future, operating results may fall

22 2016 Annual Report

below the expectations of securities analysts and investors,
which could cause our stock price to fall. This risk may
continue to be a greater concern during 2017, as the
expectations of analysts and investors of a recovery in our
business results may be higher than any level of recovery
that we do actually achieve.

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

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

ITEM 1B. UNRESOLVED STAFF
COMMENTS

None.

PART I
(continued)

ITEM 2. PROPERTIES

As of December 31, 2016, there were 2,250 restaurants
operated by Chipotle and our consolidated subsidiaries,
2,227 of which were Chipotle restaurants. The table below
sets forth the locations (by state or country) of all
restaurants in operation.

Alabama

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

12

78

6

384

76

22

6

23

135

44

7

130

34

11

26

18

8

5

82

50

31

61

37

3

9

25

6

50

4

127

45

1

168

11

26

73

7

South Carolina

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

Canada

France

Germany

United Kingdom

Total

20

18

181

10

1

89

35

5

19

2

17

5

1

6

2,250

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

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

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

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY
DISCLOSURES

Not applicable.

2016 Annual Report 23

PART II

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

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

2015

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2016

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

High

Low

$ 727.97

$ 647.28

$699.03

$598.04

$ 758.61

$ 597.33

$757.00

$ 477.97

High

Low

$ 542.50

$ 399.14

$ 473.17

$384.77

$ 444.13

$ 386.10

$440.00

$352.96

As of January 26, 2017, there were approximately 1,233 holders of our common stock, as determined by counting our record
holders and the number of participants reflected in a security position listing provided to us by the Depository Trust
Company. Because such “DTC participants” are brokers and other institutions holding shares of our common stock on
behalf of their customers, we do not know the actual number of unique shareholders represented by these record holders.

Purchases of Equity Securities by the Issuer
The table below reflects shares of common stock we repurchased during the fourth quarter of 2016.

Total Number of
Shares Purchased

Average Price Paid
Per Share

Total
Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs(1)

Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs(2)

October

49,969

$ 403.18

49,969

$149,060,523

Purchased 10/1 through 10/31

November

57,640

$ 391.17

57,640

$ 126,513,735

Purchased 11/1 through 11/30

December

62,268

$384.56

62,268

$ 102,567,759

Purchased 12/1 through 12/31

Total

169,877

$ 392.28

169,877

$ 102,567,759

(1) Shares were repurchased pursuant to a repurchase program announced on May 11, 2016.
(2) This column includes $100 million in authorized repurchases announced on October 25, 2016, but does not include an additional

$100 million in authorized repurchases announced on January 10, 2017. Our authorized repurchase programs have no expiration date,
but may be modified, suspended, or discontinued at any time.

24 2016 Annual Report

PART II
(continued)

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

COMPARISON OF CUMULATIVE TOTAL RETURN

The following graph compares the cumulative annual stockholders return on our common stock from December 31, 2011
through December 31, 2016 to that of the total return index for the S&P 500 and the S&P 500 Restaurants Index assuming
an investment of $100 on December 31, 2011. In calculating total annual stockholder return, reinvestment of dividends, if
any, is assumed. The indices are included for comparative purposes only. They do not necessarily reflect management’s
opinion that such indices are an appropriate measure of the relative performance of our common stock. This graph is not
“soliciting material,” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by
reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such
filing.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Chipotle Mexican Grill, Inc, the S&P 500 Index, and the S&P Restaurants Index

$250

$200

$150

$100

$50

$0

12/11

12/12

12/13

12/14

12/15

12/16

Chipotle Mexican Grill, Inc

S&P 500

S&P Restaurants

*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Source data: S&P Capital IQ

2016 Annual Report 25

PART II
(continued)

ITEM 6. SELECTED FINANCIAL DATA

Our selected consolidated financial data shown below should be read together with Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and respective notes
included in Item 8. “Financial Statements and Supplementary Data.” The data shown below are not necessarily indicative of
results to be expected for any future period (in thousands, except per share data).

Statement of Income:

Revenue

Year ended December 31,

2016

2015

2014

2013

2012

$3,904,384 $ 4,501,223 $ 4,108,269

$3,214,591

$ 2,731,224

Food, beverage and packaging costs

1,365,580

1,503,835

1,420,994

1,073,514

Labor costs

Occupancy costs

Other operating costs

General and administrative expenses

Depreciation and amortization

Pre-opening costs

Loss on disposal of assets

Total operating expenses

Income from operations

1,105,001

1,045,726

904,407

739,800

293,636

641,953

276,240

146,368

17,162

23,877

262,412

514,963

250,214

130,368

16,922

13,194

230,868

434,244

199,107

347,401

273,897

203,733

110,474

96,054

15,609

6,976

15,511

6,751

891,003

641,836

171,435

286,610

183,409

84,130

11,909

5,027

3,869,817

3,737,634

3,397,469

2,681,871

2,275,359

34,567

763,589

710,800

532,720

455,865

Interest and other income (expense), net

4,172

6,278

3,503

1,751

1,820

Income before income taxes

Provision for income taxes

Net income

Earnings per share

Basic

Diluted

38,739

769,867

714,303

534,471

457,685

(15,801)

(294,265)

(268,929)

(207,033)

(179,685)

22,938 $ 475,602 $ 445,374

$ 327,438

$ 278,000

0.78 $

15.30 $

0.77 $

15.10 $

14.35

14.13

$

$

10.58

10.47

$

$

8.82

8.75

$

$

$

Weighted average common shares outstanding

Basic

Diluted

29,265

29,770

31,092

31,494

31,038

31,512

30,957

31,281

31,513

31,783

Balance Sheet Data:

Total current assets

Total assets

Total current liabilities

Total liabilities

2016

2015

2014

2013

2012

December 31,

$ 522,374 $ 814,647 $ 859,511

$ 653,095 $ 537,745

$2,026,103 $2,725,066 $ 2,527,317

$1,996,068 $1,659,805

$ 281,793 $ 279,942 $ 245,710 $ 199,228 $ 186,852

$ 623,610 $ 597,092 $ 514,948 $ 457,780 $ 413,879

Total shareholders’ equity

$1,402,493 $ 2,127,974 $2,012,369

$ 1,538,288 $ 1,245,926

26 2016 Annual Report

PART II
(continued)

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

You should read the following discussion together with Item 6. “Selected Financial Data” and our consolidated financial
statements and related notes included in Item 8. “Financial Statements and Supplementary Data.” The discussion contains
forward-looking statements involving risks, uncertainties and assumptions that could cause our results to differ materially
from expectations. Factors that might cause such differences include those described in Item 1A. “Risk Factors” and
elsewhere in this report.

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

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

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

Comparable restaurant sales declines

2016

Mar. 31

Jun. 30

Sep. 30

Dec. 31

Full year

(29.7%)

(23.6%)

(21.9%)

(4.8%)

(20.4%)

Impact of deferred revenue on comparable restaurant sales

—

—

(0.8%)

0.5%

(0.1%)

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

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

Restaurant Development. As of December 31, 2016, we had 2,250 restaurants in operation, including 2,198 Chipotle
restaurants throughout the United States, with an additional 29 international Chipotle restaurants and 23 non-Chipotle
restaurants that were consolidated into our financial results. We opened 240 restaurants in 2016, net of relocations and

2016 Annual Report 27

PART II
(continued)

closures, which contributed $156.2 million to revenue. In the fourth quarter of 2016, we announced that we were exploring
strategic alternatives for our 15 ShopHouse Southeast Asian Kitchen restaurants, and as a result, we recognized a non-cash
impairment charge of $14.5 million.

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

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

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

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

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

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

28 2016 Annual Report

PART II
(continued)

Restaurant Openings, Relocations and Closures
The following table details restaurant unit data for the years indicated.

Beginning of period

Openings

Relocations/closures

Total restaurants at end of period

Year ended
December 31,

2016

2015

2014

2,010

1,783

1,595

243

229

(3)

(2)

192

(4)

2,250

2,010

1,783

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

Revenue

Revenue

Average restaurant sales

Comparable restaurant sales

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase/
(decrease)
2016 over
2015

%
increase/
(decrease)
2015 over
2014

$3,904.4 $4,501.2

$4,108.3

(13.3%)

$ 1.868 $ 2.424

$ 2.472

(22.9%)

9.6%

(1.9%)

(20.4%)

0.2%

16.8%

Number of restaurants as of the end of the period

2,250

2,010

1,783

11.9%

12.7%

Number of restaurants opened in the period, net of
relocations/closures

240

227

188

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

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

Food, Beverage and Packaging Costs

Food, beverage and packaging

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
decrease
2016
over
2015

%
increase
2015
over
2014

$1,365.6

$1,503.8

$1,421.0

(9.2%)

5.8%

35.0%

33.4%

34.6%

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

2016 Annual Report 29

PART II
(continued)

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

Labor Costs

Labor costs

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
increase
2015 over
2014

$1,105.0

$1,045.7

$904.4

5.7%

15.6%

28.3%

23.2%

22.0%

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

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

Occupancy Costs

Occupancy costs

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
increase
2015 over
2014

$293.6

$262.4

$230.9

11.9%

13.7%

7.5%

5.8%

5.6%

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

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

Other Operating Costs

Other operating costs

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
increase
2015 over
2014

$642.0

$515.0

$434.2

24.7%

18.6%

16.4%

11.4% 10.6%

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

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

30 2016 Annual Report

PART II
(continued)

General and Administrative Expenses

General and administrative expense

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
decrease
2015 over
2014

$276.2

$250.2

$273.9

10.4%

(8.6%)

7.1%

5.6%

6.7%

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

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

Depreciation and Amortization

Depreciation and amortization

As a percentage of revenue

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
increase
2015 over
2014

$146.4

$130.4

$110.5

12.3%

18.0%

3.7%

2.9%

2.7%

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

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

Loss on Disposal of Assets

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
increase
2016 over
2015

%
increase
2015 over
2014

Loss on disposal and impairment of assets

$23.9

$13.2

$7.0

81.0%

89.1%

As a percentage of revenue

0.6%

0.3% 0.2%

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

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

2016 Annual Report 31

PART II
(continued)

Income Tax Provision

Provision for income taxes

Effective tax rate

Year ended
December 31,

2016

2015

2014

(dollars in millions)

%
decrease
2016 over
2015

%
increase
2015 over
2014

$ 15.8

$294.3

$268.9

(94.6%)

9.4%

40.8%

38.2% 37.6%

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

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

2016 Quarters Ended

March 31

June 30

September 30

December 31

Revenue

Operating income (loss)

Net income (loss)

Number of restaurants opened in the quarter, net of relocations/
closures

56

58

Comparable restaurant sales increase (decrease)

(29.7%)

(23.6%)

(21.9%)

$834.5

$998.4

$1,037.0

$ (46.6)

$ 40.9

$ (26.4)

$ 25.6

$

$

9.7

7.8

54

$1,034.6

$

$

30.6

16.0

72

(4.8%)

Revenue

Operating income

Net income

2015 Quarters Ended

March 31

June 30

September 30

December 31

$1,089.0

$1,197.8

$ 197.8

$ 227.4

$ 122.6

$ 140.2

$1,216.9

$ 234.8

$ 144.9

$997.5

$ 103.6

$ 67.9

Number of restaurants opened in the quarter, net of relocations/
closures

Comparable restaurant sales increase (decrease)

49

10.4%

48

4.3%

53

2.6%

79

(14.6%)

Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales
and net income are lower in the first and fourth quarters due, in part, to the holiday season and because fewer people eat
out during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring,
summer and fall months). Other factors also have a seasonal effect on our results. For example, restaurants located near
colleges and universities generally do more business during the academic year. Seasonal factors, however, might be
moderated or outweighed by other factors that may influence our quarterly results, such as the adverse publicity that we
saw beginning in the fourth quarter of 2015 around food-borne illness incidents associated with our restaurants, as well as
fluctuations in food or packaging costs or the timing of menu price increases. The number of trading days in a quarter can
also affect our results, although, on an overall annual basis, changes in trading days do not have a significant impact.

Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based
compensation expense, the number of new restaurants opened in a quarter, anticipated and unanticipated events. New

32 2016 Annual Report

PART II
(continued)

restaurants typically have lower margins following opening as a result of the expenses associated with opening new
restaurants and their operating inefficiencies in the months immediately following opening. In addition, unanticipated
events also impact our results. Accordingly, results for a particular quarter are not necessarily indicative of results to be
expected for any other quarter or for any year.

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

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

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

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

Operating leases

Deemed landlord financing

Other contractual obligations(1)

2016

Total

1 year

2-3 years

(in thousands)

4-5
years

After 5
years

$3,682,979

$ 264,911

$ 537,995

$ 521,132

$ 2,358,941

$

$

3,895

$

423

$

846

301,623

$ 232,014

$ 69,609

$

$

885

—

$

$

1,741

—

Total contractual cash obligations

$3,988,497

$497,348

$608,450

$522,017

$2,360,682

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

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

2016 Annual Report 33

PART II
(continued)

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

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

Critical Accounting Estimates
We describe our significant accounting policies in Note 1. “Description of Business and Summary of Significant Accounting
Policies” and Note 6. “Stock Based Compensation” of our consolidated financial statements included in Item 8. “Financial
Statements and Supplementary Data.” Critical accounting estimates are those that we believe are both significant and that
require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently
uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we
believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain
different estimates if we used different assumptions or factors. We believe that of our critical accounting estimates, the
following involve a higher degree of judgement and subjectivity:

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

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

34 2016 Annual Report

PART II
(continued)

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK

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

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

2016 Annual Report 35

PART II
(continued)

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.

36 2016 Annual Report

PART II
(continued)

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheet as of December 31, 2016 and 2015

38

39

Consolidated Statement of Income and Comprehensive Income for the years ended
December 31, 2016, 2015 and 2014

40

Consolidated Statement of Shareholders’ Equity for the years ended December 31,
2016, 2015 and 2014

41

Consolidated Statement of Cash Flows for the years ended December 31, 2016,
2015 and 2014

Notes to Consolidated Financial Statements

42

43

2016 Annual Report 37

PART II
(continued)

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Chipotle Mexican Grill, Inc.

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

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

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

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

/s/ Ernst & Young LLP

Denver, Colorado
February 6, 2017

38 2016 Annual Report

PART II
(continued)

CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)

Assets

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $259 and $1,176 as of
December 31, 2016 and 2015, respectively

Inventory

Prepaid expenses and other current assets

Income tax receivable

Investments

Total current assets

Leasehold improvements, property and equipment, net

Long term investments

Other assets

Goodwill

Total assets

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

Accrued payroll and benefits

Accrued liabilities

Total current liabilities

Deferred rent

Deferred income tax liability

Other liabilities

Total liabilities

Shareholders’ equity:

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of
December 31, 2016 and 2015, respectively

Common stock $0.01 par value, 230,000 shares authorized, and 35,833 and 35,790
shares issued as of December 31, 2016 and 2015, respectively

Additional paid-in capital

Treasury stock, at cost, 7,019 and 5,206 common shares at December 31, 2016 and 2015,
respectively

Accumulated other comprehensive income (loss)

Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

See accompanying notes to consolidated financial statements.

December 31,

2016

2015

$

87,880 $ 248,005

40,451

15,019

44,080

5,108

329,836

522,374

38,283

15,043

39,965

58,152

415,199

814,647

1,303,558

1,217,220

125,055

622,939

53,177

21,939

48,321

21,939

$ 2,026,103 $2,725,066

$

78,363 $

85,709

76,301

127,129

64,958

129,275

281,793

279,942

288,927

251,962

18,944

33,946

32,305

32,883

623,610

597,092

—

358

—

358

1,238,875

1,172,628

(2,049,389)

(1,234,612)

(8,162)

(8,273)

2,220,811

2,197,873

1,402,493

2,127,974

$ 2,026,103 $2,725,066

2016 Annual Report 39

PART II
(continued)

CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)

Revenue

Restaurant operating costs (exclusive of depreciation and amortization shown
separately below):

Food, beverage and packaging

Labor

Occupancy

Other operating costs

General and administrative expenses

Depreciation and amortization

Pre-opening costs

Loss on disposal and impairment of assets

Total operating expenses

Income from operations

Interest and other income, net

Income before income taxes

Provision for income taxes

Net income

Year ended December 31,

2016

2015

2014

$3,904,384

$ 4,501,223

$ 4,108,269

1,365,580

1,503,835

1,420,994

1,105,001

1,045,726

904,407

293,636

641,953

276,240

146,368

17,162

23,877

262,412

514,963

250,214

130,368

16,922

13,194

230,868

434,244

273,897

110,474

15,609

6,976

3,869,817

3,737,634

3,397,469

34,567

763,589

710,800

4,172

6,278

38,739

769,867

3,503

714,303

(15,801)

(294,265)

(268,929)

$

22,938

$ 475,602

$ 445,374

Other comprehensive income (loss), net of income taxes:

Foreign currency translation adjustments

(1,291)

(6,322)

(2,049)

Unrealized gain (loss) on investments, net of income taxes of $(849), $946, and
$0

Other comprehensive income (loss), net of income taxes

Comprehensive income

Earnings per share:

Basic

Diluted

Weighted average common shares outstanding:

Basic

Diluted

See accompanying notes to consolidated financial statements.

$

$

$

1,402

111

(1,522)

(7,844)

—

(2,049)

23,049

$ 467,758

$ 443,325

0.78

0.77

$

$

15.30

15.10

$

$

14.35

14.13

29,265

29,770

31,092

31,494

31,038

31,512

40 2016 Annual Report

PART II
(continued)

CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)

Common Stock

Treasury Stock

Accumulated
Other
Comprehensive
Income (Loss)

Shares Amount

Additional
Paid-In
Capital

Shares

Amount

Retained
Earnings

Available-
for- Sale
Securities

Foreign
Currency
Translation

Total

Balance, December 31, 2013

35,245

$352

$ 919,840

4,212 $ (660,421) $1,276,897

$

—

1,620

$1,538,288

Stock-based compensation

Stock plan transactions and other

149

2

Excess tax benefit on stock-based
compensation

Acquisition of treasury stock

Net income

Other comprehensive income
(loss), net of income tax

97,618

(193)

21,667

155

(88,338)

445,374

97,618

(191)

21,667

(88,338)

445,374

(2,049)

(2,049)

Balance, December 31, 2014

35,394

$354

$1,038,932 4,367 $ (748,759) $ 1,722,271

$

—

(429) $2,012,369

Stock-based compensation

Stock plan transactions and other

396

4

Excess tax benefit on stock-based
compensation

Acquisition of treasury stock

Net income

Other comprehensive income
(loss), net of income tax

59,465

(211)

74,442

839

(485,853)

475,602

59,465

(207)

74,442

(485,853)

475,602

(1,522)

(6,322)

(7,844)

Balance, December 31, 2015

35,790

$358

$ 1,172,628 5,206 $ (1,234,612) $2,197,873

$(1,522)

(6,751) $ 2,127,974

Stock-based compensation

Stock plan transactions and other

43

—

Excess tax benefit on
stock-based compensation

Acquisition of treasury stock

Net income

Other comprehensive
income (loss), net of income tax

65,112

(185)

1,320

1,813

(814,777)

22,938

65,112

(185)

1,320

(814,777)

22,938

1,402

(1,291)

111

Balance, December 31, 2016

35,833

$358

$1,238,875

7,019 $(2,049,389) $ 2,220,811

$ (120)

$(8,042) $1,402,493

See accompanying notes to consolidated financial statements.

2016 Annual Report 41

PART II
(continued)

CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

Operating activities

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Deferred income tax (benefit) provision

Loss on disposal and impairment of assets

Bad debt allowance

Stock-based compensation expense

Excess tax benefit on stock-based compensation

Other

Changes in operating assets and liabilities:

Accounts receivable

Inventory

Prepaid expenses and other current assets

Other assets

Accounts payable

Accrued liabilities

Income tax payable/receivable

Deferred rent

Other long-term liabilities

Net cash provided by operating activities

Investing activities

Purchases of leasehold improvements, property and equipment

Purchases of investments

Maturities of investments

Proceeds from sale of investments

Net cash provided by (used in) investing activities

Financing activities

Acquisition of treasury stock

Excess tax benefit on stock-based compensation

Stock plan transactions and other financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosures of cash flow information

Income taxes paid

Year ended December 31,

2016

2015

2014

$ 22,938

$ 475,602

$ 445,374

146,368

130,368

(14,207)

23,877

(262)

64,166

(1,320)

(604)

11,666

13,194

(23)

57,911

(74,442)

582

110,474

(20,671)

6,976

9

96,440

(21,667)

104

(1,923)

(3,504)

(10,966)

(91)

(4,259)

(4,855)

(6,734)

33,491

54,340

37,030

1,287

262

(5,259)

(5,619)

19,525

(7,440)

32,756

32,911

4,826

(2,307)

(658)

1,071

2,168

35,019

8,831

27,025

4,845

349,242

683,316

682,067

(258,842)

(257,418)

(252,590)

—

(559,372)

(521,004)

45,000

352,650

254,750

540,648

—

—

326,806

(464,140)

(518,844)

(837,655)

(460,675)

(88,338)

1,320

52

74,442

21,667

(207)

(66)

(836,283)

(386,440)

(66,737)

110

(4,196)

(224)

(160,125)

(171,460)

96,262

248,005

419,465

323,203

$ 87,880

$ 248,005

$ 419,465

$ 23,862

$ 248,547

$ 280,687

Increase (decrease) in purchases of leasehold improvements, property, and equipment accrued
in accounts payable and accrued liabilities

$

(1,781) $

(2,870) $

9,424

Increase (decrease) in acquisition of treasury stock accrued in accrued liabilities

$ (22,878) $

25,178

$

—

See accompanying notes to consolidated financial statements.

42 2016 Annual Report

PART II
(continued)

CHIPOTLE MEXICAN GRILL, INC.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

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

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

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

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

Revenue Recognition
The Company recognizes revenue, net of discounts and
incentives, when payment is tendered at the point of
sale. The Company recognizes a liability for offers of free
food by estimating the cost to satisfy the offer based on
company–specific historical redemption patterns for similar
promotions. These costs are recognized in other operating
costs in the consolidated statement of income and
comprehensive income and in accrued liabilities in the
consolidated balance sheet. The Company reports revenue
net of sales-related taxes collected from customers and
remitted to governmental taxing authorities.

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

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

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

Accounts Receivable
Accounts receivable primarily consists of receivables from
third party gift card distributors, tenant improvement
receivables, vendor rebates, receivables arising from the
normal course of business, and payroll-related tax
receivables. The allowance for doubtful accounts is the

2016 Annual Report 43

PART II
(continued)

Company’s best estimate of the amount of probable credit
losses in the Company’s existing accounts receivable based
on a specific review of account balances. Account balances
are charged against the allowance after all means of
collection have been exhausted and the potential for
recoverability is considered remote.

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

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

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

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

44 2016 Annual Report

Leasehold improvements and buildings

Furniture and fixtures

Equipment

3-20 years

4-7 years

3-10 years

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

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

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

Impairment charges recognized during the year ended
December 31, 2016 resulted primarily from the Company’s

PART II
(continued)

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

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

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

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

Rent
Rent expense for the Company’s leases, which generally
have escalating rentals over the term of the lease, is
recorded on a straight-line basis over the lease term. The
lease term is the lesser of 20 years inclusive of reasonably
assured renewal periods, or the lease term. The lease term
begins when the Company has the right to control the use
of the property, which is typically before rent payments are
due under the lease. The difference between the rent
expense and rent paid is recorded as deferred rent in the
consolidated balance sheet. Pre-opening rent is included in
pre-opening costs in the consolidated statement of income
and comprehensive income. Tenant incentives used to fund
leasehold improvements are recorded in deferred rent and
amortized as reductions of rent expense over the term of
the lease.

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

Additionally, certain of the Company’s operating leases
contain clauses that provide additional contingent rent
based on a percentage of sales greater than certain
specified target amounts. The Company recognizes
contingent rent expense provided the achievement of that
target is considered probable.

2016 Annual Report 45

PART II
(continued)

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

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

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

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

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

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

Recently Issued Accounting Standards and
Adoption of Accounting Pronouncements
In November 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-18, “Statement of Cash Flows (Topic 230)”,
which provides guidance on the classification of restricted
cash to be included with cash and cash equivalents when
reconciling the beginning of period and end of period total
amounts on the statement of cash flows. This
pronouncement is effective for reporting periods beginning
after December 15, 2017 using a retrospective adoption
method and early adoption is permitted. For the years

46 2016 Annual Report

ended December 31, 2016, 2015 and 2014, $28,490, $22,572
and $19,889, respectively, of restricted cash would have
been included in cash and cash equivalents and changes in
the balance excluded from net cash provided by operating
activities in the consolidated statement of cash flows if this
new guidance had been adopted as of the respective dates.

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

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

In May 2014, the FASB issued ASU No. 2014-09, “Revenue
from Contracts with Customers (Topic 606),” as amended

PART II
(continued)

by multiple standards updates. The pronouncement was
issued to clarify the principles for recognizing revenue and
to develop a common revenue standard and disclosure
requirements for U.S. GAAP and IFRS. The pronouncement
is effective for reporting periods beginning after
December 15, 2017. The expected adoption method of ASU
2014-09 is being evaluated by the Company, and the
adoption is not expected to have a significant impact on the
Company’s consolidated financial position or results of
operations.

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

2. Supplemental Financial Information
Leasehold improvements, property and equipment were as
follows:

December 31,

2016

2015

Land

$

12,943

$

13,052

Leasehold improvements and
buildings

1,572,606

1,419,418

Furniture and fixtures

157,541

142,825

Equipment

405,937

362,800

Leasehold improvements,
property and equipment

2,149,027

1,938,095

Accumulated depreciation

(845,469)

(720,875)

Leasehold improvements,
property and equipment, net

$1,303,558

$ 1,217,220

Accrued payroll and benefits were as follows:

December 31,

2016

2015

Accrued liabilities were as follows:

Gift card liability

Transaction tax payable

Treasury stock liability

Other accrued expenses

Accrued liabilities

December 31,

2016

2015

$59,438

$ 51,055

20,435

2,300

15,634

25,178

44,956

37,408

$ 127,129

$129,275

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

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

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

Worker’s compensation liability

$33,038

$26,408

Accrued payroll

22,338

13,780

December 31,

2016

2015

Other accrued payroll and benefits

20,925

24,770

Amortized cost

$455,109

$1,040,850

Accrued payroll and benefits

$ 76,301

$64,958

Unrealized gains (losses)

(218)

(2,712)

Fair market value

$454,891

$ 1,038,138

2016 Annual Report 47

PART II
(continued)

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

Year ended December 31,

2016

2015

2014

Unrealized gains (losses)
on available-for-sale
securities

Unrealized gains (losses)
on available-for-sale
securities, net of tax

$ 2,251

$(2,468)

$ —

$1,402

$ (1,522)

$ —

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

Year ended December 31,

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

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

Statutory U.S. federal income
tax rate

State income tax, net of related
federal income tax benefit

Federal credits

Enhanced deduction for food
donation

Year ended December 31,

2016

2015

2014

35.0% 35.0% 35.0%

13.3

3.6

3.7

(10.1)

(0.4)

(0.5)

(2.4)

(0.2)

6.0

6.2

0.3

—

(0.1)

0.4

0.1

Realized gains (losses) from
sale of available-for-sale
securities

Other-than-temporary
impairment

2016

2015

2014

Valuation allowance

Other

$547

$ —

$ —

$ —

$244

$ —

Return to provision and other
discrete items

(7.2)

(0.1)

(1.0)

Effective income tax rate

40.8% 38.2% 37.6%

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

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

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

4. Income Taxes
The components of the provision for income taxes are as
follows:

Year ended December 31,

2016

2015

2014

Current tax:

U.S. Federal

$ 20,765

$244,470

$ 248,219

U.S. State

Foreign

Deferred tax:

U.S. Federal

U.S. State

Foreign

8,687

556

37,957

41,225

172

156

30,008

282,599

289,600

(11,596)

(2,546)

(2,470)

(16,612)

11,000

(13,890)

699

(2,288)

9,411

2,255

(6,740)

(3,075)

(23,705)

3,034

Valuation allowance

2,405

Provision for income
taxes

$ 15,801

$294,265

$ 268,929

48 2016 Annual Report

PART II
(continued)

Deferred income tax liability:

Leasehold improvements,
property and equipment

Goodwill and other assets

Prepaid assets and other

December 31,

2016

2015

$204,640

$ 192,125

1,856

6,012

1,696

8,297

Total deferred income tax liability

212,508

202,118

Deferred income tax asset:

Deferred rent

Gift card liability

Capitalized transaction costs

Stock-based compensation and
other employee benefits

Foreign net operating loss carry-
forwards

State credits

Allowances, reserves and other

63,159

5,563

500

57,716

3,171

502

101,628

83,058

9,580

4,595

19,359

11,407

4,783

18,577

Valuation allowance

(10,820)

(9,401)

Total deferred income tax asset

193,564

169,813

Net deferred income tax liability

$ 18,944

$ 32,305

The unrecognized tax benefits are as follows:

2016

2015

2014

Beginning of year

$3,776

$ 1,342

$

Increase resulting from
prior year tax position

Increase resulting from
current year tax position

—

402

435

2,032

1,342

—

—

End of year

$ 4,211

$3,776

$1,342

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

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

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

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

6. Stock Based Compensation
The Company issues shares pursuant to the Amended and
Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive
Plan (the “2011 Incentive Plan”), approved at the annual
shareholders’ meeting on May 13, 2015. Shares issued
pursuant to awards granted prior to the 2011 Incentive Plan
were issued subject to previous stock plans that were also
approved by shareholders. For purposes of counting the
shares remaining available under the 2011 Incentive Plan,
each share issuable pursuant to outstanding full value
awards, such as restricted stock units and performance
shares, count as two shares used, whereas each share
underlying a stock appreciation right or stock option count
as one share used. Under the 2011 Incentive Plan, 5,560
shares of common stock have been authorized and
reserved for issuance to eligible participants, of which 2,165
represent shares that were authorized for issuance but not
issued or subject to outstanding awards at December 31,
2016. The 2011 Incentive Plan is administered by the
Compensation Committee of the Board of Directors, which

2016 Annual Report 49

PART II
(continued)

has the authority to select the individuals to whom awards
will be granted or to delegate its authority under the plan
to make grants (subject to certain legal and regulatory
restrictions), to determine the type of awards and when the
awards are to be granted, the number of shares to be
covered by each award, the vesting schedule and all other
terms and conditions of the awards. The exercise price for
stock awards granted under the 2011 Incentive Plan cannot
be less than fair market value at the date of grant.

Stock only stock appreciation rights (“SOSARs”) generally
vest equally over two and three years and expire after
seven years. Stock-based compensation expense is
generally recognized on a straight-line basis for each
separate vesting portion. Compensation expense related to
employees eligible to retire and retain full rights to the
awards is recognized over six months which coincides with
the notice period. The Company has also granted SOSARs
and stock awards with performance vesting conditions and/
or market vesting conditions. Compensation expense on

SOSARs subject to performance conditions is recognized
over the longer of the estimated performance goal
attainment period or time vesting period. Compensation
expense on stock awards subject to performance
conditions, which is based on the quantity of awards the
Company has determined are probable of vesting, is
recognized over the longer of the estimated performance
goal attainment period or time vesting period.
Compensation expense is recognized ratably for awards
subject to market conditions regardless of whether the
market condition is satisfied, provided that the requisite
service has been provided. Some stock-based
compensation awards are made to employees involved in
the Company’s new restaurant development activities, and
expense for these awards is recognized as capitalized
development and included in leasehold improvements,
property and equipment in the consolidated balance sheet.

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

Stock-based compensation expense

Stock-based compensation expense, net of tax

Year ended December 31,

2016

2015

2014

$ 65,112

$59,465

$ 97,618

35,974

36,666

60,084

Stock-based compensation expense recognized as capitalized development

946

1,554

1,178

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

2016

2015

2014

Weighted-Average
Exercise Price Per
Share

Shares

Outstanding, beginning of year

1,694

Granted

Exercised

Forfeited or cancelled

Outstanding, end of year

460

(124)

(113)

1,917

$490.70

$ 457.77

$ 315.87

$ 559.25

$490.06

Outstanding as of December 31, 2016

Vested and expected to vest as of December 31, 2016

Exercisable as of December 31, 2016

50 2016 Annual Report

Weighted-Average
Exercise Price Per
Share

$395.46

$ 659.12

$ 297.25

$ 554.73

$490.70

Shares

2,087

379

(716)

(56)

1,694

Shares

1,690

764

(315)

(52)

2,087

Weighted-Average
Exercise Price Per
Share

$ 312.44

$545.66

$ 310.32

$ 419.74

$395.46

Weighted-Average
Exercise Price Per
Share

$490.06

$ 489.18

$ 422.32

Shares

1,917

1,851

846

Weighted-
Average
Remaining
Years of
Contractual
Life

4.4

4.3

3.3

Aggregate
Intrinsic
Value

$22,040

$22,040

$22,040

PART II
(continued)

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

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

Risk-free interest rate

Expected life (years)

Expected dividend yield

Volatility

2016

2015

2014

1.0%

3.5

0.0%

32.2%

1.1%

3.4

0.0%

30.8%

0.8%

3.4

0.0%

33.3%

Weighted-average Black-Scholes fair value per share at date of grant

$117.48

$156.32

$136.18

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

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

Outstanding, beginning of year

Granted

Vested

Forfeited or cancelled

Outstanding, end of year

2016

Grant Date Fair
Value
Per Share

$ 511.88

$509.05

$605.83

$529.54

$606.24

Shares

116

90

(7)

(74)

125

2015

Grant Date Fair
Value
Per Share

$525.60

$ 785.32

$ 413.07

$534.55

$ 511.88

2014

Grant Date Fair
Value
Per Share

$ 520.27

$495.92

$ 284.11

$ 410.55

$525.60

Shares

71

2

(2)

(1)

70

Shares

70

47

(1)

—

116

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

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

2016 Annual Report 51

PART II
(continued)

weighted equally, and performance is calculated over a
three year period beginning January 1, 2015 through
December 31, 2017.

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

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

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

Risk-free interest rate

Expected life (years)

Expected dividend yield

Volatility

2016

2015

0.9%

1.0%

3.0

2.9

0.0%

0.0%

31.4% 33.7%

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

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

7. Employee Benefit Plans
The Company maintains the Chipotle Mexican Grill 401(k)
Plan (the “401(k) Plan”). The Company matches 100% of

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

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

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

52 2016 Annual Report

PART II
(continued)

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

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

Year ended
December 31,

2016

2015

2014

Unrealized gains (losses) on
investments held in rabbi trust

$586

$(571) $184

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

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

2017

2018

2019

2020

2021

Thereafter

Total minimum lease payments

$

264,911

268,862

269,133

263,732

257,400

2,358,941

$3,682,979

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

Rental expense consists of the following:

Year ended December 31,

2016

2015

2014

Minimum rentals

$255,955 $227,602 $200,575

Contingent rentals

$

1,811 $ 4,542 $

4,616

Sublease rental income $ (2,074) $ (1,879) $ (1,838)

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

2016 Annual Report 53

PART II
(continued)

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

Stock awards subject to
performance conditions

Stock awards that were
antidilutive

Year ended December 31,

2016

2015

2014

263

266

385

1,316

289

232

Total stock awards excluded
from diluted earnings per share

1,579

555

617

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

Net income

Shares:

Weighted average
number of common
shares outstanding

Year ended December 31,

2016

2015

2014

$22,938 $475,602 $445,374

29,265

31,092

31,038

Dilutive stock awards

505

402

474

Diluted weighted
average number of
common shares
outstanding

Basic earnings per
share

Diluted earnings per
share

29,770

31,494

31,512

$ 0.78 $

15.30 $

14.35

$ 0.77 $

15.10 $

14.13

54 2016 Annual Report

10. Commitments and Contingencies

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

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

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

PART II
(continued)

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

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

Notices of Inspection of Work Authorization
Documents and Related Civil and Criminal
Investigations
Following an inspection during 2010 by the U.S. Department
of Homeland Security, or DHS, of the work authorization

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

Miscellaneous

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

2016 Annual Report 55

PART II
(continued)

11. Quarterly Financial Data (Unaudited)
Summarized unaudited quarterly financial data:

Revenue

Operating income (loss)

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Revenue

Operating income

Net income

Basic earnings per share

Diluted earnings per share

2016

March 31

June 30

September 30

December 31

$834,459

$998,383

$1,036,982

$1,034,560

$ (46,604) $ 40,895

$ (26,432) $ 25,596

$

$

(0.88) $

(0.88) $

0.88

0.87

$

$

$

$

9,726

7,799

0.27

0.27

$

$

$

$

30,550

15,975

0.55

0.55

2015

March 31

June 30

September 30

December 31

$1,089,043

$1,197,783

$1,216,890

$997,507

$

$

$

$

197,801

$ 227,416

$ 234,759

$ 103,613

122,641

$ 140,204

$ 144,883

$ 67,874

3.95

3.88

$

$

4.51

4.45

$

$

4.65

4.59

$

$

2.19

2.17

56 2016 Annual Report

PART II
(continued)

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

None.

ITEM 9A. CONTROLS AND
PROCEDURES

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

Evaluation of Disclosure Controls and
Procedures
As of December 31, 2016, we carried out an evaluation,
under the supervision and with the participation of our
management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures.
Based on the foregoing, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the
period covered by this annual report.

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

Management’s Annual Report on Internal
Control over Financial Reporting
The management of Chipotle Mexican Grill, Inc. is
responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal
control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of

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

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

Management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2016,
based on the framework set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in
Internal Control—Integrated Framework (the “2013
framework”). Based on that assessment, management
concluded that, as of December 31, 2016, our internal
control over financial reporting was effective based on the
criteria established in the 2013 framework.

Our independent registered public accounting firm, Ernst &
Young LLP, has issued an attestation report on the
effectiveness of our internal control over financial
reporting as of December 31, 2016. This report follows.

2016 Annual Report 57

PART II
(continued)

Report of Independent Registered Public Accounting Firm

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

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

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

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

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

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

/s/ Ernst & Young LLP

Denver, Colorado
February 6, 2017

58 2016 Annual Report

PART II
(continued)

ITEM 9B. OTHER INFORMATION

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

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

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

The Registration Rights Agreement also contains customary indemnification provisions.

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

2016 Annual Report 59

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

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

ITEM 11. EXECUTIVE COMPENSATION

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

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

Securities Authorized for Issuance Under Equity Compensation Plans
The following table presents information regarding options and rights outstanding under our equity compensation plans as
of December 31, 2016. All options/SOSARs reflected are options to purchase common stock.

(a)
Number of Securities
to be Issued Upon
Exercise of Outstanding
Options and Rights(1)

(b)
Weighted-Average
Exercise Price of
Outstanding Options and
Rights(1)

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))(2)

Equity Compensation Plans Approved
by Security Holders

Equity Compensation Plans Not
Approved by Security Holders

Total

2,042,317

None

2,042,317

$490.06

N/A

$490.06

2,412,105

None

2,412,105

(1)

Includes shares issuable in connection with awards with performance and market conditions, which will be issued based on achievement of performance
criteria associated with the awards, with the number of shares issuable dependent on our level of performance. The weighted-average exercise price in
column (b) includes the weighted-average exercise price of SOSARs only.

(2) Includes 2,165,105 shares remaining available under the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and 247,000 shares

remaining available under the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan. In addition to being available for future issuance upon exercise of
SOSARs or stock options that may be granted after December 31, 2016, all of the shares available for grant under the Amended and Restated Chipotle
Mexican Grill, Inc. 2011 Stock Incentive Plan may instead be issued in the form of restricted stock, restricted stock units, performance shares or other equity-
based awards. Each share underlying a full value award such as restricted stock, restricted stock units or performance shares counts as two shares used
against the total number of securities authorized under the plan.

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

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

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

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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

60 2016 Annual Report

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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

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

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

ITEM 16. FORM 10-K SUMMARY

None.

2016 Annual Report 61

SIGNATURES

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

CHIPOTLE MEXICAN GRILL, INC.

By:
Name:
Title:

/s/ JOHN R. HARTUNG

John R. Hartung
Chief Financial Officer

Date: February 6, 2017

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

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

Signature

/S/ STEVE ELLS

Steve Ells

Date

February 6, 2017

Title

Chief Executive Officer and Chairman of the Board of
Directors
(principal executive officer)

/S/ JOHN R. HARTUNG

February 6, 2017

John R. Hartung

Chief Financial Officer
(principal financial and accounting officer)

/S/ ALBERT S. BALDOCCHI

February 6, 2017

Director

Albert S. Baldocchi

/S/ JOHN S. CHARLESWORTH

February 6, 2017

Director

John S. Charlesworth

/S/ NEIL W. FLANZRAICH

February 6, 2017

Director

Neil W. Flanzraich

/S/ PATRICK J. FLYNN

February 6, 2017

Director

Patrick J. Flynn

/S/ DARLENE J. FRIEDMAN

February 6, 2017

Director

Darlene J. Friedman

/S/ STEPHEN GILLETT

February 6, 2017

Director

Stephen Gillett

/S/ ROBIN S. HICKENLOOPER

February 6, 2017

Director

Robin S. Hickenlooper

/S/ KIMBAL MUSK

Kimbal Musk

February 6, 2017

Director

/S/ MATTHEW PAULL

February 6, 2017

Director

Matthew Paull

62 2016 Annual Report

EXHIBIT INDEX

Exhibit
Number

Exhibit Description

Description of Exhibit Incorporated Herein by Reference

Form File No.

Filing Date

Exhibit
Number

Filed
Herewith

3.1

3.2

4.1

10.1†

10.1.1†

10.1.2†

10.1.3†

10.2†

10.2.3†

10.2.4†

10.2.5†

Amended and Restated Certificate of
Incorporation of Chipotle Mexican Grill, Inc.

Chipotle Mexican Grill, Inc. Amended and
Restated Bylaws

Form of Stock Certificate for Shares of Common
Stock

Amended and Restated Chipotle Mexican Grill,
Inc. 2006 Stock Incentive Plan

Form of 2009 Stock Appreciation Rights
Agreement

Form of 2011 Stock Appreciation Rights
Agreement

Form of 2011 Performance-Based Stock
Appreciation Rights Agreement

10-Q 001-32731 October 26, 2016

8-K

001-32731 October 6, 2016

3.1

3.1

10-K 001-32731

February 10, 2012

4.1

10-K 001-32731

February 17, 2011

10.2

10-K 001-32731

February 19, 2009

10.2.7

10-K 001-32731

February 17, 2011

10.2.10

10-K 001-32731

February 17, 2011

10.2.11

Amended and Restated Chipotle Mexican Grill,
Inc. 2011 Stock Incentive Plan

10-Q 001-32731 October 26, 2016

10.2.1†

Form of Board Restricted Stock Units Agreement

10-Q 001-32731 July 22, 2014

10.2.2†

Form of Stock Appreciation Rights Agreement

10-Q 001-32731 April 20, 2012

Form of Performance-Based Stock Appreciation
Rights Agreement

10-Q 001-32731 April 20, 2012

10.2

Form of 2014 Stock Appreciation Rights
Agreement

Form of 2014 Performance-Based Stock
Appreciation Rights Agreement

—

—

—

—

—

—

10.2.6†

Form of 2015 Performance Share Agreement

10-Q 001-32731 April 22, 2015

10.2.7†

Form of 2016 Stock Appreciation Rights
Agreement

10-Q 001-32731 April 27, 2016

10.2.8†

Form of 2016 Performance Share Agreement

10-Q 001-32731 April 27, 2016

10.3

Amended and Restated Registration Rights
Agreement dated January 31, 2006 among
Chipotle Mexican Grill, Inc., McDonald’s
Corporation and certain shareholders

10-K 001-32731 March 17, 2006

10.4†

Board Pay Policies

10-Q 001-32731 April 22, 2015

10.1

10.1

10.1

X

X

—

—

10.2

10.1

10.2

10.6

10.1

10.5†

10.5.1†

Chipotle Mexican Grill, Inc. Supplemental
Deferred Investment Plan

Amendment No. 1 to Chipotle Mexican Grill, Inc.
Supplemental Deferred Investment Plan

10.5.2†

Amendment No. 2 to Chipotle Mexican Grill, Inc.
Supplemental Deferred Investment Plan

10-K 001-32731

February 23, 2007

10.11

10-Q 001-32731 August 1, 2007

10.1

10-Q 001-32731 October 31, 2007

10.1

2016 Annual Report 63

EXHIBIT INDEX
(continued)

Exhibit
Number

Exhibit Description

Description of Exhibit Incorporated Herein by Reference

Form File No.

Filing Date

Exhibit
Number

Filed
Herewith

10.6†

10.7†

10.8†

10.9†

10.10

10.11

21.1

23.1

24.1

31.1

31.2

32.1

101

Form of Director and Officer Indemnification
Agreement

Chipotle Mexican Grill, Inc. Employee Stock
Purchase Plan

Chipotle Mexican Grill, Inc. 2014 Cash Incentive
Plan

Retirement and Non-Competition Agreement
dated December 9, 2016 between Chipotle
Mexican Grill, Inc. and Montgomery F. Moran

Investor Agreement dated December 14, 2016
between Chipotle Mexican Grill, Inc. and Pershing
Square Capital Management, L.P.

Registration Rights Agreement dated February 3,
2017, between Chipotle Mexican Grill, Inc. and
Pershing Square Capital Management, L.P.

Subsidiaries of Chipotle Mexican Grill, Inc.

Consent of Ernst & Young LLP (as the
independent registered public accounting firm of
Chipotle Mexican Grill, Inc.)

Power of Attorney (included on signature page of
this report)

Certification of Chief Executive Officer of
Chipotle Mexican Grill, Inc. pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer of Chipotle
Mexican Grill, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer and Chief
Financial Officer of Chipotle Mexican Grill, Inc.
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002

The following financial statements, formatted in
XBRL: (i) Consolidated Balance Sheet as of
December 31, 2016 and December 31, 2015, (ii)
Consolidated Statement of Income and
Comprehensive Income for the years ended
December 31, 2016, 2015 and 2014, (iii)
Consolidated Statement of Shareholders’ Equity
for the years ended December 31, 2016, 2015 and
2014, (iv) Consolidated Statements of Cash Flows
for the years ended December 31, 2016, 2015 and
2014; and (v) Notes to the Consolidated Financial
Statements

†- denotes management contract or compensatory plan or arrangement.

64 2016 Annual Report

8-K

001-32731 March 21, 2007

10.1

10-K 001-32731

February 10, 2012

10.11

10-Q 001-32731 July 19, 2013

10.1

8-K

001-32731 December 12, 2016

10.1

8-K

001-32731 December 19, 2016

10.1

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

X

X

X

X

X

X

X

—

—

—

—

X

Chipotle Mexican Grill, Inc.
1401 Wynkoop Street, Suite 500
Denver, CO 80202

DEAR SHAREHOLDER:

March 30, 2017

You are cordially invited to attend the annual meeting of shareholders of Chipotle Mexican Grill, Inc., which

will be held on May 25, 2017 at 8:00 a.m. local time at The Westin Denver Downtown, 1672 Lawrence Street,
Denver, Colorado. Details of the business to be conducted at the annual meeting are given in the notice of
meeting and proxy statement that follow.

Please vote promptly by following the instructions in this proxy statement or in the Notice of Internet

Availability of Proxy Materials that was sent to you.

Sincerely,

/s/ Steve Ells
Chairman of the Board and Chief Executive Officer

NOTICE OF MEETING

The 2017 annual meeting of shareholders of Chipotle Mexican Grill, Inc. will be held on May 25, 2017 at 8:00 a.m. local time
at The Westin Denver Downtown, 1672 Lawrence Street, Denver, Colorado.

Shareholders will consider and take action on the following matters:

1.

Election of the eight directors named in this proxy statement, Al Baldocchi, Paul Cappuccio, Steve Ells, Neil Flanzraich,
Robin Hickenlooper, Kimbal Musk, Ali Namvar and Matthew Paull, each to serve a one-year term;

2. An advisory vote to approve the compensation of our executive officers as disclosed in this proxy statement (or “say-

on-pay”);

3. An advisory vote on the frequency of future say-on-pay votes;

4. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year

ending December 31, 2017;

5. A shareholder proposal, if properly presented at the meeting; and

6. Such other business as may properly come before the meeting or any adjournments or postponements of the meeting.

Information with respect to the above matters is set forth in the proxy statement that accompanies this notice.

The record date for the meeting has been fixed by the Board of Directors as the close of business on March 27, 2017.
Shareholders of record at that time are entitled to vote at the meeting.

If you’d like to attend the meeting in person, you will need to obtain an admission ticket in advance. You can obtain a ticket
by following the instructions on page 51.

By order of the Board of Directors

/s/ Steve Ells
Chairman of the Board and Chief Executive Officer

March 30, 2017

Please execute your vote promptly by following the instructions included on the Notice of Internet Availability of
Proxy Materials that was sent to you, or as described under “How do I vote?” beginning on page 1 of the
accompanying proxy statement.

Proxy Statement Summary

MATTERS TO BE VOTED ON AT THE ANNUAL MEETING AND BOARD RECOMMENDATIONS

1. Election of Directors (p. 6)

Name

Albert Baldocchi

Paul T. Cappuccio

Steve Ells

Neil Flanzraich

Robin Hickenlooper

Kimbal Musk

Ali Namvar

Matthew Paull

2. Say on Pay (p. 20)

Years of
Service

20

3 months

21

10

3 months

4

3 months

3 months

Independent

Board
Recommendation

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

For

For

For

For

For

For

For

For

For

The recent appointments of
our four newest directors were
the latest step in Board
succession and refreshment
efforts that have been under
way for a number of years.

Four directors, John
Charlesworth, Pat Flynn, Darlene
Friedman and Stephen Gillett,
will not stand for reelection at
the annual meeting.

See below under
“Performance” and
“Compensation” for additional
discussion.

3. Say on Pay Frequency (p. 21)

Annual

4. Ratification of Ernst & Young LLP as independent auditors (p. 22)

For

5. Shareholder proposal (p. 25)

AGAINST

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT i

Proxy Statement Summary
(continued)

PERFORMANCE

2016 was a challenging year, as we were negatively impacted throughout the year by the food-borne illness
incidents associated with Chipotle restaurants beginning in the fourth quarter of 2015, and related negative
publicity. As a result of these business challenges, our stock price declined considerably. We believe our
management team has developed and is implementing a strategy that will position Chipotle to return to its full
potential, and believe our business has begun to head in the right direction.

COMPENSATION

In light of the continued challenges we faced during 2016, the Compensation Committee of our Board of
Directors took a number of actions:

In February 2016

In February 2017

• Officers did not receive any annual bonus under our

Annual Incentive Plan for 2015.

• For 2016, officers once again did not receive any
annual bonus under our Annual Incentive Plan.

• The committee determined that using 2015 year-end

• The committee granted performance shares that

again focused primarily on restoring lost shareholder
value, while also adding a comparable restaurant sales
growth metric to incentivize and reward sales
recovery at levels that would help restore our
restaurant economic model. Two-thirds of the 2017
awards is tied to highly challenging absolute stock
price performance goals, and one-third is tied to
achievement of strong levels of average comparable
restaurant sales increases, in each case over a three-
year performance period.

• Details regarding executive compensation for 2016,

and the executive officer equity awards made in early
2017, can be found in the compensation disclosures
beginning on page 28.

Asanadditionalresponsetothesay-on-payvoteatthe
2016annualmeeting,thetargetedvaluationofthe2017
performancesharesawardedtotheexecutiveofficers
wasreducedbybetween15%and31%ascomparedto
2016.

financials or the company’s stock price at the
beginning of 2016 as the basis for a relative
performance measure in a performance share
program could create a misalignment of shareholder
returns and executive officer compensation. More
specifically, the committee believed that using the
same relative performance measures as were used in
our 2015 performance share awards might not
translate into rebuilding lost shareholder value, or be
appropriately challenging, if used in 2016. Accordingly,
the committee awarded performance shares to our
executive officers that are solely tied to highly
challenging absolute stock price performance goals
over a three-year performance period.

Inresponsetothesay-on-payvoteattheannual
meetingofshareholdersin2016andshareholder
feedbackduringourextensiveengagementwith
shareholders,includingdiscussionsinearly2017with
holdersofapproximately40%ofouroutstanding
commonstock,weagreedwithourcurrentnamed
executiveofficersonmodificationstothe2016
performanceshareawardsto(1)increasethe
measurementperiodforestablishingstockprice
achievementfrom30daysto60days;(2)removethe
highestpayoutlevelfromtheoriginalaward,sothat
maximumpayoutwillbelimitedto3xthetargetaward;
and(3)addanawardmodifiersothatifthereisa
significantdeclineinourstockpriceafterachievement
oftheaward,theawardwillpayoutatnogreaterthan
thetargetlevel.

ii NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proxy Statement Summary
(continued)

A COMMITMENT TO WELL-DESIGNED CORPORATE GOVERNANCE THAT ALIGNS WITH SHAREHOLDER
EXPECTATIONS

For many years, Chipotle has been committed to aligning the composition of our Board and our corporate governance
policies and structures with the creation of shareholder value through our unique business model, and with shareholder
viewpoints on key governance-related issues. This commitment has been illustrated through a number of actions we
have taken over many years, as illustrated below.

Dec 2016
• Continued our Board refreshment and succession program by appointing four high-caliber
new independent directors to our Board with a wide range of skills and experience; two of
whom were appointed under an agreement with a large shareholder.

• Streamlined our management by eliminating our Co-CEO structure in connection with the

retirement of Monty Moran.

Oct 2016
• Adopted a market-standard proxy access bylaw, in response to voting at the 2016 annual
meeting of shareholders and shareholder engagement discussions, including with our
Lead Director.

May 2016
• Implemented the right for shareholders to call special meetings, in response to shareholder
voting on a management-sponsored proposal at the 2016 annual meeting of shareholders.

• Completed phase-out of classified Board structure begun in 2014.

Sep 2015
• Implemented majority voting for director elections, in response to shareholder voting on a
management-sponsored proposal that originated with shareholder engagement efforts, at
the 2015 annual meeting of shareholders.

May 2015
• Eliminated provisions requiring supermajority voting to approve certain corporate actions,

in response to shareholder voting at the 2014 annual meeting of shareholders.

• Continued our Board refreshment and succession program by appointing a new
independent director, Stephen Gillett, with significant technology experience.

Mar 2015

• Began phase-out of classified Board structure, in response to shareholder voting at the

2013 annual meeting of shareholders.

May 2014

• Continued our Board refreshment and succession program by appointing a new

independent director, Kimbal Musk, to our Board with restaurant operating experience, as
well as expertise in entrepreneurialism and innovation.

Sep 2013

• Appointed a new independent director to our Board with executive-level restaurant

company experience (this director stepped down in 2014 due to other commitments).

Sep 2012

2016

2015

2014

2013

2012

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT iii

Proxy Statement Summary
(continued)

The graphics below represent a snapshot of the overall independence of our Board, and the results of our focus on
Board refreshment, based on the makeup of our Board immediately following the upcoming annual meeting.

8+ yrs
2

Tenure of
Independent
Directors

4-8 yrs
1

< 4 yrs
4

Mix of Independent vs.
Non-Independent Directors

Independent

Non-Independent

SUSTAINABILITY REPORTING

Through our commitment to making better food accessible to everyone, we believe Chipotle is driving more positive
change in the nation’s food supply than any other restaurant company. We serve meat from animals raised in a humane
way, and without the use of non-therapeutic antibiotics or added hormones. We believe we are the only national
restaurant company with a significant stated commitment to serving local and organically grown produce. In 2015 we
became the first national restaurant company to use only non-GMO ingredients in our food. And we use dairy products
from cows raised on pasture. These are only a few of our accomplishments, and we believe the positive impacts of these
moves flow throughout our supply chain and beyond.

As our many sustainability-related initiatives have advanced, so has our reporting of our accomplishments, enabling us
to accumulate a considerable amount of tracking and analysis of sustainability-related metrics. Given our continued
development in this area, and following several years of increasing shareholder support for sustainability-related
disclosures, we believe that a logical next step in our sustainability efforts is the preparation and publication of our first-
ever comprehensive sustainability report.

Accordingly, we plan to publish Chipotle’s first sustainability report in the fourth quarter of 2017. We have completed
the initial, foundational work for the report, and will work throughout this year with two highly-regarded outside firms
with expertise in sustainability reporting and management, as well as with a group of sustainability-focused investors, to
prepare and publish our report.

Look for our sustainability report in December 2017. We look forward to taking this next step, which we believe will not only
provide valuable information to many of our stakeholders, but also will help us better manage sustainability-related issues.

iv NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proxy Statement Summary
(continued)

SUMMARY OF GOVERNANCE HIGHLIGHTS

Seven of the eight members who will continue to serve on our Board of Directors following the annual meeting are
independent.

Independent directors are led by an independent Lead Director.

All directors are up for re-election on an annual basis.

Directors are elected by majority vote in uncontested elections rather than plurality.

Independent Board members meet in executive session at each quarterly Board meeting.

Board performance is reviewed in an annual self-assessment by each director, with reporting to and evaluation by the
full Board.

Each independent director is subject to Board stock ownership requirements and prohibitions on hedging/pledging of
shares owned.

No shareholder rights plan or “poison pill.”

Adoption of bylaws permitting holders of at least 25% of our outstanding common stock to call special meetings of
shareholders.

Adoption of bylaws permitting proxy access for qualifying shareholders.

See also page 32 for significant compensation policies and procedures we employ to motivate our employees to build
shareholder value, while protecting the interests of all our shareholders.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT v

Table of Contents

Proxy Statement Summary

Annual Meeting Information

Beneficial Ownership of Our Common Stock

Proposal 1 — Election of Eight Directors

Information Regarding the Board of Directors

Biographical Information

A Majority of our Board Members are Independent

Committees of the Board

Director Compensation

Corporate Governance

Chairman of the Board

Lead Director

Board Performance Self-Evaluation Process

How to Contact the Board of Directors

Executive Sessions

Director Nomination Process

Policies and Procedures for Review and Approval of Transactions with Related Persons

Role of the Board of Directors in Risk Oversight

Proposal 2 — An Advisory Vote to Approve the Compensation of our Executive
Officers as Disclosed in this Proxy Statement

Proposal 3 — An Advisory Vote on the Frequency of Future Say-On-Pay Votes

Proposal 4 — Ratification of Appointment of Ernst & Young LLP as Independent
Registered Public Accounting Firm

Audit Committee Report

Policy for Pre-Approval of Audit and Permitted Non-Audit Services

Proposal 5 — An Advisory Vote on a Shareholder Proposal Regarding Special
Meetings Of The Shareholders

Statement in Opposition by our Board of Directors

Executive Officers

Compensation Discussion and Analysis

Letter From the Compensation Committee of our Board of Directors

vi NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

i

1

4

6

6

6

11

11

13

14

15

15

15

16

16

16

18

18

20

21

22

24

24

25

27

28

28

Table of Contents
(continued)

Executive Summary

Compensation Philosophy and Objectives

Executive Compensation Program Components and Structures

Pay at Risk

Factors in Setting Executive Officer Pay

Roles and Responsibilities of the Committee, Compensation Consultant and the CEO in
Setting Executive Officer Compensation

Role of Market Data and Our Peer Group

2016 Compensation Program

Executive Stock Ownership Guidelines

Prohibition on Hedging and Pledging

Executive Agreements

Compensation Program Risk

Tax and Other Regulatory Considerations

Compensation Committee Report

2016 Compensation Tables

Summary Compensation Table

Grants of Plan-Based Awards in 2016

Terms of 2016 Equity-Based Awards

Outstanding Equity Awards at December 31, 2016

Option Exercises and Stock Vested in 2016

Non-Qualified Deferred Compensation for 2016

Potential Payments Upon Termination or Change-in-Control

Section 16(a) Beneficial Ownership Reporting Compliance

Certain Relationships and Related Party Transactions

Shareholder Proposals and Nominations for 2018 Annual Meeting

Availability of SEC Filings, Corporate Governance Guidelines, Code of Conduct,
Codes of Ethics and Committee Charters

Delivery of Materials to Shareholders with Shared Addresses

Attendance at the Meeting

Miscellaneous

29

33

33

34

34

35

35

37

41

42

42

42

42

42

43

43

44

44

45

46

46

48

48

49

50

50

50

51

51

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT vii

[THIS PAGE INTENTIONALLY LEFT BLANK]

Annual Meeting Information

ANNUAL MEETING INFORMATION

This proxy statement contains information related to the annual meeting of shareholders of Chipotle Mexican Grill, Inc.
to be held on Thursday, May 25, 2017, beginning at 8:00 a.m. at The Westin Denver Downtown, 1672 Lawrence Street,
Denver, Colorado. This proxy statement was prepared under the direction of Chipotle’s Board of Directors to solicit
your proxy for use at the annual meeting. It will be made available to shareholders on or about March 30, 2017.

Who is entitled to vote and how many votes do I have?
If you were a shareholder of record of our common stock on March 27, 2017, you are entitled to vote at the annual meeting,
or at any postponement or adjournment of the annual meeting. On each matter to be voted on, you may cast one vote for
each share of common stock you hold. As of March 27, 2017, there were 28,683,190 shares of common stock outstanding
and entitled to vote.

What am I voting on?
You will be asked to vote on five proposals:

Board
Recommendation:

PROPOSAL 1 – Election of eight directors: Al Baldocchi, Paul Cappuccio, Steve Ells, Neil Flanzraich,
Robin Hickenlooper, Kimbal Musk, Ali Namvar and Matthew Paull.

FOR

PROPOSAL 2 – An advisory vote to approve the compensation of our executive officers as disclosed

FOR

in this proxy statement (“say-on-pay”).

PROPOSAL 3 – An advisory vote on the frequency of future say-on-pay votes.

ANNUAL

PROPOSAL 4 – Ratification of the appointment of Ernst & Young LLP as our independent registered

FOR

public accounting firm for the year ending December 31, 2017.

PROPOSAL 5 – A shareholder proposal, if properly presented at the meeting, requesting that the

AGAINST

Board of Directors implement changes to Chipotle’s governing documents to lower the
threshold for shareholders to call special meetings of shareholders to an aggregate of
15% of our outstanding common stock.

The Board of Directors is not aware of any other matters to
be presented for action at the meeting.

How does the Board of Directors recommend I
vote on the proposals?
The Board of Directors recommends a vote FOR each
candidate for director, FOR Proposals 2 and 4, for future
say-on-pay votes to be held on an ANNUAL basis, and
AGAINST Proposal 5.

How do I vote?
If you hold your shares through a broker, bank, or other
nominee in “street name,” you need to submit voting
instructions to your broker, bank or other nominee in order
to cast your vote. In most instances you can do this over

the Internet. The Notice of Internet Availability of Proxy
Materials that was provided to you has specific instructions
for how to submit your vote, or if you have received or
request a hard copy of this proxy statement you may mark,
sign, date and mail the accompanying voting instruction
form in the postage-paid envelope provided. Your vote is
revocable by following the procedures outlined in this proxy
statement. However, since you are not a shareholder of
record you may not vote your shares in person at the
meeting without obtaining authorization from your broker,
bank or other nominee.

If you are a shareholder of record, you can vote your
shares over the Internet as described in the Notice of
Internet Availability of Proxy Materials that was provided to

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 1

Annual Meeting Information
(continued)

you, or if you have received or request a hard copy of this
proxy statement and accompanying form of proxy card you
may vote by telephone as described on the proxy card, or
by mail by marking, signing, dating and mailing your proxy
card in the postage-paid envelope provided. Your
designation of a proxy is revocable by following the
procedures outlined in this proxy statement. The method
by which you vote will not limit your right to vote in person
at the annual meeting.

If you receive hard copy materials and sign and return your
proxy card without specifying choices, your shares will be
voted as recommended by the Board of Directors.

Will my shares held in street name be voted if
I do not provide voting instructions?
Under the rules of the New York Stock Exchange, or NYSE,
on voting matters characterized by the NYSE as “routine,”
NYSE member firms have the discretionary authority to
vote shares for which their customers do not provide
voting instructions. On non-routine proposals, such
“uninstructed shares” may not be voted by member firms.
Only the proposal to ratify the appointment of our
independent registered public accounting firm is
considered a routine matter for this purpose. None of the
other proposals presented in this proxy statement are
considered routine matters. Accordingly, if you hold your
shares through a brokerage firm and do not provide timely
voting instructions, your shares will be voted, if at all, only
on Proposal 4. We strongly encourage you to exercise
your right to vote in the election of directors and other
matters to be voted on at the annual meeting.

Can I change my vote or revoke my proxy?
You can change your vote or revoke your proxy at any time
before it is voted at the annual meeting by:

• re-submitting your vote on the Internet;

• if you are a shareholder of record, by sending a written
notice of revocation to our corporate Secretary at our
principal offices, 1401 Wynkoop Street, Suite 500,
Denver, Colorado, 80202; or

• if you are a shareholder of record, by attending the

annual meeting and voting in person.

Attendance at the annual meeting will not by itself revoke
your proxy. If you hold shares in street name and wish to
cast your vote in person at the meeting, you must contact
your broker, bank or other nominee to obtain authorization
to vote.

What do I need to attend the meeting?
To attend the meeting, you must be a shareholder on the
record date and obtain an admission ticket in advance by
following the instructions set forth on page 51. Tickets will
be available to registered and beneficial owners and to one
guest accompanying each registered or beneficial owner.
Requests for admission tickets will be processed in the
order in which they are received and must be requested no
later than May 24, 2017. Please note that seating is limited
and requests for tickets will be accepted on a first-come,
first-served basis. On the day of the meeting, each
shareholder will be required to present valid picture
identification such as a driver’s license or passport with
their admission ticket. Seating will begin at 7:30 a.m. and
the meeting will begin at 8:00 a.m. Cameras (including cell
phones with photographic capabilities), recording devices
and other electronic devices will not be permitted at the
meeting. You may be required to enter through a security
check before being granted access to the meeting.

What constitutes a quorum?
A quorum is necessary to conduct business at the annual
meeting. At any meeting of our shareholders, the holders of
a majority in voting power of our outstanding shares of
common stock entitled to vote at the meeting, present in
person or by proxy, constitutes a quorum for all purposes.
You are part of the quorum if you have voted by proxy.
Abstentions, broker non-votes and votes withheld from
director nominees count as “shares present” at the
meeting for purposes of determining whether a quorum
exists.

What is a “broker non-vote”?
A broker non-vote occurs when a broker, bank or other
nominee who holds shares for another does not vote on a
particular item because the nominee has not received
instructions from the owner of the shares and does not
have discretionary voting authority for that item. See “Will
my shares held in street name be voted if I do not provide
voting instructions?” above for more information.

What vote is required to approve each
proposal?
Proposal 1 — Re-election of each nominee for director
requires that such nominee receive a majority of the votes
cast regarding his or her election. Abstentions and broker
non-votes are not counted as votes cast and will have no
effect on the outcome of the election of directors.

Proposals 2, 4 and 5 — The say-on-pay vote and
ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year

2 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Annual Meeting Information
(continued)

ending December 31, 2017, and approval of the shareholder
proposal (if properly presented at the meeting), all require
the affirmative vote of a majority of the shares present and
entitled to vote on the matter in order to be approved.
Abstentions will have the same effect as a vote “AGAINST”
these proposals; broker non-votes are not counted as
entitled to vote and will have no effect on the outcome of
any of these proposals.

Proposal 3 — You may vote to have the advisory say-on-
pay vote held every “one,” “two” or “three” years. The
alternative receiving the highest number of votes will
indicate the frequency preferred by our shareholders.
Abstentions and broker non-votes are not counted as votes
cast and will have no effect on the outcome of this
proposal.

Because the say-on-pay vote (Proposal 2), the frequency of
say-on-pay votes (Proposal 3) and the vote on the
shareholder proposal (Proposal 5) are advisory, they will
not be binding on the Board or Chipotle. However, the
Board will review the voting results and take them into
consideration when making future decisions regarding
executive compensation and the subject matter of the
shareholder proposal. Ratification of our appointment of
independent auditors is not required and therefore the vote
on Proposal 4 is also advisory only. See Proposal 4 for
additional information about the effect of the voting
outcome on this proposal.

What if a nominee for director does not receive a
majority of votes cast regarding his or her election?
Such director(s) would be required to submit an irrevocable
resignation to the Nominating and Governance Committee
of the Board, and the committee would make a
recommendation to the Board as to whether to accept or
reject the resignation or whether other action should be
taken. The Board would then act on the resignation, taking
into account the committee’s recommendation, and publicly
disclose (by a press release and filing an appropriate
disclosure with the Securities and Exchange Commission, or
SEC) its decision regarding the resignation, and if such
resignation is rejected the rationale behind the decision,
within 90 days following certification of the election
results. The committee in making its recommendation and
the Board in making its decision each may consider any
factors and other information that they consider
appropriate and relevant.

How is this proxy statement being delivered?
We have elected to deliver our proxy materials
electronically over the Internet as permitted by rules of the
SEC. As required by those rules, we are distributing to our
shareholders of record and beneficial owners as of the
close of business on March 27, 2017 a Notice of Internet
Availability of Proxy Materials. On the date of distribution
of the notice, all shareholders and beneficial owners will
have the ability to access all of the proxy materials at the
URL address included in the notice. These proxy materials
are also available free of charge upon request at 1-800-
690-6903, or by e-mail at sendmaterial@proxyvote.com, or
by writing to Chipotle Mexican Grill, Inc., c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717. Requests by e-mail or
in writing should include the control number included on
the notice you received. If you would like to receive the
Notice of Internet Availability of Proxy Materials via e-mail
rather than regular mail in future years, please follow the
instructions on the notice, or enroll on the Investors page
of our web site at www.chipotle.com. Delivering future
notices by e-mail will help us reduce the cost and
environmental impact of our annual meeting.

Who is bearing the cost of this proxy
solicitation?
We will bear the cost of preparing, assembling and mailing
the Notice of Internet Availability of Proxy Materials; of
making these proxy materials available on the Internet and
providing hard copies of the materials to shareholders who
request them; and of reimbursing brokers, nominees,
fiduciaries and other custodians for the out-of-pocket and
clerical expenses of transmitting copies of the Notice of
Internet Availability of Proxy Materials and the proxy
materials themselves to beneficial owners of our shares. A
few of our officers and employees may participate in the
solicitation of proxies, without additional compensation, by
telephone, e-mail or other electronic means or in person.
We have also engaged Alliance Advisors, LLC to assist us in
the solicitation of proxies, for which we have agreed to pay
a fee of $22,500 plus reimbursement of customary
expenses.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 3

Ownership Information

BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

The following tables set forth information as of March 27, 2017 as to the beneficial ownership of shares of our common
stock by:

• each person (or group of affiliated persons) known to us to beneficially own more than 5 percent of our common stock;

• each of the executive officers listed in the Summary Compensation Table appearing later in this proxy statement;

• each of our directors; and

• all of our current executive officers and directors as a group.

The number of shares beneficially owned by each shareholder is determined under SEC rules and generally includes shares
for which the holder has voting or investment power. The information does not necessarily indicate beneficial ownership for
any other purpose. The percentage of beneficial ownership shown in the following tables is based on 28,683,190
outstanding shares of common stock as of March 27, 2017. For purposes of calculating each person’s or group’s percentage
ownership, shares of common stock issuable pursuant to the terms of stock options, stock appreciation rights or restricted
stock units exercisable or vesting within 60 days after March 27, 2017 are included as outstanding and beneficially owned
for that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any
other person or group.

Name of Beneficial Owner

Beneficial holders of 5% or more of outstanding common stock

FMR LLC(1)

Pershing Square Capital Management, L.P.(2)

The Vanguard Group, Inc.(3)

BlackRock, Inc.(4)

Sands Capital Management, LLC(5)

Directors and named executive officers

Steve Ells(6)(7)

John Hartung(8)

Mark Crumpacker(9)

Albert Baldocchi(6)(10)(11)

Paul Cappuccio(12)

John Charlesworth(10)

Neil Flanzraich(10)

Patrick Flynn(10)

Darlene Friedman(6)(10)(13)

Stephen Gillett(14)

Robin Hickenlooper(12)

Kimbal Musk(15)

Ali Namvar(16)

Matthew Paull(12)

Montgomery Moran(6)(17)

All directors and current executive officers as a group (15 people)(16)

*

Less than one percent.

4 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Total Shares
Beneficially Owned

Percentage of
Class Beneficially
Owned

3,281,840

2,882,463

2,650,416

2,412,231

1,668,312

328,052

125,427

35,500

73,183

–

3,668

3,896

6,578

5,129

–

–

312

–

400

11.44%

10.05%

9.24%

8.41%

5.82%

1.14%

*

*

*

–

*

*

*

*

–

–

*

–

*

487,386

582,145

1.68%

2.01%

Ownership Information
(continued)

(1) Based solely on a report on Schedule 13G/A filed on February 14, 2017. Various persons have the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the shares of common stock reflected as beneficially owned by FMR
LLC. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts, 02210.

(2) Based solely on a report on Schedule 13D/A filed by Pershing Square Capital Management, L.P., PS Management GP, LLC, and William A.
Ackman (collectively, “Pershing Square”) on February 7, 2017. The address of Pershing Square is 888 Seventh Avenue, 42nd Floor,
New York, New York, 10019.

(3) Based solely on a report on Schedule 13G/A filed on February 10, 2017. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd.,

Malvern, Pennsylvania, 19355.

(4) Based solely on a report on Schedule 13G/A filed on January 23, 2017. The address of BlackRock, Inc. is 55 East 52nd Street, New York,

New York, 10022.

(5) Based solely on a report on Schedule 13G/A filed on February 14, 2017. The address of Sands Capital Management, LLC is 1000 Wilson

Blvd., Suite 3000, Arlington, Virginia, 22209.

(6) A portion of the shares beneficially owned by Mr. Ells, Mr. Baldocchi, Ms. Friedman and Mr. Moran are entitled to piggyback registration

rights.

(7) Shares beneficially owned by Mr. Ells include 131,250 shares underlying vested stock appreciation rights.
(8) Shares beneficially owned by Mr. Hartung include: 19,782 shares in a revocable trust for Mr. Hartung’s benefit and of which his spouse

is the trustee; 35 shares beneficially owned by his children; and 95,000 shares underlying vested stock appreciation rights. Mr. Hartung
disclaims beneficial ownership of the shares beneficially owned by his children.

(9) Shares beneficially owned by Mr. Crumpacker include 32,500 shares underlying vested stock appreciation rights.
(10) Shares beneficially owned by Messrs. Baldocchi, Charlesworth, Flanzraich and Flynn and Ms. Friedman include 696 shares underlying
unvested restricted stock units, which are deemed to be beneficially owned because each such director is retirement-eligible and the
vesting of the awards accelerates in the event of the director’s retirement.

(11) Shares beneficially owned by Mr. Baldocchi include 69,648 shares owned jointly by Mr. Baldocchi and his spouse.
(12) Shares beneficially owned by Messrs. Cappuccio and Paull and Ms. Hickenlooper exclude 16 shares underlying unvested restricted stock

units.

(13) Shares beneficially owned by Ms. Friedman include 4,000 shares held by a revocable trust of which Ms. Friedman is a co-trustee.
(14) Shares beneficially owned by Mr. Gillett exclude 417 shares underlying unvested restricted stock units.
(15) Shares beneficially owned by Mr. Musk include 242 shares underlying unvested restricted stock units which will vest on May 15, 2017,

and exclude 454 shares underlying unvested restricted stock units.

(16) Mr. Namvar disclaims beneficial ownership of the shares beneficially owned by Pershing Square Capital Management L.P., PS

Management GP, LLC and William A. Ackman, and accordingly such shares are not reported above as beneficially owned by Mr. Namvar.

(17) Shares beneficially owned by Mr. Moran include 381,250 shares underlying vested stock appreciation rights. Mr. Moran stepped down
from the position of Co-Chief Executive Officer and as a member of the Board in December 2016 in connection with his planned
retirement in June 2017.

(18) See Notes (6) through (17). Shares beneficially owned exclude shares beneficially owned by Mr. Moran, who no longer serves as an

executive officer.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 5

Proposal 1

Election of Directors

Our Board of Directors currently has twelve members. Current directors John Charlesworth, Pat Flynn, Darlene Friedman,
and Stephen Gillett are not standing for re-election at the annual meeting. Accordingly, at the annual meeting, shareholders
will be asked to vote on the eight nominees named below, each of whom will be elected on an annual basis.

Al Baldocchi, Paul Cappuccio, Steve Ells, Neil Flanzraich, Robin Hickenlooper, Kimbal Musk, Ali Namvar and Matthew Paull
are the nominees for election as directors to serve for a one year term expiring at the 2018 annual meeting. We sometimes
refer to these nominees as a group in this proxy statement with the term “continuing directors.” Each of the nominees was
nominated by the Board upon the recommendation of the Nominating and Corporate Governance Committee, and has
consented to serve if elected. If any nominee is unable to serve or will not serve for any reason, the persons designated on
the accompanying form of proxy will vote for other candidates in accordance with their judgment. We are not aware of any
reason the nominees would not be able to serve if elected.

Re-election of each nominee for director requires that such nominee receive a majority of the votes cast regarding his or
her election. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of any
of these proposals.

The Board of Directors recommends a vote FOR the election of Ms. Hickenlooper and Messrs. Baldocchi, Cappuccio,
Ells, Flanzraich, Musk, Namvar and Paull as directors.

INFORMATION REGARDING THE BOARD OF DIRECTORS

Biographical Information
The following is biographical information about each nominee, including a description of the experience, qualifications and
skills that have led the Board to determine that each nominee should serve on the Board. The respective current terms of all
directors expire as of the date of next year’s annual meeting of shareholders or continue until their successors are elected
and have qualified.

DIRECTORS WHOSE TERMS EXPIRE AT THE 2017 ANNUAL MEETING OF SHAREHOLDERS
AND WHO ARE NOMINEES FOR TERMS EXPIRING AT THE 2018 ANNUAL MEETING

Albert S.
Baldocchi

Age: 62

Director Since: 1997

Background:

Mr. Baldocchi has been self-employed since 2000 as a financial
consultant and strategic advisor for, and investor in, a variety of
privately-held companies. He holds a Bachelor of Science degree in
chemical engineering from the University of California at Berkeley
and an MBA from Stanford University.

Qualifications:

Mr. Baldocchi’s extensive
involvement with restaurant
companies over a period of
17 years has given him an in-
depth knowledge of restaurant
company finance, operations and
strategy. He also has
considerable experience with
high-growth companies in the
restaurant industry and in other
industries, and his experience as
a senior investment banker at a
number of prominent institutions,
including Morgan Stanley,
Solomon Brothers and
Montgomery Securities, helped
him develop solid capabilities in
accounting and finance as well.

6 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

Paul T.
Cappuccio

Age: 55

Director Since: 2016

Background:

Mr. Cappuccio was appointed to the Board on December 14, 2016.
Mr. Cappuccio has served as Executive Vice President and General
Counsel of Time Warner since 2001. In this capacity, he oversees the
worldwide management of Time Warner’s legal functions,
collaborating with all of its operating businesses. From 1999 to 2001,
Mr. Cappuccio was Senior Vice President and General Counsel at
America Online. Before joining AOL, he was a partner at the
Washington, DC office of law firm Kirkland & Ellis LLP, where he
specialized in telecommunications law, appellate litigation, and
negotiation with government agencies. From 1991 to 1993,
Mr. Cappuccio was Associate Deputy Attorney General at the United
States Department of Justice. Prior to his service at the DOJ, Mr.
Cappuccio served as law clerk at the United States Supreme Court
for Justices Antonin Scalia and Anthony M. Kennedy, and as a law
clerk to Judge Alex Kozinski of the United States Court of Appeals
for the Ninth Circuit. Mr. Cappuccio earned a law degree from
Harvard Law School in 1986 and a Bachelor’s degree from
Georgetown University in 1983, and serves on the board of directors
of Central European Media Enterprises Ltd. (NasdaqGS: CETV).

Steve Ells

Background:

Age: 51

Director Since: 1996

Mr. Ells founded Chipotle in 1993. He is Chief Executive Officer and
was appointed Chairman of the Board in 2005. From 2009 through
2016 he served as Co-Chief Executive Officer and Chairman. Prior
to launching Chipotle, Mr. Ells worked for two years at Stars
restaurant in San Francisco. Mr. Ells’s vision – that food served fast
doesn’t have to be low quality and that delicious food doesn’t have
to be expensive – is the foundation on which Chipotle is based.
Mr. Ells graduated from the University of Colorado with a Bachelor
of Arts degree in art history, and is also a 1990 Culinary Institute of
America graduate.

Qualifications:

Mr. Cappuccio’s contributions to
the Board include strong
experience in legal and
regulatory compliance, risk
management, and public
company corporate governance.

Qualifications:

Mr. Ells’s visionary thinking has
led Chipotle to extraordinary
accomplishments, such as
growing from a single restaurant
to over 2,200 and serving more
responsibly-raised meat than any
other restaurant company. This
thinking has also resulted in
Mr. Ells remaining a principal
driving force behind making our
company innovative and striving
for constant improvement, and
he continues to provide
important leadership to our
executive officers, management
team, and Board. He is also one
of the largest individual
shareholders of our company.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 7

Proposal 1
(continued)

Neil W.
Flanzraich

Age: 73

Director Since: 2007

Robin
Hickenlooper

Age: 38

Director Since: 2016

Background:

Mr. Flanzraich is the Executive Chairman of Cantex
Pharmaceuticals, Inc. (formerly ParinGenix, Inc.), a privately-owned
biotech company, where he previously served as CEO and Chairman,
and additionally, he has been a private investor since February
2006. From 1998 through its sale in January 2006 to TEVA
Pharmaceuticals Industries, Ltd., he served as Vice Chairman and
President of IVAX Corporation, an international pharmaceutical
company. From 1995 to 1998, Mr. Flanzraich served as Chairman of
the Life Sciences Legal Practice Group of Heller Ehrman LLP, a law
firm, and from 1981 to 1994, served as the Senior Vice President and
Chief Counsel and member of the Operating and Executive
Committees of Syntex Corporation, an international pharmaceutical
company. He was a director of Equity One Inc. (NYSE: EQY) until it
was acquired on March 1, 2017. Mr. Flanzraich was also previously a
director of BELLUS Health Inc. until May 2012, and prior to that
served as a director of a number of additional publicly-traded
companies. Mr. Flanzraich received an A.B. from Harvard College
and a J.D. from Harvard Law School.

Background:

Ms. Hickenlooper was appointed to the Board on December 14, 2016.
Ms. Hickenlooper is Senior Vice President of Corporate Development
at Liberty Media Corporation and has served in senior corporate
development roles at Liberty Media and its affiliates since 2010.
Prior to joining Liberty Media in 2008, Ms. Hickenlooper worked at
Del Monte Foods and in investment banking at Thomas Weisel
Partners. Ms. Hickenlooper serves on the board of directors of FTD
Companies, Inc. (Nasdaq: FTD). She earned an MBA from Kellogg
School of Management at Northwestern University, and a Bachelor’s
degree in Public Policy from Duke University.

Qualifications:

Mr. Flanzraich’s executive
experience has helped him
develop outstanding skills in
leading and managing strong
teams of employees, and in
oversight of the growth and
financing of businesses in a
rapidly-evolving market. His legal
background also is valuable to us
in the risk management area, and
Mr. Flanzraich brings to us
extensive experience serving as
an independent director of other
public and privately-held
companies.

Qualifications:

Ms. Hickenlooper brings to the
Board significant experience in
marketing and new media, as well
as public company corporate
governance.

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(continued)

Kimbal Musk

Background:

Age: 44

Director Since: 2013

Mr. Musk is an entrepreneur and restaurateur who has founded and
advised several companies and non-profits including: The Kitchen
Restaurant Group, a restaurant company with restaurants in
Colorado, Illinois and Tennessee; The Kitchen Community; Zip2
Corporation (acquired by Compaq Computer Corporation); PayPal,
Inc. (acquired by eBay Inc.); Everdream Corporation (acquired by
Dell Inc.); Tesla Motors, Inc.; Space Exploration Technologies Corp.
(SpaceX); OneRiot (acquired by Wal-Mart Stores, Inc.) and SolarCity
Corporation. Mr. Musk has been Chief Executive Officer of The
Kitchen Restaurant Group since April 2004, and Executive Director
of The Kitchen Community, a non-profit organization that creates
learning gardens in schools across the United States, since
November 2010. After success in the technology business, Mr. Musk
decided to pursue his passion for food and cooking and attended
the French Culinary Institute in New York City. He is a member of
the board of directors of Tesla Motors, Inc. (Nasdaq:TSLA) as well
as a number of privately-held companies and charitable
organizations. He has served as an Adjunct Professor at New York
University, and is a graduate of Queen’s Business School in Canada
and the French Culinary Institute.

Qualifications:

Mr. Musk’s extensive experience
with fast-growing and innovative
companies, as well as restaurants
and other retail operations, and
his experience on numerous
boards of directors, are an asset
to our Board.

Ali Namvar

Background:

Age: 47

Director Since: 2016

Mr. Namvar was appointed to our Board on December 14, 2016.
Mr. Namvar is a Partner at Pershing Square Capital Management,
L.P., currently our second largest shareholder. Prior to joining
Pershing Square in 2006, he held positions at Blackstone Group
and Goldman Sachs Group, Inc. Mr. Namvar holds a Bachelor of
Arts degree from Columbia University and an MBA from the
Wharton School at the University of Pennsylvania.

Qualifications:

Mr. Namvar has significant
experience with restaurant
investments, and also brings to
the Board a deep knowledge of
finance and investor relations.

Matthew
H. Paull

Age: 65

Director Since: 2016

Background:

Mr. Paull was appointed to our Board on December 14, 2016.
Mr. Paull was Senior Vice President and Chief Financial Officer of
McDonald’s Corp. from 2001 until he retired from that position in
2008. Prior to joining McDonald’s in 1993, Mr. Paull was a Partner
at Ernst & Young, LLP. Mr. Paull currently serves on the boards of
directors of Air Products and Chemicals, Inc. (NYSE: APD),
Canadian Pacific Railway Limited (NYSE: CP) and KapStone Paper
and Packaging Corp. (NYSE: KS). Mr. Paull previously served as a
member of the board of WMS Industries, Inc. until 2013, and Best
Buy Co. until 2013. He also serves on the advisory board of
Pershing Square Capital Management, L.P. Mr. Paull holds a
Bachelor’s degree and a Master’s degree in Accounting from the
University of Illinois.

Qualifications:

Mr. Paull brings to our Board
expert knowledge in finance,
accounting, and public company
corporate governance.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 9

Proposal 1
(continued)

In addition to the specific skills and experience described above, each director has demonstrated a strong work ethic and
dedication to Chipotle, including coming prepared to meetings, supporting our strategic vision while asking constructive
questions and challenging management in a productive way, and otherwise providing valuable oversight of our business on
behalf of our shareholders. We also believe that each director, through their personal accomplishments and in their service
to Chipotle, has demonstrated high integrity, strong intellectual acumen, solid business judgment, and strategic vision.

The graphic below depicts a number of the key skills, experiences and attributes our Board believes to be important to have
represented on the Board, and identifies the number of continuing directors having those skills, experiences and attributes.

SKILLS, EXPERIENCE AND ATTRIBUTES

LEADERSHIP

INTERNATIONAL

(CEO; LEADERSHIP OF LARGE ORGANIZATIONS; PUBLIC
COMPANY BOARD SERVICE)

(FOREIGN JURISDICTIONS; ORGANIZATIONAL & TAX
STRUCTURE)

6/8 directors

4/8 directors

RESTAURANT INDUSTRY

SUSTAINABILITY

(SOURCING & SUPPLY; FOOD SAFETY; QUALITY ASSURANCE)

(ENVIRONMENTAL, SOCIAL & GOVERNANCE ISSUES)

5/8 directors

2/8 directors

HR/PEOPLE MANAGEMENT

GOVERNMENT RELATIONS

(RECRUITING; TALENT DEVELOPMENT & MOTIVATION;
COMPLIANCE)

(REGULATION, INVESTIGATIONS & COMPLIANCE)

2/8 directors

3/8 directors

FINANCE/ACCOUNTING

(ACCOUNTING SYSTEMS; PUBLIC REPORTING; INTERNAL
CONTROLS)

5/8 directors

INVESTOR RELATIONS

6/8 directors

(ENGAGEMENT REGARDING STRATEGY, COMPENSATION, AND
CORPORATE GOVERNANCE)

RISK MANAGEMENT

(OVERSIGHT & EVALUATION)

3/8 directors

(GENDER; ETHNIC/NATIONAL ORIGIN)

DIVERSITY

1/8 directors

REAL ESTATE

(SITE SELECTION; PROPERTY ADMINISTRATION)

4/8 directors

BRANDING/MARKETING

4/8 directors
(CUSTOMER RELATIONS; BRAND INNOVATION)

TECHNOLOGY

(BUSINESS EFFICIENCY; REVENUE OPPORTUNITIES;
CYBERSECURITY)

1/8 directors

10 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

The Board of Directors held ten meetings in 2016. Each
director attended at least 75 percent of the meetings of the
Board and of committees of which they were members during
the time in which they served as a member of the Board in
2016. The Board has requested that each of its members
attend our annual shareholder meetings absent extenuating
circumstances, and all directors serving on the Board on the
date of the 2016 annual meeting attended the meeting.

A Majority of our Board Members Are
Independent
Our Board of Directors, under direction of the Nominating
and Corporate Governance Committee, reviews the
independence of our directors to determine whether any
relationships, transactions or arrangements involving any
director or any family member or affiliate of a director may
be deemed to compromise the director’s independence
from us, including under the independence standards
contained in the rules of the NYSE. Based on that review, in
March 2017 the Board determined that none of our
directors have any relationships, transactions or
arrangements that would compromise their independence,
except that Mr. Ells is not an independent director as a
result of his employment with us as Chief Executive Officer.
In particular, the Board determined that the following
transactions do not constitute relationships that would
create material conflicts of interest or otherwise
compromise the independence of the directors in attending
to their duties as Board members: (i) the registration rights
granted to Mr. Baldocchi as described below under “Certain
Relationships and Related Party Transactions;” and (ii) our
agreements with Pershing Square Capital Management,
L.P., in which Mr. Namvar is a partner and for which
Mr. Paull serves on the advisory board. Accordingly, the
Board concluded that each director other than Mr. Ells
qualifies as an independent director.

Committees of the Board
Our Board of Directors has three standing committees:
(1) the Audit Committee, (2) the Compensation Committee,
and (3) the Nominating and Corporate Governance
Committee, each composed entirely of persons the Board
has determined to be independent as described above.
Each member of the Audit Committee has also been
determined by the Board to be independent under the
definition included in SEC Rule 10A-3(b)(1), and each
member of the Compensation Committee has been
determined to be independent under NYSE Rule
303A.02(a)(ii). Each committee operates pursuant to a
written charter adopted by our Board of Directors which
sets forth the committee’s role and responsibilities and
provides for an annual evaluation of its performance. The

charters of all three standing committees are available on
the Investors page of our corporate website at
ir.chipotle.com under the Corporate Governance link.

For information about the membership of each committee
following the four pending departures from our Board, see
page 13.

Audit Committee
In accordance with its charter, the Audit Committee acts to
oversee the integrity of our financial statements and
system of internal controls, the annual independent audit of
our financial statements, the performance of our internal
audit services function (including review of audit plans,
budget and staffing), our compliance with legal and
regulatory requirements, the implementation and
effectiveness of our disclosure controls and procedures,
and the evaluation and oversight of risk issues, and also
acts to ensure open lines of communication among our
independent auditors, accountants, internal audit and
financial management. The committee’s responsibilities
also include review of the qualifications, independence and
performance of the independent auditors, who report
directly to the Audit Committee. The committee regularly
holds executive sessions with the audit partner for
continued assessment of the performance, effectiveness
and independence of the independent audit firm. The
committee also retains, determines the compensation of,
evaluates, and when appropriate replaces our independent
auditors and pre-approves audit and permitted non-audit
services provided by our independent auditors. The Audit
Committee has adopted the “Policy Relating to Pre-
Approval of Audit and Permitted Non-Audit Services” under
which audit and non-audit services to be provided to us by
our independent auditors are pre-approved. This policy is
summarized on page 24 of this proxy statement. The
committee determined that the fees paid to the
independent auditor in 2016, including in connection with
non-audit services, were appropriate, necessary and cost-
efficient in the management of our business, and did not
present a risk of compromising the auditor’s independence.
The committee has also adopted and annually reviews
compliance with the company’s Hiring Policy for Former
Employees of Independent Auditor Firm, which further
ensures that the independence of the independent audit
firm is not impaired.

As required by law, the Audit Committee has established
procedures to handle complaints received regarding our
accounting, internal controls or auditing matters. It is also
required to ensure the confidentiality of employees who have
provided information or expressed concern regarding

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 11

Proposal 1
(continued)

questionable accounting or auditing practices. The committee
also fulfills the oversight function of the Board with respect
to risk management, as described under “Corporate
Governance – Role of the Board of Directors in Risk
Oversight.” The committee may retain independent advisors
at our expense that it considers necessary for the completion
of its duties. The Audit Committee held nine meetings in 2016.
The members of the Audit Committee are Messrs. Baldocchi
(Chairperson), Charlesworth, Flanzraich and Gillett. Our
Board of Directors has determined that all of the Audit
Committee members meet the enhanced independence
standards required of audit committee members by
regulations of the SEC, and are financially literate as defined
in the listing standards of the NYSE. The Board has further
determined that Mr. Baldocchi qualifies as an “Audit
Committee Financial Expert” as defined in SEC regulations.

No member of the Audit Committee served on more than
three audit or similar committees of publicly held
companies, including Chipotle, in 2016. A report of the
Audit Committee is found under the heading “Audit
Committee Report” on page 24.

Compensation Committee
The Compensation Committee oversees our executive
compensation policies and programs. In accordance with its
charter, the committee determines the compensation of our
Chief Executive Officer based on an evaluation of his
performance, and approves the compensation level of our
other executive officers following an evaluation of their
performance and recommendation by the Chief Executive
Officer. The manner in which the committee makes
determinations as to the compensation of our executive
officers is described in more detail below under “Executive
Officers and Compensation – Compensation Discussion and
Analysis.”

The Compensation Committee charter also grants the
committee the authority to: review and make
recommendations to the Board with respect to the
establishment of any new incentive compensation and
equity-based plans; review and approve the terms of
written employment agreements and post-service
arrangements for executive officers; review our
compensation programs generally to confirm that those
plans provide reasonable benefits to us; recommend
compensation to be paid to our outside directors; review
disclosures to be filed with the SEC and distributed to our
shareholders regarding executive compensation and
recommend to the Board the filing of such disclosures;
assist the Board with its functions relating to our
compensation and benefits programs generally; and other

administrative matters with regard to our compensation
programs and policies. The committee may delegate any of
its responsibilities to a subcommittee comprised of one or
more members of the committee, except where such
delegation is not allowed by legal or regulatory
requirements.

The Compensation Committee has also been appointed by
the Board to administer our Amended and Restated 2011
Stock Incentive Plan and to make awards under the plan,
including as described below under “Executive Officers and
Compensation – Compensation Discussion and Analysis –
2016 Compensation Program – Long-Term Incentives.” The
committee has in some years, including 2016, delegated its
authority under the plan to our executive officers to make
grants to non-executive officer level employees, within
limitations specified by the committee in its delegation of
authority.

The Compensation Committee retained Pay Governance,
LLC, an outside executive compensation consulting firm, to
provide the committee with advice regarding compensation
matters for 2016 and for the equity compensation awards
made to our executive officers in February 2016. All of the
fees paid to Pay Governance during 2016 were in
connection with the firm’s work on executive compensation
matters on behalf of the committee; no fees were paid to
the firm for any other work. Pay Governance was retained
pursuant to an engagement letter with the Compensation
Committee, and the committee determined that the firm’s
service to Chipotle did not and does not give rise to any
conflict of interest, and considers Pay Governance to have
sufficient independence from our company and executive
officers to allow it to offer objective advice.

The Compensation Committee held fifteen meetings in
2016, including a number of meetings with shareholders to
discuss executive compensation and corporate governance
matters. A report of the committee is found under the
heading “Executive Officers and Compensation –
Compensation Discussion and Analysis – Compensation
Committee Report” on page 42.

Compensation Committee Interlocks and Insider
Participation
The members of the Compensation Committee are
Mr. Flanzraich (Chairperson), Ms. Friedman and Mr. Flynn.
There are no relationships between the members of the
committee and our executive officers of the type
contemplated in the SEC’s rules requiring disclosure of
“compensation committee interlocks.” None of the
members of the committee is our employee and no member

12 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

has been an officer of our company at any time. The Board
has determined that each member of the committee
qualifies as a “Non-Employee Director” under SEC
Rule16b-3 and as an “Outside Director” under
Section 162(m) of the Internal Revenue Code of 1986, as
amended, and that each member satisfies the standards of
NYSE Rule 303A.02(a)(ii) regarding independence of
compensation committee members. No member of the
committee nor any organization of which any member of
the committee is an officer or director received any
payments from us during 2016, other than the payments
disclosed under “– Compensation of Directors” below.

Nominating and Corporate Governance Committee
The responsibilities of the Nominating and Corporate
Governance Committee include reviewing, at least annually,
the adequacy of our corporate governance principles and
recommending to the Board any changes to such principles
as deemed appropriate, and recommending to the Board
appropriate guidelines and criteria to determine the
qualifications to serve and continue to serve as a director.
The Nominating and Corporate Governance Committee also
identifies and reviews the qualifications of, and
recommends to the Board, (i) individuals to be nominated
by the Board for election to the Board at each annual
meeting, (ii) individuals to be nominated and elected to fill
any vacancy on the Board which occurs for any reason
(including increasing the size of the Board) and
(iii) appointments to committees of the Board.

The committee, at least annually, reviews the size,
composition and organization of the Board and its
committees and recommends any policies, changes or
other action it deems necessary or appropriate, including
recommendations to the Board regarding retirement age,
resignation or removal of a director, independence
requirements, frequency of Board meetings and terms of
directors. A number of these matters are covered in our
Corporate Governance Guidelines, which the committee
also reviews at least annually. The committee also reviews
the nomination by our shareholders of candidates for
election to the Board if such nominations are within the
time limits and meet other requirements established by our
bylaws. The committee oversees the annual evaluation of
the performance of the Board and its committees and
reviews and makes recommendations regarding succession
plans for positions held by executive officers.

The Nominating and Corporate Governance Committee
held four meetings in 2016. The members of the committee
are Mr. Flynn (Chairperson), Ms. Friedman and Mr. Gillett.

Committee Realignment
Immediately prior to the annual shareholder meeting, we
intend to appoint new members to the Board’s three
standing committees in order to replace the departing
members of the Board on each committee. The committee
memberships following the annual meeting will be as
follows:

AUDIT COMMITTEE

COMPENSATION
COMMITTEE

Al Baldocchi (Chair) Neil Flanzraich

(Chair)

NOMINATING AND
CORPORATE
GOVERNANCE
COMMITTEE

Paul Cappuccio
(Chair)

Paul Cappuccio

Ali Namvar

Neil Flanzraich

Robin Hickenlooper Matthew Paull

Ali Namvar

Demand Review Committee
In addition to the standing committees described above, in
May 2016 the Board established a Demand Review
Committee in response to requests from two individual
shareholders that the Board investigate potential violations
of law in connection with food safety matters. The Demand
Review Committee consists of Messrs. Flanzraich and Musk.

Director Compensation
Directors who are also employees of Chipotle do not
receive compensation for their services as directors.
Directors who are not employees of Chipotle received an
annual retainer during 2016 of $195,000, of which $75,000
was paid in cash and $120,000 was paid in restricted stock
units representing shares of our common stock, based on
the closing price of the stock on the grant date, which is the
date of our annual shareholders meeting each year. Each
director who is not an employee of Chipotle also received a
$2,000 cash payment for each meeting of the Board of
Directors he or she attended and $1,500 for each meeting
of a committee of the Board of Directors he or she
attended ($750 in the case of telephonic attendance at an
in-person committee meeting). Annual cash retainers are
paid to the chairperson of each committee of the Board of
Directors, in the following amounts for 2016: $20,000 for
the Audit Committee Chairperson, $15,000 for the
Compensation Committee Chairperson, $10,000 for the
Nominating and Corporate Governance Committee
Chairperson, and $5,000 for the chairperson of any other
committee established by the Board of Directors unless
otherwise specified by the Board. We also paid an annual
retainer of $15,000 to the Lead Director for 2016. In March
2017, the Board (with Mr. Flanzraich recusing himself)
approved an increase in the annual Lead Director retainer
to $50,000. Additionally, directors are reimbursed for

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 13

Proposal 1
(continued)

expenses incurred in connection with their service as
directors, including travel expenses for meetings.

We have also adopted a requirement that each non-
employee director is expected to own Chipotle common
stock with a market value of five times the annual cash
retainer within five years of the director’s appointment or
election to the Board. All continuing directors other than

Mr. Musk, who was appointed to the Board in September
2013, and Messrs. Cappuccio, Namvar and Paull and
Ms. Hickenlooper, each of whom was appointed to the
Board in December 2016, met this requirement as of
December 31, 2016. Unvested restricted stock units
received as compensation for Board service count as
shares owned for purposes of this requirement.

The compensation of each of our non-employee directors in 2016 is set forth below.

NAME

Albert S. Baldocchi

Paul T. Cappuccio(2)

John S. Charlesworth

Neil W. Flanzraich

Patrick J. Flynn

Darlene J. Friedman

Stephen Gillett

Robin Hickenlooper(2)

Kimbal Musk

Ali Namvar(2)(3)

Matthew H. Paull(2)

FEES EARNED OR
PAID IN CASH

STOCK AWARDS(1)

TOTAL

$ 121,000

$ 5,699

$ 101,000

$160,250

$ 121,500

$ 110,750

$107,000

$ 5,699

$ 87,500

—

$120,310

$ 6,273

$120,310

$120,310

$120,310

$120,310

$120,310

$ 6,273

$120,310

—

$ 241,310

$

11,972

$ 221,310

$280,560

$ 241,810

$ 231,060

$ 227,310

$

11,972

$ 207,810

—

$ 5,699

$ 6,273

$

11,972

(1) Reflects the grant date fair value under FASB Topic 718 of restricted stock units awarded for the equity portion of each director’s
annual retainer. Restricted stock units in respect of 265 shares of common stock were granted to non-employee directors Messrs.
Baldocchi, Charlesworth, Flanzraich, Flynn, Gillett and Musk and Ms. Friedman on May 11, 2016 The restricted stock units were valued at
$454.00, the closing price of our common stock on May 11, 2016. Restricted stock units in respect of 16 shares of common stock were
granted to non-employee directors Messrs. Cappuccio and Paull and Ms. Hickenlooper upon their appointment as non-employee
directors. The restricted stock units were valued at $392.07, the closing price of our common stock on December 16, 2016, the date of
the grants. The restricted stock units vest on the third anniversary of the grant date subject to the director’s continued service as a
director through that date. Vesting accelerates in the event of the retirement of a director who has served for a total of six years
(including any breaks in service), or in the event the director leaves the Board following certain changes in control of Chipotle.
Directors may elect in advance to defer receipt upon vesting of the shares underlying the restricted stock units. As of December 31,
2016, Messrs Baldocchi, Charlesworth, Flanzraich, Flynn, and Musk, and Ms. Friedman, each held 696 unvested restricted stock units as
of that date; Mr. Gillett held 417 unvested restricted stock units and Messrs. Cappuccio and Paull and Ms. Hickenlooper held 16 unvested
restricted stock units as of that date.

(2) Ms. Hickenlooper and Messrs. Cappuccio, Namvar and Paull were appointed to the Board effective December 14, 2016.
(3) Mr. Namvar waives his right to receive compensation as an outside director.

CORPORATE GOVERNANCE

Our Board of Directors has adopted a number of policies to
support our values and provide for good corporate
governance, including our Corporate Governance
Guidelines, which set forth our principles of corporate
governance; our Board committee charters; the Chipotle
Mexican Grill, Inc. Code of Conduct, which applies to all
Chipotle officers, directors and employees; and separate
Codes of Ethics for our directors, our Chief Executive
Officer and our Chief Financial Officer/principal accounting
officer. The Corporate Governance Guidelines, Code of

Conduct, and each of the Codes of Ethics are available on
the Investors page of our corporate website at
ir.chipotle.com under the Corporate Governance link.

If we make any substantive amendment to, or grant a
waiver from, a provision of the Code of Conduct or our
Codes of Ethics that apply to our executive officers, we
intend to satisfy the applicable SEC disclosure requirement
by promptly disclosing the nature of the amendment or
waiver on the Investors page of our website at
ir.chipotle.com under the Corporate Governance link.

14 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

Chairman of the Board
Mr. Ells, our founder and Chief Executive Officer, also serves
as Chairman of the Board. The Chairman of the Board
presides at meetings of the Board and exercises and
performs such other powers and duties as may be
periodically assigned to him in that capacity by the Board or
prescribed by our bylaws. We believe it is not only
appropriate but also important for Mr. Ells to serve as
Chairman in addition to serving as Chief Executive Officer.
As the founder of our company, he has since our inception
been the principal architect of our corporate strategy and
vision, and continues to be a primary driving force to keep
our company innovative and striving for constant
improvement. The Board believes that its oversight
responsibilities can be most effectively fulfilled if the Board
is led by that same driving force, and also believes that it is
appropriate for Mr. Ells to lead the Board due to his being
one of the largest individual shareholders of our company.
The Board also believes that in light of recent changes to
the Board as part of our ongoing Board refreshment efforts,
the continuity of vision and strategy that is inherent in
having the company founder lead the Board will be valuable
as new members are assimilated onto our Board.

The Board, particularly the Lead Director and the
chairperson of the Nominating and Corporate Governance
Committee, as well as each member of the Board through
our annual Board evaluation program, carefully considers
the Board’s leadership structure, and acknowledges that at
some point there may be a need for a different Board
leadership structure. At the present time, however, the
Board is confident that the leadership of Mr. Ells as both
Chairman of the Board and Chief Executive Officer is in the
best interests of Chipotle and our shareholders.

Lead Director
Mr. Flanzraich was appointed Lead Director in September
2014. The Board believes that maintaining a Lead Director
position held by an independent director ensures that our
outside directors remain independent of management and
provide objective oversight of our business and strategy.
The Lead Director chairs Board meetings during any
sessions conducted as executive sessions without employee
directors or other employees being present, and also
consults with the Chairman and Chief Executive Officer and
the Chief Financial Officer on business issues and with the
Nominating and Corporate Governance Committee on Board
management. Other responsibilities of the Lead Director
include (i) coordinating activities of the other independent
directors and serving as a liaison between the Chairman and
independent directors, (ii) calling meetings of the
independent directors when determined to be necessary or

appropriate, (iii) reviewing meeting agendas and consulting
with the Chairman regarding agenda items, (iv) interviewing,
along with the Chairman and the Chair and members of the
Nominating and Corporate Governance Committee,
candidates for director positions and making
recommendations to the Nominating and Corporate
Governance Committee, (v) working in collaboration with
the Chair of the Nominating and Corporate Governance
Committee to complete the annual Board performance self-
evaluation process, (vi) advising the Nominating and
Corporate Governance Committee on the composition of
Board committees and selection of committee chairs,
(vii) providing leadership to the Board if circumstances arise
in which the roles of the Chairman and the Chief Executive
Officer may be, or may be perceived to be, in conflict,
(viii) considering Board succession planning matters; and
(ix) participating in shareholder outreach efforts relating to
executive compensation and corporate governance matters.

In March 2017, we agreed with shareholders Amalgamated
Bank and CtW Investment Group to further strengthen our
Lead Director position by providing that the Lead Director
will (i) write an annual letter to shareholders to be included
in the proxy statement for our annual shareholder
meetings each year, beginning in 2018; (ii) review and
approve the agenda for each Board meeting; (iii) together
with the chair of the Compensation Committee, lead the
annual performance evaluation of our Chief Executive
Officer; and (iv) continue to lead executive sessions of the
independent directors of the Board, which will be held at
least quarterly. In reliance on these commitments, the
shareholders agreed to withdraw their shareholder
proposal calling for us to separate the positions of
Chairman of the Board and Chief Executive Officer and
appoint an independent Chairman.

Board Performance Self-Evaluation Process
The Chairman of the Nominating and Corporate
Governance Committee oversees an annual evaluation
process during which each director evaluates the Board as
a whole and their individual contributions to the Board, and
each member of the standing committees of the Board
evaluates the committees on which he or she serves.

The individual director evaluations consider, among other
factors, (i) the extent to which directors understand our
products, markets and business initiatives, (ii) the extent to
which individual director experience, information and
insight contribute to the effectiveness of the Board, and
(iii) the availability of training and development
opportunities, if necessary, to enhance individual
contributions to the Board. The Board self-evaluations

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 15

Proposal 1
(continued)

consider whether and how the Board has performed the
responsibilities in our Corporate Governance Guidelines,
evaluates the composition of the Board and its committees,
and assesses the quality of meetings, agendas,
presentations and meeting materials in relation to the
Board’s role of overseeing management’s execution of our
corporate strategies. The committee self-evaluations
consider whether and how well each committee has
performed the responsibilities in its charter, whether the
committee members possess the right skills and experience
to perform their responsibilities, whether the meeting
materials are effective in communicating important
information and enabling the committees to meet their
responsibilities, and other matters.

For 2016, the Chairman of the Nominating and Corporate
Governance Committee conducted an interview with each
director to discuss the matters described above, and to
conduct individual director self-evaluations and identify any
other issues regarding Board or committee performance.
The results of these discussions were then compiled and
presented in discussions with the full Board. In some years,
the Board self-evaluation also results in changes to the
Board’s policies, procedures and priorities in order to best
enable the Board to discharge its oversight responsibilities.

How to Contact the Board of Directors
Any shareholder or other interested party may contact the
Board of Directors, including the Lead Director or the non-
employee directors as a group, or any individual director or
directors, by writing to the intended recipient(s) in care of
Chipotle Mexican Grill, Inc., 1401 Wynkoop Street, Suite 500,
Denver, Colorado, 80202, Attention: Corporate Secretary.
Any communication to report potential issues regarding
accounting, internal controls and other auditing matters
will be directed to the Audit Committee. Our corporate
Secretary or general counsel, or their designees, will review
and sort communications before forwarding them to the
addressee(s), although communications that do not, in the
opinion of the Secretary, our general counsel or their
designees, deal with the functions of the Board or a
committee or do not otherwise warrant the attention of the
addressees may not be forwarded.

Executive Sessions
Our independent directors met in executive session without
management present at the end of each regularly-
scheduled Board meeting during 2016. The independent
directors also typically hold an executive session prior to
each regularly-scheduled Board meeting as well. The Lead
Director chaired the non-employee executive sessions of

the Board held during 2016. The Board expects to continue
to conduct executive sessions of the independent directors
at each regularly-scheduled Board meeting during 2017,
and independent directors may schedule additional
sessions in their discretion.

At regularly-scheduled meetings of the Audit Committee
and Compensation Committee, executive sessions are
generally held at the end of each meeting, with only the
committee members or the committee members and their
advisors present, to discuss any topics the committee
members deem necessary or appropriate. The
Compensation Committee also meets regularly in executive
session without the executive officers, and the Nominating
and Corporate Governance Committee meets in executive
session without management from time to time as
circumstances warrant.

Director Nomination Process
The Nominating and Corporate Governance Committee is
responsible for establishing criteria for nominees to serve
on our Board, screening candidates, and recommending for
approval by the full Board candidates for vacant Board
positions and for election at each annual meeting of
shareholders. The committee’s policies and procedures for
consideration of Board candidates are described below.
Each nominee for election as a director at this year’s
annual meeting was recommended to the Board as a
nominee by the Nominating and Corporate Governance
Committee.

The committee considers candidates suggested by its
members, other directors, senior management and
shareholders. The committee is also authorized under its
charter to retain, at our expense, search firms, consultants,
and any other advisors it may deem appropriate to identify
and screen potential candidates. The committee may also
retain a search firm to evaluate and perform background
reviews on director candidates, including those
recommended by shareholders. Any advisors retained by
the committee will report directly to the committee.

Candidate Qualifications and Considerations
The committee seeks to identify candidates of high
integrity who have a strong record of accomplishment and
who display the independence of mind and strength of
character necessary to make an effective contribution to
the Board and to represent the interests of all
shareholders. Candidates are selected for their ability to
exercise good judgment and to provide practical insights
and diverse perspectives. In addition to considering the

16 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

Board’s and Chipotle’s needs at the time a particular
candidate is being considered, the committee considers
candidates in light of the entirety of their credentials,
including:

• Their integrity and business ethics;

• Their strength of character and judgment;

• Their ability and willingness to devote sufficient time to

Board duties;

• Their potential contribution to the diversity and culture

of the Board;

• Their educational background;

• Their business and professional achievements and

experience and industry background, particularly in light
of our principal business and strategies, and from the
standpoint of alignment with our vision and values;

• Their independence from management, including under
requirements of applicable law and listing standards,
and any potential conflicts of interest arising from their
other business activities; and

• Relevant provisions of our Corporate Governance

Guidelines.

These factors may be weighted differently depending on
the individual being considered or the needs of the Board at
the time. We do not have a particular policy regarding the
diversity of nominees or Board members. The Board does
believe that diverse membership with varying perspectives
and breadth of experience is an important attribute of a
well-functioning Board. Accordingly, diversity (whether
based on factors commonly associated with diversity such
as race, gender, national origin, religion, or sexual
orientation or identity, as well as on broader principles such
as diversity of perspective and experience) is one of many
elements that will be considered in evaluating a particular
candidate. Search firms with which we work to identify
potential Board nominees will be instructed to specifically
focus on identifying candidates that would, in addition to
bringing particular skills and experience to the Board, also
add to the gender and/or ethnic diversity on the Board.

Consideration of Shareholder-Recommended
Candidates and Procedure for Shareholder
Nominations
Shareholders wishing to recommend candidates to be
considered by the Nominating and Corporate Governance
Committee must submit to our corporate Secretary the
following information: a recommendation identifying the

candidate, including the candidate’s contact information; a
detailed resume of the candidate and an autobiographical
statement explaining the candidate’s interest in serving on
our Board; and a statement of whether the candidate meets
applicable law and listing requirements pertaining to
director independence. Candidates recommended by
shareholders for consideration will be evaluated in the
same manner as any other candidates, as described below
under “Candidate Evaluation Process,” and in view of the
qualifications and factors identified above under
“Candidate Qualifications and Considerations.”

Under our bylaws, shareholders may also nominate
candidates for election as a director at our annual meeting.
To do so, a shareholder must comply with the provisions of
our bylaws regarding shareholder nomination of directors,
including compliance with the deadlines described under
“Shareholder Proposals and Nominations for 2018 Annual
Meeting – Bylaw Requirements for Shareholder Submission
of Nominations and Proposals” on page 50. Our bylaws also
permit qualified shareholders or groups of shareholders to
include nominations for election as a director in our proxy
materials. To do so, a shareholder must comply with the
proxy access provisions in our bylaws.

Candidate Evaluation Process
The committee initially evaluates candidates in view of the
qualifications and factors identified above under
“Candidate Qualifications and Considerations,” and in doing
so may consult with the Chairman, the Lead Director, other
directors, senior management or outside advisors
regarding a particular candidate. The committee also takes
into account the results of recent Board and Board
committee self-evaluations and the current size and
composition of the Board, including expected retirements
and anticipated vacancies. In the course of this evaluation,
some candidates may be eliminated from further
consideration because of conflicts of interest, unavailability
to attend Board or committee meetings or other reasons.
Following the initial evaluation, the committee would
arrange for interviews of candidates deemed worthy of
further consideration. To the extent feasible, candidates
are interviewed by the Chairman and Chief Executive
Officer, the Lead Director, and the members of the
Nominating and Corporate Governance Committee, and
potentially other directors as well. The results of these
interviews would be considered by the committee in its
decision to recommend a candidate to the Board. Those
candidates approved by the Board as nominees are named
in the proxy statement for election by the shareholders at
the annual meeting (or, if between annual meetings, one or
more nominees may be elected by the Board itself if

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 17

Proposal 1
(continued)

needed to fill vacancies, including vacancies resulting from
an increase in the number of directors).

Board Appointments Made in December 2016
Prior to appointing four new members to our Board in
December 2016, the Nominating and Corporate Governance
Committee considered a large number of potential
candidates, including candidates identified by outside legal,
financial and other advisors, candidates referred by
members of the Board and management, and candidates
identified by shareholders. The Lead Director also
participated, together with the executive officers and other
members of management, in a number of meetings with
large shareholders at which Board succession and
refreshment was discussed. In the course of this process,
diversity considerations were given a high priority, along
with considerations of the current skill sets represented on
the Board, and skills that may be valuable in light of
Chipotle’s strategic priorities.

As a result of the foregoing, a list of potential candidates
was generated, and the candidates – including the two
candidates elected to the Board pursuant to the Investor
Agreement described below – were considered as described
above under “Candidate Evaluation Process.”

Investor Agreement Regarding Board Nominations
On December 14, 2016, we and Pershing Square Capital
Management, L.P. (together with funds it advises, “Pershing
Square”) entered into a letter of agreement (which we refer
to as the “Investor Agreement”) regarding nominations to
the Board and a number of related matters.

The Investor Agreement provides for the nominations of Ali
Namvar and Matthew Paull for election to Chipotle’s Board
at the 2017 annual meeting of shareholders and the 2018
annual meeting of shareholders, a procedure for replacing
Mr. Namvar with a successor director in certain cases, and
specified voting obligations of Pershing Square with
respect to Chipotle’s annual shareholder meetings. In
accordance with the Investor Agreement, Pershing Square
has further agreed to cause the resignation of Mr. Namvar
from Chipotle’s Board in the event Pershing Square’s
ownership of Chipotle’s outstanding common stock falls
below 5%.

Under the Investor Agreement, Pershing Square is also
subject to specified standstill restrictions lasting generally
until the later of a specified period before the advance
notice period for nominating directors at Chipotle’s 2019
annual meeting of shareholders, and a specified period
after Pershing Square ceases to have any representatives

serving on Chipotle’s Board. For further details regarding
the Investor Agreement and related agreements, see
“Certain Relationships and Related Party Transactions.”

Policies and Procedures for Review and
Approval of Transactions with Related
Persons
We recognize that transactions in which our executive
officers, directors or principal shareholders, or family
members or other associates of our executive officers,
directors or principal shareholders, have an interest may
raise questions as to whether those transactions are
consistent with the best interests of Chipotle and our
shareholders. Accordingly, our Board has adopted written
policies and procedures requiring the Audit Committee to
approve in advance, with limited exceptions, any
transactions in which any person or entity in the categories
named above has any material interest, whether direct or
indirect, unless the value of all such transactions in which a
related party has an interest during a year total less than
$10,000. We refer to such transactions as “related person
transactions.” Current related person transactions to which
we are a party are described on page 49.

A related person transaction will only be approved by the
Audit Committee if the committee determines that the
related person transaction is beneficial to us and the terms
of the related person transaction are fair to us. No member
of the Audit Committee may participate in the review,
consideration or approval of any related person transaction
with respect to which such member or any of his or her
immediate family members is the related person.

Role of the Board of Directors in Risk
Oversight
While our executive officers and various other members of
management are responsible for the day-to-day
management of risk, the Board of Directors exercises an
oversight role with respect to risk issues facing our
company, principally through considering risks associated
with our company strategy as part of its oversight of our
overall strategic direction, as well as delegation to the
Audit Committee of the responsibility for evaluating
enterprise risk issues. Under the terms of its charter, the
Audit Committee discusses with management, our internal
auditors and our independent auditors our major financial,
operating and other risk exposures, as well as the adequacy
and effectiveness of steps management has taken to
monitor and control such exposures (including, for
instance, our internal control over financial reporting). The
Audit Committee’s oversight of risk management includes
its review each year of an annual risk assessment

18 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 1
(continued)

conducted by our internal audit department, which
functionally reports to the Audit Committee. The Audit
Committee also recommends from time to time that key
identified risk areas be considered by the full Board, and
individual Board members also periodically ask the full
Board to consider an area of risk. In those cases the Board
considers the identified risk areas, typically at an in-person
or telephonic meeting, including receiving reports from and
conducting discussions with the appropriate management
personnel.

Enhanced Oversight of Food Safety Risks
In the wake of food-borne illness incidents that had a
significant negative impact on our business at the end of
2015 and during 2016, the Audit Committee and
management implemented additional procedures to
enhance the committee’s oversight over food safety risks.
This enhanced oversight entails increased reporting to the
Audit Committee and full Board regarding food safety-
related matters, including reporting from Chipotle’s Food
Safety Advisory Council, a panel of outside experts and our
Executive Director – Foods Safety that we’ve assembled to
supplement the expertise of our internal team with
independent guidance and validation from experts outside
the company. During 2016, the Audit Committee also

increased its oversight over food safety matters through
participation by Mr. Charlesworth in certain food safety
audits, trainings, and other activities, and follow-up reports
by Mr. Charlesworth to the Audit Committee.

Board Leadership Structure and Risk Oversight
The Board believes our current leadership structure
facilitates its oversight of risk by combining independent
leadership through the Lead Director, independent Board
committees, and majority independent Board composition,
with an experienced Chairman and Chief Executive Officer
with intimate knowledge of our business, industry and
challenges. The Chief Executive Officer’s in-depth
understanding of these matters and levels of involvement
in the day-to-day management of Chipotle allows him to
promptly identify and raise key risks to the Board, call
special meetings of the Board when necessary to address
critical issues, and focus the Board’s attention on areas of
concern. This is effectively balanced by the independent
oversight of the Lead Director, independent Board
committees, and independent directors as a whole, who can
objectively assess the risks identified by the Board or by
management, as well as management’s effectiveness in
managing such risks.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 19

Proposal 2

An Advisory Vote to Approve the Compensation of our
Executive Officers as Disclosed in this Proxy Statement

As required by Section 14A of the Securities Exchange Act
of 1934, we are asking shareholders to cast an advisory
vote to approve the compensation of our executive officers
as disclosed in this proxy statement. This proposal,
commonly known as a “say-on-pay” proposal, gives
shareholders the opportunity to endorse or not endorse
our executive compensation programs and policies and the
compensation paid to our executive officers. We have
committed to holding say-on-pay votes at each year’s
annual meeting; the Compensation Committee will evaluate
the frequency of future say-on-pay votes following this
year’s annual meeting and the outcome of the advisory
vote called for in Proposal 3, below.

Executive Compensation Disclosures
Detailed discussion and analysis of our executive
compensation begins on page 28. See, in particular, the
disclosures under “Executive Officers and Compensation –
Compensation Discussion and Analysis – Executive
Summary” for a concise description of the extensive
changes we’ve made over the past two years in regards to
the compensation of our executive officers, and the
measures we’ve taken to ensure that executive
compensation is aligned with company performance and
the creation of shareholder value.

Say-on-Pay Resolution
The Compensation Committee of our Board of Directors
believes that our executive compensation programs
continue to emphasize performance-oriented components
that encourage and reward strong operating and financial
performance and stock price gains, and that have aligned
the interests of our officer team with those of shareholders.
Accordingly, our Board asks that you vote in favor of the
following shareholder resolution:

“RESOLVED, that the compensation of the executive
officers of Chipotle Mexican Grill, Inc. as disclosed
pursuant to the Securities and Exchange Commission’s
compensation disclosure rules, including the
Compensation Discussion and Analysis section,
compensation tables and related material in the
company’s proxy statement, are hereby approved.”

The say-on-pay vote is advisory and therefore will not be
binding on the Compensation Committee, the Board of
Directors, or Chipotle. However, the Compensation
Committee and Board will review the voting results and
take them into consideration when making future decisions
regarding executive compensation.

The Board of Directors recommends a vote FOR the say-
on-pay proposal.

20 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 3

An Advisory Vote on the Frequency With Which We Will
Conduct Say-On-Pay Votes

In addition to the say-on-pay vote, we are asking you to
cast an advisory vote as required by Section 14A of the
Securities Exchange Act of 1934 on the frequency with
which we will conduct future say-on-pay votes – every year,
every two years, or every three years.

The vote on the frequency of future say-on-pay votes is
advisory and therefore will not be binding on the
Compensation Committee, the Board of Directors, or
Chipotle. However, the Compensation Committee and
Board will take the voting results into consideration when
determining the frequency and timing of future say-on-pay
votes. SEC rules require that we conduct a say-on-pay vote
at least once every three years, and a shareholder
resolution in favor of holding a say-on-pay vote every two
or three years would not prohibit us from holding such a
vote on a more frequent basis if circumstances were to
warrant it.

We hold an advisory vote on the frequency of future say-
on-pay votes every six years. At our annual meeting of

shareholders in 2011, shareholders voted in favor of holding
annual say-on-pay votes (i.e., a vote every ONE year).

Please read the “Executive Officers and Compensation”
section of this proxy statement before determining how to
vote on this proposal. As described in more detail in that
section, and particularly under the heading “ –
Compensation Discussion and Analysis,” our executive
compensation programs emphasize performance and
accountability while maintaining alignment with
shareholder interests. We believe that holding a say-on-pay
vote every year will help the committee assess its success
in meeting these objectives.

You are being asked to vote on a preference that we hold a
say-on-pay vote every three years, two years or every year,
or you may abstain from this vote.

The Board of Directors recommends a vote in favor of
holding the advisory say-on-pay vote every ONE year.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 21

Proposal 4

Ratification of Appointment of Ernst & Young LLP as
Independent Registered Public Accounting Firm

The Audit Committee, which is responsible for the appointment, compensation and oversight of our independent auditors, has
engaged Ernst & Young LLP as independent auditors to audit our consolidated financial statements for the year ending
December 31, 2017 and to perform other permissible, pre-approved services. As a matter of good corporate governance, we are
requesting that shareholders ratify the Audit Committee’s appointment of Ernst & Young as independent auditors. If
shareholders do not ratify the appointment of Ernst & Young, the committee will reevaluate the appointment. Even if the
selection is ratified, the committee in its discretion may select a different independent registered public accounting firm at any
time during fiscal 2017 if it determines that such a change would be in the best interests of Chipotle and our shareholders.

The Audit Committee annually evaluates the performance of our independent registered public accounting firm, including
the senior audit engagement team, and determines whether to reengage the current independent auditors or consider
other audit firms. Factors considered by the committee in deciding whether to retain include:

• Ernst & Young’s capabilities considering the scope and complexity of our business, and the resulting demands placed on

Ernst & Young in terms of technical expertise and knowledge of our industry and business;

• the quality and candor of Ernst & Young’s communications with the committee and management;

• Ernst & Young’s independence;

• the quality and efficiency of the services provided by Ernst & Young, including input from management on Ernst &
Young’s performance and how effectively Ernst & Young demonstrated its independent judgment, objectivity and
professional skepticism;

• external data on audit quality and performance, including recent Public Company Accounting Oversight Board (PCAOB)

reports on Ernst & Young and its peer firms; and

• the appropriateness of Ernst & Young’s fees, tenure as our independent auditor, including the benefits of a longer

tenure, and the controls and processes in place that help ensure Ernst & Young’s continued independence.

Based on this evaluation, the Audit Committee and the Board believe that retaining Ernst & Young to serve as our
independent registered public accounting firm for the fiscal year ending December 31, 2017, is in the best interests of
Chipotle and our shareholders.

The Audit Committee also oversees the process for, and ultimately approves, the selection of our independent registered
public accounting firm’s lead engagement partner at the five-year mandatory rotation period. Prior to the mandatory
rotation period, at the committee’s instruction, the firm will select candidates to be considered for the lead engagement
partner role, who are then interviewed by members of our management. After considering the candidates recommended by
the firm, management makes a recommendation to the committee regarding the new lead engagement partner. After
discussing the qualifications of the proposed lead engagement partner with the current lead engagement partner, the
members of the committee, individually and/or as a group, will interview the leading candidate, and the committee then
considers the appointment and approves the selection as a committee. A new lead engagement partner was appointed for
the 2016 audit; the next change in lead engagement partner after the current five-year rotation period will occur for the
2021 audit.

The committee has adopted a policy which sets out procedures that the committee must follow when retaining the
independent auditor to perform audit, review and attest engagements and any engagements for permitted non-audit
services. This policy is summarized below under “Policy for Pre-Approval of Audit and Permitted Non-Audit Services” and
will be reviewed by the Audit Committee periodically, but no less frequently than annually, for purposes of assuring
continuing compliance with applicable law. All services performed by Ernst & Young for the years ended December 31, 2016
and 2015 were pre-approved by the Audit Committee in accordance with this policy, following a determination by the
committee that the fees to be paid to Ernst & Young in each year, including in connection with non-audit services, were
appropriate, necessary and cost-efficient in the management of our business, and did not present a risk of compromising
the independence of Ernst & Young as our independent auditors.

22 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Proposal 4
(continued)

Ernst & Young has served as our independent auditors since 1997. Representatives of Ernst & Young are expected to be
present at the annual meeting and will have an opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.

INDEPENDENT AUDITORS’ FEE

The aggregate fees and related reimbursable expenses for professional services provided by Ernst & Young for the years
ended December 31, 2016 and 2015 were:

Fees for Services

Audit Fees(1)

Audit-Related Fees(2)

Tax Fees(3)

All Other Fees

Total Fees

2016

2015

$783,808

$ 754,899

–

168,426

–

2,148

510,107

–

$ 952,234

$1,267,154

(1)

Includes fees and expenses related to the fiscal year audit and interim reviews, notwithstanding when the fees and expenses were
billed or when the services were rendered. Audit fees also include fees and expenses, if any, related to SEC filings, comfort letters,
consents, SEC comment letters and accounting consultations.

(2) Represents fees for a subscription to an Ernst & Young online service used for accounting research purposes.
(3) Represents fees for tax consulting and advisory services, and for 2015, tax compliance services as well.

The Board of Directors recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year ending December 31, 2017.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 23

Proposal 4
(continued)

AUDIT COMMITTEE REPORT

With regard to the fiscal year ended December 31, 2016, the
Audit Committee (i) reviewed and discussed with
management our audited consolidated financial statements
as of December 31, 2016 and for the year then ended;
(ii) discussed with Ernst & Young LLP, the independent
auditors, the matters required by the Auditing
Standards 1301, Communication with Audit Committees;
(iii) received the written disclosures and the letter from
Ernst & Young LLP required by applicable requirements of
the PCAOB regarding Ernst & Young LLP’s communications
with the Audit Committee regarding independence; and
(iv) discussed with Ernst & Young LLP their independence.

Based on the review and discussions described above, the
Audit Committee recommended to our Board of Directors
that our audited consolidated financial statements be
included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2016 for filing with the SEC.

The Audit Committee:
Albert S. Baldocchi, Chairperson
John S. Charlesworth
Neil W. Flanzraich
Stephen Gillett

POLICY FOR PRE-APPROVAL OF
AUDIT AND PERMITTED NON-AUDIT
SERVICES

The Board of Directors has adopted a policy for the pre-
approval of all audit and permitted non-audit services
proposed to be provided to Chipotle by its independent
auditors. This policy provides that the Audit Committee
must pre-approve all audit, review and attest engagements
and may do so on a case-by-case basis or on a class basis if
the relevant services are predictable and recurring. Any

internal control-related service may not be approved on a
class basis, but must be individually pre-approved by the
committee. The policy prohibits the provision of any
services that the auditor is prohibited from providing under
applicable law or the standards of the PCAOB.

Pre-approvals on a class basis for specified predictable and
recurring services are granted annually at or about the
start of each fiscal year. In considering all pre-approvals,
the committee may take into account whether the level of
non-audit services, even if permissible under applicable law,
is appropriate in light of the independence of the auditor.
The committee reviews the scope of services to be
provided within each class of services and imposes fee
limitations and budgetary guidelines in appropriate cases.

The committee may pre-approve a class of services for the
entire fiscal year. Pre-approval on an individual service
basis may be given or effective only up to six months prior
to commencement of the services.

The committee periodically reviews a schedule of fees paid
and payable to the independent auditor by type of covered
service being performed or expected to be provided. Our
Chief Financial Officer is also required to report to the
committee any non-compliance with this policy of which he
becomes aware. The committee may delegate pre-approval
authority for individual services or a class of services to
any one of its members, provided that delegation is not
allowed in the case of a class of services where the
aggregate estimated fees for all future and current periods
would exceed $500,000. Any class of services projected to
exceed this limit or individual service that would cause the
limit to be exceeded must be pre-approved by the full
committee. The individual member of the committee to
whom pre-approval authorization is delegated reports the
grant of any pre-approval by the individual member at the
next scheduled meeting of the committee.

24 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Shareholder Proposal

Proposal 5 is a shareholder proposal. If the shareholder proponent of the proposal, or representative who is qualified under
state law, is present at the annual meeting and submits the proposal for a vote, the proposal will be voted upon. The
shareholder proposal and related supporting statement is included in this proxy statement as submitted by the proponent
and we accept no responsibility for its contents. The Board’s statement in opposition to the proposal is presented
immediately following the proposal and supporting statement. The name and address of the proponent of the proposal and
the amount of stock owned by such proponent will be promptly provided to any shareholder making an oral or written
request for such information to our corporate Secretary at our headquarters.

Proposal 5

AN ADVISORY VOTE ON A SHAREHOLDER PROPOSAL REGARDING
SPECIAL MEETINGS OF THE SHAREHOLDERS

Special Shareholder Meetings

Resolved:

The shareholders of Chipotle Mexican Grill, Inc. (CMG) (‘Company’) hereby request that the Board of Directors take

the steps necessary to amend our bylaws and each appropriate governing document to give holders in the aggregate of
15% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our
board’s current power to call a special meeting.

Supporting Statement:

Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting

is a way to bring an important matter to the attention of both management and shareholders outside the annual meeting
cycle. This is important because there could be 15-months between annual meetings.

A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an

important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are
associated with increased governance quality and shareholder value. Our Company offers no right of shareholders to act by
written consent.

Currently, more than 60% of the companies in the S&P 500 have adopted company bylaws, articles of

incorporation, or charter provisions to allow shareholders to call a special meeting.

This proposal topic won more than 70% support at Edwards Lifesciences and SunEdison in 2013. It may be possible

to adopt this proposal by simply incorporating this text into our governing documents:

“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statue, may be

called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or
Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of
stockholders owning 15% of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”

We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning

15% of our outstanding common stock to call a special meeting.

Please vote for: Special Shareowner Meetings – Proposal 5

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 25

Shareholder Proposal
(continued)

Statement in Opposition

Our current bylaws provide that holders of an aggregate of 25% of our outstanding common stock are permitted to
call special meetings of shareholders. We believe this provision ensures that a reasonable number of shareholders
consider a matter important enough to merit a special meeting in order for such a meeting to be held. Accordingly, we
recommend a vote AGAINST this proposal and the lower threshold it seeks to establish.

A proposal on this topic was submitted for the 2016 annual meeting of shareholders, calling on the Board to amend our
bylaws to implement a right for holders of 10% of our outstanding common stock to call a special meeting. Because our
certificate of incorporation provided, prior to last year’s annual meeting, that only the Board or the Chairman of the
Board could call special meetings of shareholders, we included in our proxy materials for the 2016 annual meeting a
proposal to remove that limitation. Our proposal further committed that, if the proposal was approved by shareholders,
our Board would amend our bylaws to implement a right for holders of 25% of our outstanding common stock to call a
special meeting. Our proposal and related commitment to amending our bylaws were approved by nearly 95% of the
votes cast at the meeting, while the shareholder proposal seeking the right for holders of 10% of our outstanding
common stock to call special meetings garnered only 43% of the votes cast.

We believe the shareholder voting at the 2016 annual meeting of shareholders, as well as the stated views of a number
of our largest shareholders supporting a 25% threshold for shareholders to call special meetings, reflect strong
support from our shareholders for the existing 25% ownership requirement.

A special meeting of shareholders can be a very expensive and time-consuming matter because of the cost to prepare
required disclosure documents, printing and mailing costs, and the time commitment required of the Board and our
executive officers to prepare for and conduct the meeting. Special meetings of shareholders should be extraordinary
events that only occur when fiduciary obligations or strategic concerns require that the matters to be addressed
cannot wait until the next annual meeting. We believe that the existing 25% ownership requirement strikes the
appropriate balance between the right of shareholders to call a special meeting in appropriate circumstances and the
substantial administrative and financial burdens that special meetings can impose on our company.

The Board of Directors recommends a vote AGAINST the shareholder proposal.

26 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation

EXECUTIVE OFFICERS

In addition to Steve Ells, our Chairman of the Board and Chief Executive Officer, whose biography is included under the
heading “Information Regarding the Board of Directors,” our executive officers as of March 27, 2017, are as follows:

John R. (Jack) Hartung, 59, is Chief Financial Officer and has served in this role since 2002. In addition to having
responsibility for all of our financial and reporting functions, Mr. Hartung also oversees safety, security and risk;
compensation and benefits; and Chipotle’s European operations. Mr. Hartung joined Chipotle after spending 18 years at
McDonald’s where he held a variety of management positions, most recently as Vice President and Chief Financial Officer of
its Partner Brands Group. Mr. Hartung has a Bachelor of Science degree in accounting and economics as well as an MBA
from Illinois State University.

Mark Crumpacker, 54, was appointed Chief Marketing Officer in January 2009 and as Chief Development Officer in October
2013. From December 2002 until December 2008 Mr. Crumpacker was Creative Director for Sequence, LLC, a strategic
design and marketing consulting firm he co-founded in 2002, and prior to that served as creative director and in other
leadership roles for a variety of design and media companies. Mr. Crumpacker attended the University of Colorado and
received his B.F.A. from the Art College of Design in Pasadena, California.

Curt Garner, 47, was appointed Chief Digital and Information Officer in March 2017. Mr. Garner joined Chipotle in November
2015 as Chief Information Officer, and prior to that had worked for Starbucks Corp. for 17 years, most recently serving as
Executive Vice President and Chief Information Officer. Mr. Garner has a Bachelor of Arts degree in economics from The
Ohio State University. He serves as a director of Aerohive Networks, Inc. (NYSE: HIVE).

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 27

Executive Officers and Compensation
(continued)

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the objectives and principles underlying our executive compensation
programs, outlines the material elements of the compensation of our executive officers, and explains the Compensation
Committee’s determinations as to the actual compensation of our executive officers for 2016. In addition, this
Compensation Discussion and Analysis is intended to put into perspective the tables and related narratives which follow it
regarding the compensation of our executive officers.

Letter from the Compensation Committee of our Board of Directors

Dear Fellow Shareholder,

2016 was a year of both continuing challenges and turnaround for Chipotle. We have developed and are implementing a
plan to rebuild our company after a number of food-borne illness incidents associated with Chipotle restaurants
beginning in late 2015. The company worked to stabilize revenue and profit levels throughout 2016, and showed positive
comparable restaurant sales growth in December 2016. Nevertheless, Chipotle continues to face challenges. The related
negative publicity had a severe adverse impact on our sales and profitability for both 2015 and 2016. As a result of these
business challenges, our stock price declined significantly in late 2015 and remained depressed through 2016.

Notwithstanding these challenges, Chipotle remains one of the great brands and successes in the restaurant industry.
The Compensation Committee as well as our full Board continue to believe that our innovative company is led by
talented entrepreneurs and visionaries. We have the greatest confidence in the abilities of this team to rebuild the
shareholder value that was lost in late 2015 and early 2016 and to grow beyond that.

As we wrote last year, the committee believes the best way to drive outstanding shareholder value creation at Chipotle
is to design compensation programs that motivate the unique entrepreneurial and innovative drive of our management
team. These programs should reward success when the management team’s efforts build shareholder value, and
dramatically limit realizable compensation when shareholder value declines and/or goals are not achieved. For a
definition of realizable pay, see “Executive Summary – Alignment of CEO Realizable Pay and Performance” below. We
have a history of demonstrating aligned pay for performance. Consistent with that history, due to the challenges and
performance for 2016, our executive officers were not paid any cash bonuses for the year, the second year in a row of
zero bonuses. Further, the committee reviewed Mr. Ells’ realizable pay from 2014-2016 to evaluate the alignment of his
pay and Chipotle stock price performance; realizable pay value for Mr. Ells as of December 31, 2016 was 13.4% of the
2014-2016 amounts shown in the Summary Compensation Table. Stated another way, the “in-the-money” value as of
December 31, 2016 of the equity awards granted to the executive officers in 2014 and 2016 was zero, and the equity
awards granted in 2015 would not have paid out as of December 31, 2016. Based on these factors, as well as input from
our independent compensation consultant and other factors, the committee concluded that there was strong
alignment between the CEO’s pay and our stock price performance. The Board also responded to shareholder feedback
to make our executive organizational structure more strategic and focused by eliminating our Co-CEO structure.

Shareholder Outreach

The committee has consistently conducted substantial shareholder outreach since 2014, and continued to do so
throughout 2016 and into early 2017. See “Executive Summary – Response to 2016 SOP Vote and Shareholder
Outreach” below for shareholder feedback received in 2016 and 2017 and changes we made as a result. We have also
continued to evaluate and modify our equity incentive design and grant sizes, to ensure motivation of our highly-
valued executive team in the context of shareholder perspectives.

2016 and 2017 Performance Share Grants

In light of the business challenges faced by our company beginning in late 2015, the Compensation Committee
reviewed the measures used in our new equity program to ensure that they continued to be appropriate. We had

28 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

concerns that using 2015 year-end financials or the company’s stock price at the beginning of 2016 as the basis for a
relative performance measure in a performance share program could create a misalignment of shareholder returns
and executive officer compensation. More specifically, the committee believed that using the same relative
performance measures as were used in our 2015 performance share awards might not be appropriately challenging if
used in 2016 due to the low point from which we were starting in late 2015. In early 2016, we discussed some of these
issues and potential equity program changes with our largest shareholders.

Following those discussions and additional analysis, for 2016, the performance shares were solely tied to highly
challenging absolute stock price performance goals over a three-year performance period that we believe aligns
executive officer compensation with restoring shareholder value, and motivates the management team to further
enhance value to our owners. The committee considered alternative performance metrics to be used for the 2016
performance shares, but ultimately concluded that restoring lost shareholder value was paramount. The 2016
performance share award design is discussed in greater detail below.

Our 2016 say-on-pay proposal was approved by 72% of shareholders; based upon specific shareholder feedback and
our say-on-pay vote, we modified certain grant features of the 2016 performance share awards to address shareholder
concerns (see “2016 Compensation Program – Long Term Incentives” below for additional details). Our 2017
performance share award uses a stock price performance goal similar to the 2016 design, while adding a comparable
restaurant sales increase goal as well (see “2016 Compensation Program – Long Term Incentives – 2017 Performance
Share Award Design” below for additional details). In addition to the performance share award design changes, we
reduced Mr. Ells’ 2017 target long-term incentive, or LTI, award by 31% when compared to his 2016 target LTI award.

The 2016 performance shares are included in the Summary Compensation Table, Grants of Plan-Based Awards in 2016
table and the Outstanding Equity Awards at December 31, 2016 table below. The 2017 performance shares are not
shown in any of those tables and instead will be included in the proxy statement for our 2018 annual meeting, but we
believe that an understanding of these most recent awards is important in evaluating our executive compensation
practices and determining your say-on-pay vote.

In closing, the members of the Compensation Committee would like to thank the shareholders with whom we spoke for
their insights and candor. We value the support and input of our shareholders, and we look forward to continuing to
have an open dialogue.

Neil Flanzraich, Lead Director and Chair of the Compensation Committee
Darlene Friedman
Pat Flynn

Executive Summary

Performance Overview for 2016
2016 was a year of change for Chipotle. We:

• Conducted a top-to-bottom review of our food safety programs and procedures and made enhancements to ensure that

our food is as safe as it can possibly be.

• Relied heavily on marketing promotions – including promotions for free and discounted food, our Chiptopia Summer

Rewards loyalty program, and an increased focus on catering and other out-of-restaurant sales – to restore customer
loyalty and attract new customers.

• Eliminated our Co-CEO structure to simplify our decision-making and enhance our focus on providing outstanding

customer experiences.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 29

Executive Officers and Compensation
(continued)

We focused on rebuilding our business following the food-borne illness challenges in late 2015, but our financial
performance in 2016 reflected a slower-than-expected pace of recovery:

• Revenue decreased 13.3% on a year-over-year basis.

• Comparable restaurant sales decreased 20.4% on a year-over-year basis.

• Restaurant level operating margin was 12.8%, a decrease from 26.1% in 2015.

Shareholder Outreach and Response to 2016 SOP Vote
Throughout 2016, both before and after the annual meeting, members of the Compensation Committee engaged in
discussions with a number of our largest shareholders to solicit feedback on our compensation programs. These
engagement efforts included discussions regarding our business strategy and plans in light of the downturn in our business
that began in late 2015, and related compensation considerations.

At our 2016 annual meeting of shareholders, 72% of the votes cast by our shareholders supported our say-on-pay proposal,
which was a decrease from the 95% approval at our 2015 annual meeting. We believe this result was primarily due to our
disappointing business and stock price performance, but members of the committee also continued to engage with
shareholders to understand what drove the vote result.

Over the course of 2016, shareholder engagement with members of the Board on compensation and governance issues
reached holders of over 60% of our outstanding common stock. We view these discussions as an important opportunity to
develop broader relationships with investors over the long term and to engage in open dialogue on compensation and
governance related issues.

We took investor feedback into account, and took a number of actions in both 2016 and early 2017 to address investor
concerns, as depicted below:

WHAT WE HEARD FROM SHAREHOLDERS

WHAT CHIPOTLE DID

Disappointed with the decline in stock price
that began in late 2015

• Tied 2016 performance share award to challenging absolute stock
price goals to focus executive officers on rebuilding value and
ensuring alignment with shareholder interests

Concerned with select features of 2016
performance share award design

Want to ensure there is balance in
performance share award design and that
design is complementary to key strategic
objectives

Concerned with the level of equity awards to
our CEO continue to be high (this was a
larger issue when we had Co-CEOs)

Desire to ensure pay and performance
alignment

• Modified 2016 awards to reduce maximum payout, increase the

duration of over which stock price performance must be sustained in
order for awards to vest, and add a cap in the event our stock price
declines after stock price goals are achieved during the performance
period

• Introduced a key financial metric – comparable restaurant sales

increases – into the 2017 performance share design (see 2017 Design
Highlights) in addition to challenging absolute stock price targets.

• Reduced 2017 equity award level for our CEO by 36% (at target)

• No longer have Co-CEOs

• Designed 2016 and 2017 performance share awards to have an

absolute stock price goal component (the sole metric in the 2016
awards)

• As a result of annual incentive plan goals not being met, our executive
officers did not earn annual incentive payouts for the 2015 and 2016
plan years

30 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

2016 Pay Actions
As a result of the above, our 2016 executive officer pay was significantly impacted:

ACTION

ADDITIONAL CONSIDERATIONS

No annual incentives under our Annual
Incentive Plan, or AIP, were paid to our
executive officers for 2016 performance
given the 2016 annual incentive performance
goals were not met

• This is the second consecutive year for which our executive officers

did not receive an annual incentive payout.

Performance shares were awarded to
executives tied to highly challenging
absolute stock price goals

• We intended to clearly align compensation for our executive officers

to our shareholders’ investment performance.

• As of December 31, 2016, the realizable value of these awards is $0.

No salary increase for our CEO

• Our co-CEOs, at the time, received no salary increases.

Alignment of CEO Realizable Pay Value and Performance
The Compensation Committee reviewed a three-year realizable pay value analysis for the executive officers to inform
design and award levels for 2017 equity awards. We calculate realizable pay as the sum of annual base salary, actual AIP
bonus paid, the “in-the-money” value of SOSARs and of performance shares that are based on achievement of absolute
stock price targets, and, for performance shares that are based on the level of relative achievement versus the peer group,
the current value as determined by measuring relative performance thus far in the performance period and determining the
resulting level of assumed payout.

• The aggregate realizable pay value of the total base salary, AIP bonus, and long-term incentives, or LTI, for our CEO for

the last three fiscal years (2014-2016) was $8.0 million at the end of 2016, or approximately 13.4% of the three-year total
compensation values disclosed in the Summary Compensation Table (plus the target AIP bonus for each year).

• The realizable pay value of our last three fiscal years of LTI awards to our CEO was zero at the end of 2016.

• Another way to express the realizable pay value of our last three fiscal years of LTI awards is that the 2014 and 2016

awards, the value of which is driven directly by stock price, had zero “in-the-money” value as of December 31, 2016, and
the 2015 awards, the value of which is based on relative performance versus our peer group, would not have paid out as
of December 31, 2016.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 31

Executive Officers and Compensation
(continued)

The graphics below depict these findings, which demonstrate alignment of the CEO’s realizable pay with shareholders’
investment performance over the three-year time period shown.

2014-16 Total Compensation
Value and Realizable Pay Value
($000)

$59,797

2014-16 Disclosed LTI Value
and Realizable LTI Value
($000)

$49,731

Base Salary

AIP Bonus

LTI

$8,036

2014-16 Total
Compensation
Value

2014-16 Total
Realizable Pay
Value

2014-16
Disclosed LTI
Value

$0

2014-16
Realizable
LTI Value

Strong performance in sales growth, net income growth, and total shareholder return relative to our restaurant peer group
during 2017 will result in a payout of the performance shares granted in 2015. For value to be realized under the 2014 and
2016 awards, our stock price would have to increase to more than $543.20 per share by February 2021 (for the 2014
SOSARs), or to an average of at least $700 per share for 60 consecutive trading days by February 2019 (for the 2016
performance shares).

Alignment of Executive Compensation with Shareholder Interests: What We Do and Don’t Do

WHAT WE DO

WHAT WE DON’T DO

No guaranteed employment contracts or change-in-
control agreements.

Executive officers and directors are prohibited from
hedging or pledging shares of Chipotle stock or
holding Chipotle stock in margin accounts.

No stock option repricing, reloads, exchanges or
options granted below market value without
shareholder approval.

Equity awards include double triggers in order for an
executive to receive benefits in connection with a
change in control.

Engage the committee’s consultant for additional work
for or on behalf of the executive officers.

Conduct extensive shareholder engagement on
compensation and governance related issues. Engage in
careful consideration of the annual say-on-pay results
and respond to shareholder feedback when appropriate.

Employ an LTI program based entirely on
performance-based equity awards.

Maintain a strong link between financial and
operational goals, shareholder value creation and
executive compensation.

Ensure our compensation programs are designed to
discourage excessive risk taking, with design features
including the incorporation of multiple performance
measures in our incentive programs, strong executive
stock ownership guidelines, three-year performance
and vesting periods on LTI awards, payout limitations
in performance share awards in the event of
deteriorating stock price performance, and a clawback
policy related to LTI awards.

Use an independent compensation consultant who is
engaged directly by the committee to advise on
executive compensation matters.

32 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

Compensation Philosophy and Objectives
Our philosophy with regard to the compensation of our employees, including our executive officers, is to reinforce the
importance of performance and accountability at the corporate, regional and individual levels. We strive to provide our
employees with meaningful rewards while maintaining alignment with shareholder interests, corporate values, and
important management initiatives. In setting and overseeing the compensation of our executive officers, the committee
believes our compensation philosophy to be best effectuated by designing compensation programs and policies to achieve
the following specific objectives:

• Attracting, motivating, and retaining highly capable executives who are vital to our short- and long-term success,

profitability, and growth;

• Aligning the interests of our executives and shareholders by rewarding executives for the achievement of strategic and

other goals that we believe will enhance shareholder value; and

• Differentiating executive rewards based on actual performance.

The committee believes that these objectives are most effectively advanced when a significant portion of each executive
officer’s overall compensation is in the form of at-risk elements such as annual incentive bonuses and long-term incentive-
based compensation, which should be structured to closely align compensation with actual performance and shareholder
interests.

The committee’s philosophy in structuring executive compensation rewards is that performance should be measured by
comparing our company performance to market-wide performance in our industry, as well as subjectively evaluating each
executive officer’s performance.

The overarching objective of our executive compensation program is to motivate our entrepreneurial and innovative
management team to create long-term shareholder value. Our success is driven by our people and their commitment to our
brand.

Executive Compensation Program Components and Structures
Our executive compensation program is comprised of three primary components:

BASE SALARY

ANNUAL CASH BONUS (AIP)

EQUITY COMPENSATION (LTI)

Determined subjectively
each year based on
each executive’s
contributions, individual
performance, and level
of experience.

Determined under our
company-wide Annual
Incentive Plan, or AIP, which
provides for variable payouts
based on achievement
against operating and
financial performance goals
approved by the committee
at the beginning of each year,
as well as subjective
evaluations of individual
performance.

Aligns the incentives of our executive officers with
shareholder interests and rewards the creation of
shareholder value.

• For 2016, following significant stock price declines in

late 2015 and early 2016, and after significant ongoing
dialogue with shareholders, we used a different
structure for the executive officers’ performance
share awards than in 2015, with vesting of the 2016
awards based solely on restoration of shareholder
value to levels achieved prior to the food-borne illness
issues that impacted us in the latter half of 2015.

• For 2017, in response to a decline in the level of

approval of our say-on-pay vote in 2016, and after
significant ongoing dialogue with shareholders, we
amended the 2016 awards to address concerns
expressed by shareholders about the 2016 awards. We
also used a similar structure for the 2017 awards with
lower grant date values than the 2016 awards.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 33

Executive Officers and Compensation
(continued)

Pay at Risk
The Compensation Committee allocates pay among these components in a manner designed to place performance at the
forefront of our overall executive compensation program. This is illustrated in the following graphics, which reflect the heavy
emphasis placed on at-risk, performance-based pay elements (based on 2016 compensation, including target AIP bonus):

Base Salary
8.8%

Base Salary
10.8%

Base Salary
11.4%

Target AIP
11.0%

Target AIP
9.2%

Target AIP
7.5%

Steve Ells, 
Chairman & CEO

Equity Comp.
80.2%

O

verall Pay at  R i s k   9 1 %

Jack Hartung, 
CFO

Equity Comp.
80.0%

O

verall Pay at  R i s k   8

Mark  
Crumpacker,
Chief Marketing 
& Development 
Officer

Equity Comp.
81.1%

O

verall Pay at  R i s k   8

%

9

%

9

Factors in Setting Executive Officer Pay
The committee sets compensation for the executive officers annually after considering the following factors:

• Chipotle’s performance relative to goals approved by the committee

• The business climate in the restaurant industry, general economic conditions and other factors

• Each executive officer’s experience, knowledge, skills and personal contributions

• Levels of compensation for similar jobs at market reference points

• The degree of difficulty in committee-approved goals

The CEO makes recommendations to the committee regarding compensation for executive officers after reviewing
Chipotle’s overall performance and each executive officer’s personal contributions. The CEO uses discretion when making
pay recommendations to the committee. The committee is responsible for approving executive officer compensation and
has broad discretion when setting compensation types and amounts.

With respect to the CEO, the committee annually reviews and approves the corporate goals and objectives relevant to the
CEO’s compensation, evaluates the CEO’s performance against those objectives and makes determinations regarding the
CEO’s compensation level based on that evaluation.

As part of its reviews of executive compensation, the committee reviews tally sheets that show historical pay for each
executive officer (including the CEO), as well as their accumulated equity. These tally sheets are used as a reference point
to assist the committee in understanding the overall compensation provided to each executive officer.

34 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

Roles and Responsibilities of the Committee, Compensation Consultant and the CEO in Setting
Executive Officer Compensation

Responsible Party

Role and Responsibilities

Compensation Committee
The committee is currently
comprised of three independent
directors and reports to the Board

• Retains independent consultants and counsel to assist it in evaluating
compensation and fulfilling its obligations as set forth in its Charter.

• Works with the CEO to set performance goals at the beginning of each year

targeted to positively influence shareholder value.

• Evaluates CEO performance in relation to those goals and Chipotle’s overall

performance.

• Determines and approves compensation for our executive officers.
• Reviews and approves overall compensation philosophy and strategy, as well
as all compensation and benefits programs in which our executive officers
participate.

• Reviews applicable peer group and broader market data as one of multiple

reference points.

• Engages with shareholders and others to receive stakeholder input on

executive compensation matters.

Consultant to the Compensation
Committee
Pay Governance, as an independent
consultant, has been retained
directly engaged by the committee
to provide consulting advice on
matters of governance and
executive compensation

• Provides advice and opinion on the appropriateness and competitiveness of
our compensation programs relative to market practice, our strategy and
internal processes.

• Performs all functions at the direction of the committee.
• Attends committee meetings.
• Provides advice regarding compensation decision-making governance.
• Provides market data, as requested.
• Consults on various compensation matters and recommends compensation

program designs and practices.

• Confers with the committee, the CEO, the CFO and the company’s

compensation and benefits team on incentive goals (annual and long-term).

Chief Executive Officer
With the support of other members
of the management team, including
the internal compensation and
benefits team

• Works with the other executive officers to set performance goals at the beginning

of each year that are targeted to positively influence shareholder value.

• Reviews performance of the other executive officers and makes

recommendations to the committee with respect to their compensation.

• Confers with the committee concerning design and development of

compensation and benefit plans for Chipotle executive officers and employees.

Role of Market Data and Our Peer Group

Market Data
The committee believes the investment community generally assesses our company performance by reference to other
companies in the restaurant industry, and our management team and Board also reference such peer company
performance in analyzing and evaluating our business.

Each year, the committee’s independent compensation consultant provides the committee with pay data for executive
officer roles and the incentive plan structures of the companies in our peer group. The committee does not explicitly
benchmark our executive officers’ compensation to the peers, but the peer group data is one of multiple reference points
used to evaluate our executive compensation programs.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 35

Executive Officers and Compensation
(continued)

2016 Peer Group
The peer group used for 2016 was comprised publicly-traded companies in the restaurant industry, as defined by the Global
Industry Classification Standard (GICS), with annual revenues greater than $500 million, excluding companies serving a
substantially different market or client base than we do.

$ in millions

Company Name

McDonald’s Corporation

Starbucks Corporation

Darden Restaurants, Inc.

Yum! Brands, Inc.

Bloomin’ Brands, Inc.

Brinker International, Inc.
Cracker Barrel Old Country Store, Inc.

Panera Bread Company

Domino’s Pizza, Inc.

The Cheesecake Factory Incorporated

Texas Roadhouse, Inc.

Buffalo Wild Wings, Inc.

Papa John’s International, Inc.

Jack in the Box Inc.

The Wendy’s Company

Bob Evans Farms, Inc.

Red Robin Gourmet Burgers, Inc.

Ruby Tuesday, Inc.

BJ’s Restaurants, Inc.

Carrols Restaurant Group, Inc.

Biglari Holdings Inc.

Dunkin’ Brands Group, Inc.

Fiesta Restaurant Group, Inc.

DineEquity, Inc.

Sonic Corp.

Ignite Restaurant Group, Inc.

Peer group median

Chipotle Mexican Grill, Inc.

Percentile Rank

Notes:

(1) Trailing 12 months as of December 31, 2016.
(2) As of December 31, 2016.

Revenues1

Market Cap2

$24,622

$ 21,316

$ 6,995

$ 6,366

$ 4,252

$ 3,236
$ 2,920

$ 2,795

$ 2,394

$ 2,199

$ 1,991

$ 1,987

$ 1,714

$ 1,599

$ 1,590

$ 1,344

$ 1,296

$ 1,022

$

$

$

$

$

$

$

$

961

932

850

829

720

634

590

462

$ 1,657

$101,082

$80,804

$ 8,950

$ 23,242

$ 1,900

$ 2,459
$ 4,014

$ 4,798

$ 7,677

$ 2,726

$ 3,402

$ 2,810

$ 3,157

$ 3,610

$

3,321

$ 1,052

$

$

$

$

$

725

191

914

538

978

$ 4,810

$

798

$ 1,393

$ 1,238

$

14

$ 2,768

$ 3,904

$ 10,923

81%

89%

The committee reviews the composition of the restaurant industry peer group periodically and will make adjustments to the
peer group in response to changes in the size or business operations of Chipotle and of companies in the peer group,
companies in the peer group being acquired or taken private, and other companies in the GICS restaurant industry
becoming public.

36 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

2016 Compensation Program

Base Salaries
We pay a base salary to compensate our executive officers for services rendered during the year, and also to provide them
with income regardless of our stock price performance, which helps avoid incentives to create short-term stock price
fluctuations and mitigates the impact of forces beyond our control such as general economic and stock market conditions.

We do not have written employment agreements with any of our executive officers and therefore do not have contractual
commitments to pay any particular level of base salary. Rather, the committee reviews the base salary of each executive
officer, at least annually, and adjusts salary levels as the committee deems necessary and appropriate; the salaries for our
Co-CEOs were not adjusted in 2016 nor was our CEO’s salary adjusted in 2017.

Recommendations for the executive officers (other than the CEO) are provided to the committee by our CEO. The
committee reviews the CEO’s base salary and recommends any changes for review and approval by the full Board.
Adjustments to base salaries, if any, typically occur during the first quarter of each year.

Executive Officer

Steve Ells

Monty Moran

Jack Hartung

Mark Crumpacker

2015

$1,540,000

$1,320,000

$ 750,000

$ 535,000

Base Salaries

2016

% Change

$1,540,000

$1,320,000

$ 800,000

$ 600,000

0%

0%

7%

12%

Annual Incentive Plan
The AIP is our annual cash incentive program for all employees. Our executive officers participate in the AIP alongside other
eligible salaried employees, with slight variations to the plan terms in order to appropriately incentivize our executive
officers to drive superior business results. The formula to determine payouts under the 2016 AIP consisted of a company
performance factor (CPF), a team performance factor (TPF) and an individual performance factor (IPF):

AIP Bonus Target

x

Company Performance Factor
(0-150%)

=

Adjusted AIP Bonus Target

X 30% Weighting
x
Team Performance
Factor
(0-150%)

X 70% Weighting
x
Individual
Performance Factor
(0-150%)

=

Final AIP Bonus Payout

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 37

Executive Officers and Compensation
(continued)

Targeted goals for business performance metrics used to determine the company performance factor are set at the
beginning of the year. Achievement at the target level of each performance metric would yield a company performance
factor of 100%, equating to a payout at the target level. The company performance factor is adjusted up or down based on
the performance versus the underlying performance metrics. As a result of our underperformance versus the AIP
performance metrics in 2016, as depicted below, the CPF was 0%.

CPF Measure

Adjusted Operating Income

New Restaurant Average Daily Sales

Comparable Restaurant Sales

New Weeks of Operations

Key Initiatives

Target

Actual

Impact on CPF

$503.1 million

$102.1 million

$4,954

-12.2%

6,622

–

$3,801

-20.3%

6,045

–

-92.5%

-12.0%

-46.2%

-2.6%

0.0%

Total:

-153.3%

A. Beginning CPF:

B. Actual Perf. Impact to CPF:

C. Final CPF (A + B)*

100.0%

-153.3%

0%

*Cannot be less than 0% or higher than 150%

The team performance measure generally uses the same underlying performance measures as the company performance
measure, but is based on regional-or corporate office-specific goals. For 2016, the team performance measure did not
include a New Weeks of Operations performance measure.

The individual performance factor is a function of an individual employee’s subjective performance rating for the year. The
committee evaluates the performance of the CEO to determine his individual performance factor, and approves individual
performance factors for each of the other executive officers after considering recommendations from the CEO.

The committee may, in its discretion, authorize a deviation from the parameters set for any particular performance factor in
order to account for exceptional circumstances and to ensure that AIP bonuses further the objectives of our compensation
programs. The committee did not exercise any discretion when determining the executive officer’s AIP bonuses for 2016.

We did not award AIP bonuses to our executive officers as shown below:

Executive Officer

Steve Ells

Monty Moran

Jack Hartung

Mark Crumpacker

Long-Term Incentives

Target 2016 AIP Bonus

% of Base Salary Dollar Value

Actual
2016 AIP Bonus

Actual as %
of Target

125%

125%

85%

65%

$ 1,925,000

$1,650,000

$680,000

$390,000

$0

$0

$0

$0

0%

0%

0%

0%

2016 Performance Share Award Design
In late 2015, the Compensation Committee evaluated how to approach executive officer equity compensation following the
business challenges we faced during the second half of the year. After significant analysis and input from the committee’s
independent consultant, Pay Governance, the committee concluded that using operating or relative performance metrics
for the 2016 equity awards would not be optimal. The committee had concerns that using 2015 year-end financials or stock
price at the beginning of 2016 as the basis for a performance evaluation relative to our peers could create a misalignment

38 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

of shareholder returns and executive officer compensation. More specifically, the committee recognized that performance
relative to our peers on the measures incorporated into the 2015 performance share awards may not translate into
rebuilding lost shareholder value or be appropriately challenging due to the lowered point from which performance would
begin to be measured.

In early 2016, the committee discussed some of these issues and potential equity program changes with our largest
shareholders. Following those discussions and after further review and analysis, for 2016, the committee decided to
continue using performance shares for the executive officer equity compensation program. The 2016 performance shares
are solely tied to highly-challenging absolute stock price performance goals over the three-year performance period
beginning on the grant date, February 3, 2016. The committee considered alternative performance metrics to be used for
the 2016 performance shares, but ultimately concluded that restoring lost shareholder value was paramount. Further, the
committee also concluded that granting SOSARs or other option-like awards would not be appropriate given the relatively
low strike price that would be associated with this type of grant.

Vesting of the awards is based on Chipotle’s stock price performance over the three-year performance period. The initial
terms stipulated that the awards would only pay out only if the average closing price of Chipotle’s common stock for any
period of 30 consecutive trading days during performance period was at least $700, which was approximately 52% higher
than the closing price of Chipotle’s common stock on the grant date. The number of shares issuable at the end of the
performance period was to be determined based on the highest average closing stock price achieved for any period of 30
consecutive trading days during the performance period.

After soliciting shareholder feedback during the second half of 2016 following the say-on-pay vote at the 2016 annual
meeting, the committee recommended in early 2017, and the executive officers (other than Mr. Moran in light of his pending
retirement) accepted, the following modifications to the 2016 performance share award terms:

• The measurement period for establishing stock price achievement was increased from 30 days to 60 days.

• The maximum payout was reduced to 300% of target award (the prior maximum was 400% of target).

• An end-of-period performance modifier was added that stipulates if the average stock price for the last 60 days in the
performance period is below $650, then the final payout will be no higher than target, even if an above-target average
stock price was achieved during the performance period.

The table below depicts potential payouts under the 2016 performance shares awards after giving effect to the
modifications made in early 2017:

Executive Officer

Steve Ells

Monty Moran(1)

Jack Hartung

Mark Crumpacker

Number of Shares Eligible to be Earned

$700
(Threshold)

$800
(Target)

$1,000
(Maximum)(1)

Target Value on
Grant Date*

13,500

27,000

6,060

5,675

4,050

12,120

11,350

8,100

81,000

36,360

34,050

24,300

$12,466,980

$12,466,980

$ 5,240,749

$ 3,740,094

* Based on grant date stock price of $461.74
(1) – The maximum payout for Mr. Moran’s award remains at 400% of target, in the event the average stock price determined under the award terms is

$1,200 per share or greater. In light of Mr. Moran’s proposed retirement in June 2017, the payouts of his award, if any, will be prorated based on the portion
of the performance period during which he was employed. The prorated payouts would be 6,060 shares at threshold, 12,120 shares at target, and 48,482
shares at maximum.

The number of shares to be issuable between the various performance levels depicted above will be determined by linear
interpolation between the next highest and lowest of the depicted performance levels. If the closing price of Chipotle
common stock does not average at least $700 for any period of 60 consecutive trading days (30 consecutive trading days
for Mr. Moran) during the performance period, the awards will expire with no payout. The vesting and payout of the awards
will be subject to the recipient’s continued employment through the end of the performance period, subject to the potential

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 39

Executive Officers and Compensation
(continued)

pro-rata payout, based on actual stock price performance, to the recipient or his estate in the event of termination due to
death, disability or retirement, and to potential accelerated vesting in the event of certain terminations within two years of
certain change in control transactions.

2017 Performance Share Award Design
In early 2017, we continued with our shareholder outreach and discussed our potential 2017 performance share award
design with several of our largest shareholders. The 2017 performance share award design uses a stock price performance
goal similar to the 2016 design, while adding a comparable restaurant sales increase goal as well.

• As a result of our trailing one-year stock price range of approximately $350 to $540, the committee determined that it

would be appropriate to establish a stock price performance goal of $650, in order to ensure the awards have
motivational value to our executive officers. Although this is a lower stock price goal relative to the 2016 award, the
stock price goal remains well above the stock price as of the grant date and will require the restoration of substantial
shareholder value before the awards pay out at all. As a result, the committee determined that the stock price goal was
appropriately challenging.

• Comparable restaurant sales is a metric closely followed by our management, our shareholders, and securities analysts

and is a key measure for any growth-oriented restaurant or retail organization. Restoring our industry-leading economic
model will be substantially dependent on comparable restaurant sales growth, and including this measure in the award
ties any payout to a strong company sales recovery, rather than tying the payout solely to stock price performance.

The absolute stock price goals have similar parameters as the modified 2016 awards:

• 60-day average to determine stock price goal achievement.

• End-of-period performance modifier that stipulates if the average stock price for the last 60 days in the performance
period is below $600, then the final payout will be no higher than target, even if an above-target average stock price
was achieved during the performance period.

Metric

Weighting

Absolute Stock Price

CRS 3-Year Compound Annual
Growth Rate

2/3

1/3

Performance
Period

Feb. 19, 2017
to
Feb. 19, 2020

Jan. 1, 2017
to
Dec. 31, 2019

Performance Level

Stock Price /
3-Year CRS CAGR
Goals

Payout
(as % of target)

Threshold

Target

Maximum

Threshold

Target

Maximum

$600

$650

$900

5%

7%

11%

50%

100%

350%

50%

100%

300%

Given 2016 stock price performance and financial results, the committee believed a reduction in the target value of the 2017
performance share award as compared to 2016 was appropriate, and reduced Mr. Ells’ target award value significantly:

Target 2017 Award Value

Percentage Change versus 2016 (at target)

$8.6 million

-31%

“Target value” refers to the number of shares payable at target level performance, times the stock price as of the grant
date. The target value of the 2016 performance share award for each of our then-serving Co-CEOs was $12.5 million. The
grant date fair value shown in the Summary Compensation Table was $14.0 million as a result of the accounting expense
valuation required by SEC reporting requirements; the grant date fair value reflected in the Summary Compensation Table
for Mr. Ells for 2017 will also differ from the $8.6 million target value disclosed above.

40 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

Expiration of 2013 Performance Share Awards Without Payout
The end of the third quarter of 2016 concluded the three-year performance period for performance shares awarded in
December of 2013. These performance share awards consisted of a right to receive a pre-determined number of shares of
our common stock based on our achievement of cumulative adjusted cash flow from operations over the performance
period at a threshold, target or maximum level. The minimum performance threshold was not achieved, and these awards
expired without value at the conclusion of the performance period.

Benefits and Perquisites
In addition to the principal compensation elements described above, we provide our executive officers with access to the
same benefits we provide all of our full-time employees. We also provide our officers with perquisites and other personal
benefits that we believe are reasonable and consistent with our compensation objectives, and with additional benefit
programs that are not available to all employees throughout our company.

Perquisites are generally provided to help us attract and retain top performing employees for key positions, and in some
cases perquisites are designed to facilitate our executive officers bringing maximum focus to what we believe to be
demanding job duties. In addition to the perquisites identified in notes to the Summary Compensation Table below, we have
occasionally allowed executive officers to be accompanied by a guest when traveling for business on an airplane owned or
chartered by us. Executive officers have also used company-owned or chartered airplanes for personal trips; in those cases,
the executive officer fully reimburses us for the cost of personal use of the airplane, except where prohibited by applicable
regulations. Our executive officers are also provided with personal administrative and other services by company
employees from time to time, including scheduling of personal appointments, performing personal errands, and use of
company-provided drivers. We believe that the perquisites we provide our executive officers are consistent with market
practices, and are reasonable and consistent with our compensation objectives.

We also administer a non-qualified deferred compensation plan for our senior employees, including our executive officers.
The plan allows participants to defer the obligation to pay taxes on certain elements of their compensation while also
potentially receiving earnings on deferred amounts. We offer an employer match on a portion of the contributions made by
the employees. We believe this plan is an important retention and recruitment tool because it helps facilitate retirement
savings and financial flexibility for our key employees, and because many of the companies with which we compete for
executive talent provide a similar plan to their key employees.

Executive Stock Ownership Guidelines
Our Board of Directors has adopted stock ownership
guidelines for our executive officers. These guidelines are
intended to ensure that our executive officers retain
ownership of a sufficient amount of Chipotle stock to align
their interests in a meaningful way with those of our
shareholders. Alignment of our employees’ interests with
those of our shareholders is a principal purpose of the
equity component of our compensation program.

The ownership guidelines, reflected as a targeted number
of shares to be owned, are presented below for each named
executive officer who continues to serve as an executive
officer. The guidelines are reviewed for possible adjustment
each year and may be adjusted by the committee at any
time.

OFFICER

Steve Ells

Jack Hartung

Mark Crumpacker

# OF
SHARES

ACTUAL
OWNERSHIP

31,000

196,802

7,000

3,000

30,464

3,000

ACTUAL
OWNERSHIP
AS % OF BASE
SALARY(1)

53x

16x

2x

(1) – Based on the closing stock price on March 27, 2017.

Shares underlying unvested restricted stock or restricted
stock units count towards satisfaction of the guidelines,
while shares underlying SOSARs (whether vested or
unvested) and unearned performance shares do not count.
Executive officers who do not meet the guidelines are
allowed five years to acquire the requisite number of
shares to comply. All of our executive officers meet the
stock ownership guidelines.

For stock ownership guidelines applicable to non-employee
members of our Board of Directors, see page 14.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 41

Executive Officers and Compensation
(continued)

Prohibition on Hedging and Pledging
To further align the interests of our officers with those of our
shareholders, we have adopted a policy prohibiting our
directors and certain employees, including all of the executive
officers, from hedging their Chipotle stock ownership,
pledging their shares of Chipotle stock as collateral for loans,
or holding shares of Chipotle stock in margin accounts.

Executive Agreements
We have generally not entered into written employment,
change-in-control, severance or similar agreements with any
of our employees, including our executive officers.
Accordingly, we do not have any written agreements requiring
that we make post-employment severance payments to the
executive officers in the event their employment terminates.
In addition, payouts under the AIP are conditioned on the
employee being employed as of the payout date.

In connection with the planned retirement of Mr. Moran as
our Co-CEO, we entered into a Retirement and Non-
Competition Agreement with him in December 2016, pursuant
to which he has agreed for a two-year period not to, directly
or indirectly, own, manage, operate, control, be employed or
engaged in any capacity (whether or not for compensation)
by, or render services, advice, or assistance in any capacity
to, a business competing with us in the continental United
States. Through his retirement date, Mr. Moran will remain
employed in a non-officer position. The Retirement and Non-
Competition Agreement contains certain other rights and
obligations, and the foregoing description of the agreement is
qualified in its entirety by reference to the full terms of the
agreement, which is filed as an exhibit to our Current Report
on Form 8-K filed on December 12, 2016.

Compensation Program Risk
In structuring and approving our executive compensation
programs, as well as policies and procedures relating to
compensation throughout our company, the Committee also
considers risks that may be inherent in such programs, policies
and procedures. The Committee has determined that it is not
reasonably likely that our compensation programs, policies and
procedures will have a material adverse effect on our company.

Tax and Other Regulatory Considerations

Code Section 162(m)
Section 162(m) of the Internal Revenue Code provides that
compensation of more than $1,000,000 paid to the chief
executive officer or to certain other executive officers of a
public company will not be deductible for federal income
tax purposes unless amounts above $1,000,000 qualify for
one of several exceptions. The committee’s primary
objective in designing executive compensation programs is
to support and encourage the achievement of our
company’s strategic goals and to enhance long-term
shareholder value. For these and other reasons, the
committee has determined that it will not necessarily seek
to limit executive compensation to the amount that will be
fully deductible under Section 162(m).

We have implemented the 2014 Cash Incentive Plan as an
umbrella plan under which AIP bonuses are paid in order to
preserve the deductibility of the amount of the payouts
from our reported income under Section 162(m). Under the
2014 plan, the committee sets maximum bonuses for each
executive officer and other key employees. If the bonus
amount determined under the AIP for participants in the
2014 plan is lower than the maximum bonus set under the
2014 plan, the committee has historically exercised
discretion to pay the AIP bonus rather than the maximum
bonus payable under the 2014 plan.

Accounting Rules
Various rules under generally accepted accounting
principles determine the manner in which we account for
equity-based compensation in our financial statements. The
committee may consider the accounting treatment under
Financial Accounting Standards Board Accounting
Standards Codification Topic 718 (FASB Topic 718) of
alternative grant proposals when determining the form and
timing of equity compensation grants to our executive
officers. The accounting treatment of such grants, however,
is not generally determinative of the type, timing, or
amount of any particular grant of equity-based
compensation the committee determines to make.

COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this Proxy
Statement with management. Based on such review and discussion, the Compensation Committee recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the SEC.

The Compensation Committee.

Neil W. Flanzraich, Chairperson
Patrick J. Flynn
Darlene J. Friedman

42 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

2016 COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

YEAR

SALARY

STOCK
AWARDS(1)

OPTION
AWARDS(2)

NON-EQUITY
INCENTIVE PLAN
COMPENSATION(3)

ALL OTHER
COMPENSATION(4)

NAME AND
PRINCIPAL POSITION

STEVE ELLS

Chairman and Chief
Executive Officer

MONTY MORAN(5)

Former Co-Chief
Executive Officer

JACK HARTUNG

Chief Financial Officer

2016

2015

2014

2016

2015

2014

2016

2015

2014

$1,540,000

$14,002,740

$ 1,526,000

$12,030,036

–

–

–

–

$1,400,000

–

$23,698,500

$3,570,000

$ 1,320,000

$14,002,740

$1,308,000

$12,030,036

–

–

–

–

$1,200,000

–

$23,698,500

$3,060,000

$ 792,308

$ 5,886,337

$ 745,769

$ 5,052,179

–

–

–

–

$ 700,000

–

$ 8,125,200

$ 1,213,800

MARK CRUMPACKER 2016

$ 590,000

$ 4,200,822

Chief Marketing and
Development Officer

2015

2014

$ 532,077

$ 3,608,930

$ 500,000

–

$ 4,062,600

$ 663,000

–

–

–

–

$ 120,356

$ 281,858

$ 255,770

$ 156,520

$ 223,041

$ 194,702

$ 175,559

$ 235,361

$206,842

$ 109,914

$ 141,581

$ 109,591

TOTAL

$ 15,663,096

$ 13,837,891

$28,924,270

$ 15,479,260

$ 13,561,077

$ 28,153,203

$ 6,854,204

$ 6,033,309

$ 10,245,842

$ 4,900,736

$ 4,282,588

$ 5,335,191

(1) Amounts under “Stock Awards” represent the grant date fair value under FASB Topic 718 of performance shares awarded in 2015 and
2016, and for the 2015 award, for which vesting was considered probable as of the grant date. See Note 6 to our audited consolidated
financial statements for the year ended December 31, 2016, which are included in our Annual Report on Form 10-K filed with the SEC on
February 7, 2017, for descriptions of the methodologies and assumptions we use to value stock awards and the manner in which we
recognize the related expense pursuant to FASB ASC Topic 718. The 2016 performance share awards will not pay out or have any value
unless the price of our common stock exceeds an average of $700 for a period of 60 consecutive trading days, before February 3,
2019. For further discussion, see above under “Compensation Discussion and Analysis – 2016 Compensation Program – Long Term
Incentives – 2016 Award Design.”

(2) Amounts under “Option Awards” represent the grant date fair value under FASB Topic 718 of SOSARs awarded in the relevant year.

See Note 6 to our audited consolidated financial statements for the year ended December 31, 2016, as referenced in footnote 1, for
descriptions of the methodologies and assumptions we use to value SOSAR awards and the manner in which we recognize the related
expense pursuant to FASB ASC Topic 718. Options granted in 2014 and reflected in this table have an exercise price of $543.20 per
share, and expire in February 2021.

(3) Amounts under “Non-Equity Incentive Plan Compensation” represent the amounts earned under the AIP for the relevant year.
(4) Amounts under “All Other Compensation” for 2016 include the following:

• Matching contributions we made on the executive officers’ behalf to the Chipotle Mexican Grill, Inc. 401(K) plan as well as the

Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan, in the aggregate amounts of $60,354 for Mr. Ells, $53,246 for
Mr. Moran, $32,846 for Mr. Hartung, and $23,523 for Mr. Crumpacker. See “Non-Qualified Deferred Compensation for 2016” below
for a description of the Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan.

• Company car costs, which include the depreciation expense recognized on company-owned cars or lease payments on leased cars
(in either case less employee payroll deductions), insurance premiums, and maintenance and fuel costs. Company car costs for
Mr. Ells were $59,249, for Mr. Moran were $102,521, for Mr. Hartung were $38,885, and for Mr. Crumpacker were $32,078.

• Housing costs, including monthly rent and utilities payments, of $44,108 for Mr. Hartung and $47,319 for Mr. Crumpacker.

• $25,816 for Mr. Hartung and $6,241 for Mr. Crumpacker for reimbursement of taxes payable in connection with taxable perquisites

under rules of the Internal Revenue Service.

• Commuting expenses, which include air fare, airport parking and ground transportation relating to travel between home and our

company headquarters, for Mr. Hartung totaling $33,151.

(5) Mr. Moran stepped down from the position of Co-Chief Executive Officer in December 2016 in connection with his planned retirement in

June 2017.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 43

Executive Officers and Compensation
(continued)

GRANTS OF PLAN-BASED AWARDS IN 2016

NAME

STEVE ELLS

MONTY MORAN

JACK HARTUNG

MARK CRUMPACKER

ESTIMATED POSSIBLE PAYOUTS
UNDER NON-EQUITY INCENTIVE
PLAN AWARDS(1)

ESTIMATED POSSIBLE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS(2)

GRANT
DATE

AWARD
DESCRIPTION

THRESHOLD
($)

TARGET
($)

MAXIMUM
($)

THRESHOLD
(# shares)

TARGET
(# shares)

MAXIMUM
(# shares)

GRANT DATE
FAIR VALUE
OF STOCK
AWARDS(3)

n/a

AIP

2/3/16 Performance Shares

n/a

AIP

2/3/16 Performance Shares

n/a

AIP

2/3/16 Performance Shares

n/a

AIP

2/3/16 Performance Shares

$ 0

$ 1,925,000 $ 4,331,250

$ 0

$ 1,650,000 $ 3,712,500

$ 0

$ 680,000 $ 1,530,000

$ 0

$

390,000 $ 877,500

13,500

27,000

81,000

$ 14,002,740

6,060

12,120

48,482

$ 14,002,740

5,675

11,350

34,050

$ 5,886,337

4,050

8,100

24,300

$ 4,200,822

(1) Each executive officer was entitled to a cash award to be paid under our 2014 Cash Incentive Plan, although as a matter of practice the
Compensation Committee exercises discretion to pay each executive officer a lesser amount determined under the AIP as described
under “Compensation Discussion and Analysis – 2016 Compensation Program – Annual Incentive Plan.” Amounts under Threshold
reflect that no payouts would be paid under the AIP if achievement against company targets under the AIP were sufficiently below
target. Amounts under Target reflect the target AIP bonus, which would have been paid to the executive officer if each of the company
performance factor, team performance factor and individual performance factor under the AIP had been set at 100 percent. Amounts
under Maximum reflect the AIP bonus which would have been payable had each of the company performance factor, team performance
factor and individual performance factor been at the maximum level. Actual AIP bonuses paid are reflected in the “Non-Equity
Incentive Plan Compensation” column of the table labeled Summary Compensation Table above.

(2) The Performance Share awards are denominated in shares of common stock, and were granted under the Amended and Restated

Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan. Achievement at the threshold level would require that our average closing stock
price for any period of 60 consecutive trading days (30 consecutive trading days for Mr. Moran) during the performance period be at
least $700. See “Terms of 2016 Performance Share Awards” below for further description of the vesting terms for the Performance
Shares granted during 2016. See Note 6 to our audited consolidated financial statements for the year ended December 31, 2016, which
are included in our Annual Report on Form 10-K filed with the SEC on February 7, 2017, for descriptions of the methodologies and
assumptions we used to value Performance Share awards pursuant to FASB Topic 718. The grant date fair value of Performance Share
awards is included in the “Stock Awards” column of the Summary Compensation Table above for each executive officer for 2016.
As described under “Compensation Discussion and Analysis – 2016 Compensation Program – Long-Term Incentives” above, these
awards were modified in March 2017 for each current executive officer so that the maximum payouts under the awards are now as
shown in the table. The original awards provided for maximum payouts of 108,000 shares for Mr. Ells, 45,400 shares for Mr. Hartung,
and 32,400 shares for Mr. Crumpacker. The payouts for Mr. Moran, who will retire in June 2017, subject to the terms of his retirement
agreement were not modified with the other executive officers, but will be prorated based on his retirement date. The table reflects the
pro-rated payouts to which he would be entitled; the original awards provided for payouts of 13,500 shares at the threshold level of
performance, 27,000 shares at target, and 108,000 shares at maximum.

(3) See footnote (1) to the Summary Compensation Table above.

Terms of 2016 Performance Share Awards
Vesting of the performance share awards granted to the executive officers in 2016 will be based on Chipotle’s stock price
performance over the three-year performance term. The awards will pay out only if the average closing price of Chipotle’s
common stock for any period of 60 consecutive trading days during performance term (or 30 consecutive trading days for
Mr. Moran, whose award was not modified in February 2017 with the other executive officers due to his pending retirement)
is at least $700, which is approximately 52% higher than the closing price of Chipotle’s common stock on the grant date.
The number of shares issuable at the end of the performance term will be determined based on the highest average closing
stock price achieved for any period of 60 consecutive trading days during the performance term (30 consecutive trading
days for Mr. Moran). Additionally, as a result of the modification of each award (other than Mr. Moran’s) in March 2017, if the
average closing stock price of Chipotle’s common stock during the last 60 consecutive trading days of the performance
period is below $650, the maximum payout of the award will be no greater than the target payout, regardless of whether a
higher payout level was actually achieved earlier in the performance period.

44 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

Vesting and payout of each award is subject to the recipient’s continued employment through the vesting date, subject to
the potential pro-rata payout to the recipient or his estate in the event of termination due to death, disability or retirement,
and to potential accelerated vesting in the event of certain terminations within two years of certain change in control
transactions, as described in the footnotes to the Equity Award Vesting table appearing below under “Potential Payments
Upon Termination or Change-in-Control.” We filed the form of Performance Share Agreements for these grants as an
exhibit to our Quarterly Report on Form 10-Q filed with the SEC on April 27, 2016.

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016

OPTION AWARDS

STOCK AWARDS

NAME

STEVE ELLS

MONTY MORAN

JACK HARTUNG

MARK CRUMPACKER

NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
EXERCISABLE

NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
UNEXERCISABLE

OPTION
EXERCISE
PRICE

OPTION
EXPIRATION
DATE

43,750

43,750

40,000

60,000

75,000

75,000

43,750

43,750

25,000

25,000

15,000

15,000

4,000

4,000

2,000

7,500

7,500

43,750(1)

43,750(2)

–

–

–

–

43,750(1)

43,750(2)

–

–

15,000(1)

15,000(2)

–

–

–

7,500(1)

7,500(2)

$543.20

$543.20

$ 371.63

$ 371.63

$ 318.45

$ 318.45

$543.20

$543.20

$ 318.45

$ 318.45

$543.20

$543.20

$ 318.45

$ 318.45

$365.80

$543.20

$543.20

2/3/2021

2/3/2021

2/6/2019

2/6/2019

2/7/2020

2/7/2020

2/3/2021

2/3/2021

2/7/2020

2/7/2020

2/3/2021

2/3/2021

2/7/2020

2/7/2020

6/8/2020

2/3/2021

2/3/2021

EQUITY INCENTIVE
PLAN AWARDS:
NUMBER OF
UNEARNED
SHARES, UNITS
OR OTHER RIGHTS
THAT HAVE NOT
VESTED

EQUITY INCENTIVE
PLAN AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER RIGHTS
THAT HAVE NOT
VESTED

7,444(3)

13,500(5)

7,444(3)(6)

13,500(5)(6)

$2,808,770(4)

$5,093,820(4)

$2,808,770(4)

$5,093,820(4)

3,126(3)

5,675(5)

$ 1,179,502(4)

$ 2,141,291(4)

2,233(3)

4,050(5)

$ 842,556(4)

$ 1,528,146(4)

(1) Vesting of the unvested portion of these Performance SOSARs is contingent upon our achievement of stated levels of cumulative cash
flow from operations prior to the fifth fiscal year-end following the award date, with vesting to occur no sooner than February 3, 2017.
Vesting of these Performance SOSARs may accelerate as described in the footnotes to the table below under “Potential Payments
Upon Termination or Change-in-Control.”

(2) These SOSARs, which were subject to time-based vesting only, vested in full on February 3, 2017.
(3) Represents shares issuable under the 2015 performance share awards, assuming achievement at the threshold level. Vesting is based

on relative achievement versus our restaurant industry peer group in sales growth, net income growth and total shareholder return
over the three year performance period.

(4) Based on the closing stock price of our common stock on December 30, 2016 of $377.32 per share.
(5) Represents shares issuable under the 2016 performance share awards, assuming achievement at the threshold level (which would

require that our average closing stock price for any period of 60 consecutive trading days during the performance period is at least
$700). The performance terms for the 2016 performance share awards are further described above under “ – Terms of 2016
Performance Share Awards.”

(6) Any payouts for Mr. Moran, who will retire in June 2017, subject to the terms of his retirement agreement, will be prorated based on his
retirement date and would be 5,984 shares at the threshold level for the award described in note (3) above, and 6,060 shares at the
threshold level for the award described in note (5), above.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 45

Executive Officers and Compensation
(continued)

OPTION EXERCISES AND STOCK VESTED IN 2016
The following table provides summary information about all SOSARs exercised by our executive officers during 2016. No
full-value shares of stock vested during 2016.

NAME

Steve Ells

OPTION AWARDS

NUMBER OF
SHARES
ACQUIRED
ON
EXERCISE

75,000

VALUE REALIZED
ON EXERCISE(1)

$9,245,980

(1) Based on the amount by which the price of our common stock used to compute the exercise proceeds exceeded the base price of the

SOSARs on the date of exercise; this amount does not take into account the tax liability associated with the exercise.

NON-QUALIFIED DEFERRED COMPENSATION
FOR 2016
The Chipotle Mexican Grill, Inc. Supplemental Deferred
Investment Plan permits eligible management employees
who elect to participate in the plan, including our executive
officers, to make contributions to deferral accounts once
the participant has maximized his or her contributions to
our 401(k) plan. Contributions are made on the participant’s
behalf through payroll deductions from 1 percent to 50
percent of the participant’s monthly base compensation,
which are credited to the participant’s “Supplemental
Account,” and from 1 percent to 100 percent of awards
under the AIP, which are credited to the participant’s
“Deferred Bonus Account.” We also match contributions at
the rate of 100 percent on the first 3 percent of
compensation contributed and 50 percent on the next 2
percent of compensation contributed. Amounts contributed
to a participant’s deferral accounts are not subject to
federal income tax at the time of contribution. Amounts
credited to a participant’s deferral accounts fluctuate in
value to track a variety of available investment choices
selected by the participant (which may be changed by the
participant at any time), and are fully vested at all times
following contribution.

Participants may elect to receive distribution of amounts
credited to either or both of the participant’s Supplemental
Account or Deferred Bonus Account, in either (1) a lump
sum amount paid from two to six years following the end of
the year in which the deferral is made, subject to a one-
time opportunity to postpone such lump sum distribution,
or (2) a lump sum or installment distribution following
termination of the participant’s service with us, with
installment payments made in accordance with the
participant’s election on a monthly, quarterly or annual
basis over a period of up to 15 years following termination,
subject to a one-time opportunity to change such
distribution election within certain limitations. Distributions
in respect of one or both of a participant’s deferral
accounts are subject to federal income tax as ordinary
income in the year the distribution is made.

Amounts credited to participants’ deferral accounts are
unsecured general obligations of ours to pay the value of
the accounts to the participants at times determined under
the plan.

46 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Executive Officers and Compensation
(continued)

The table below presents contributions by each executive officer, and our matching contributions, to the Supplemental
Deferred Investment Plan during 2016, as well as each executive officer’s earnings under the plan and ending balances in
the plan on December 31, 2016.

NAME

Steve Ells

Monty Moran

Jack Hartung

Mark Crumpacker

EXECUTIVE
CONTRIBUTIONS
IN LAST FY(1)

REGISTRANT
CONTRIBUTIONS
IN LAST FY(2)

AGGREGATE
EARNINGS)
IN LAST FY(3)

AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS

$ 62,192

$ 52,570

$372,154

$ 16,154

$49,754

$42,646

$30,538

$ 12,923

$ 71,819

$110,649

$ 34,942

$ 12,219

$654,003

$948,590

–

$ 61,583

AGGREGATE
BALANCE
AT LAST
FYE(4)

$1,006,524

$2,577,344

$ 6,178,923

$ 249,977

(1) These amounts are reported in the Summary Compensation Table as part of each executive’s “Salary” for 2016.
(2) These amounts are reported in the Summary Compensation Table as part of each executive’s “All Other Compensation” for 2016.
(3) These amounts are not reported as compensation in the Summary Compensation Table because none of the earnings are “above

market” as defined in SEC rules.

(4) These amounts include amounts previously reported in the Summary Compensation Table as “Salary,” “Non-Equity Incentive Plan

Compensation” or “All Other Compensation” for years prior to 2016 (ignoring for purposes of this footnote any investment losses on
balances in the plan and any withdrawals/distributions), in the following aggregate amounts: $2,338,669 for Mr. Ells, $3,134,558 for
Mr. Moran, $5,228,939 for Mr. Hartung, and $318,612 for Mr. Crumpacker.

McDonald’s Excess Non-Qualified Plan and
Non-Qualified Supplemental Plan
Prior to our separation from McDonald’s in October 2006,
our executive officers and other key employees were
permitted to participate in non-qualified deferred
compensation plans maintained by McDonald’s. These plans
provided substantially similar benefits to participants as
our Supplemental Deferred Investment Plan, except that
the investment and distribution options in the McDonald’s

plans are different than those in our plan. Effective with our
separation from McDonald’s, our employees’ service with
McDonald’s was deemed to have terminated, and the
balances in these plans were distributed in accordance with
each participant’s distribution elections. Our employees are
no longer permitted to contribute to these plans, but the
balances remaining in the plans in respect of our executive
officers are attributable in part to service as one of our
employees.

The table below presents, for Mr. Hartung, our only executive officer with a balance remaining in any McDonald’s non-
qualified deferred compensation plan, his aggregate earnings under and aggregate withdrawals from the McDonald’s plans
during 2016, as well as his aggregate ending balance in the plans as of December 31, 2016.

NAME

Jack Hartung

EXECUTIVE
CONTRIBUTIONS
IN LAST FY

REGISTRANT
CONTRIBUTIONS
IN LAST FY

AGGREGATE
EARNINGS
IN LAST FY(1)

AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS(2)

AGGREGATE
BALANCE
AT LAST
FYE

–

–

$4,908

$383,536

–

(1) This amount is not reported as compensation in the Summary Compensation Table because none of the earnings are “above market”

as defined in SEC rules.

(2) This amount includes amounts previously reported in the Summary Compensation Table as “Salary” or “All Other Compensation” for

2006 (ignoring for purposes of this footnote any investment losses on balances in the plans), in the amounts of $140,647.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 47

Executive Officers and Compensation
(continued)

POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE-IN-CONTROL
We have not entered into written employment, change-in-
control, severance or similar agreements with any of our
employees, including our executive officers. Accordingly,
we do not have any written agreements requiring that we
make post-employment severance payments to the
executive officers in the event their employment
terminates. In addition, payouts under the AIP are
conditioned on the employee being employed as of the
payout date. We have in the past paid severance to
executives or other key employees who have left us, and we
may negotiate individual severance arrangements with any
executive officer whose employment with us terminates in
the future, depending on the circumstances of the
executive’s termination.

The terms of the equity-based awards made to our
executive officers do provide for post-employment benefits
in certain circumstances. However of the unvested equity-
based awards outstanding as of December 31, 2016, (i) the
2014 SOSAR awards and 2016 performance share awards
were “underwater” based on the closing price of our
common stock on December 31, 2016 and therefore had no
value as of that date, and (ii) the 2015 performance share
awards would not have paid out, based on our relative
performance versus the peer group as of December 31,
2016.

On December 9, 2016, Monty Moran, who previously served
as Co-Chief Executive Officer, provided us notice that he

will retire effective June 9, 2017, and resigned from his
officer positions and as a member of our Board. In
connection with his resignation and pending retirement,
Mr. Moran entered into a Retirement and Non-Competition
Agreement, pursuant to which he has agreed for a two year
period not to, directly or indirectly, own, manage, operate,
control, be employed or engaged in any capacity (whether
or not for compensation) by, or render services, advice, or
assistance in any capacity to, a business competing with us
in the continental United States. Through his retirement
date, Mr. Moran will remain employed in a non-officer
position. The Retirement and Non-Competition Agreement
contains certain other rights and obligations, and the
foregoing description of the agreement is qualified in its
entirety by reference to the full terms of the agreement,
which is filed as an exhibit to our Current Report on Form
8-K filed on December 12, 2016.

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our officers and directors and holders of greater
than 10 percent of our outstanding common stock to file
initial reports of their ownership of our equity securities
and reports of changes in ownership with the SEC. Based
solely on a review of the copies of such reports furnished to
us and written representations from our officers and
directors, we believe that all Section 16(a) filing
requirements were complied with on a timely basis in 2016.

48 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Certain Relationships and Related
Party Transactions

Agreements With Pershing Square Capital
Management, L.P.
See “Proposal 1 – Election of Directors – Director
Nomination Process – Investor Agreement Regarding Board
Nominations” for details regarding the Investor Agreement
entered into with Pershing Square on December 14, 2016.
Concurrent with the Investor Agreement, we also entered
into a Confidentiality Agreement allowing Pershing Square
to receive non-public information regarding Chipotle,
subject to specified confidentiality obligations.

Agreement, the Confidentiality Agreement and the
Registration Rights Agreement are qualified in their
entirety by reference to the full text of the Investor
Agreement (including the form of Confidentiality
Agreement included as an exhibit thereto), which is
attached as Exhibit 10.1 to our Current Report on Form 8-K
filed with the SEC on December 19, 2016, and the
Registration Rights Agreement, which is attached as Exhibit
10.11 to our Annual Report on Form 10-K filed with the SEC
on February 7, 2017.

Additionally, on February 3, 2017, we entered into a
Registration Rights Agreement with Pershing Square.
Pursuant to the Registration Rights Agreement, Pershing
Square may make up to four requests that we file a
registration statement to register the sale of shares of our
common stock that Pershing Square beneficially owns,
subject to the limitations and conditions provided in the
Registration Rights Agreement. The Registration Rights
Agreement also provides that we will file and keep
effective, subject to certain limitations, a shelf registration
statement covering shares of our common stock
beneficially owned by Pershing Square, and also provides
certain piggyback registration rights to Pershing Square.
We would be responsible for the expenses of any such
registration.

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

The Investor Agreement, Confidentiality Agreement and
Registration Rights Agreement contain various other
obligations and provisions applicable to Chipotle and
Pershing Square. The foregoing descriptions of the Investor

Other Registration Rights
Prior to our initial public offering in 2006, certain of our
current shareholders, including Steve Ells, our Chairman
and Chief Executive Officer, Monty Moran, our former Co-
Chief Executive Officer and former member of our Board of
Directors, and Albert S. Baldocchi and Darlene J. Friedman,
members of our Board, entered into a registration rights
agreement with us relating to shares of common stock they
held at the time the agreement was executed. Under the
agreement, these directors are entitled to piggyback
registration rights with respect to registration statements
we file under the Securities Act of 1933, as amended,
subject to customary restrictions and pro rata reductions in
the number of shares to be sold in an offering. We would be
responsible for the expenses of any such registration.

Director and Officer Indemnification
We have entered into agreements to indemnify our
directors and executive officers, in addition to the
indemnification provided for in our certificate of
incorporation and bylaws. These agreements, among other
things, provide for indemnification of our directors and
executive officers for certain expenses (including
attorneys’ fees), judgments, fines and settlement amounts
incurred by any such person in any action or proceeding,
including any action by or in the right of our company,
arising out of such person’s services as a director or
executive officer of ours, any subsidiary of ours or any
other company or enterprise to which the person provided
services at our request. We believe that these provisions
and agreements are necessary to attract and retain
qualified persons as directors and executive officers.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 49

Other Business and Miscellaneous

The Board and our management do not know of any other
matters to be presented at the annual meeting. If other
matters do properly come before the annual meeting, it is
intended that the persons named in the accompanying
proxy vote the proxy in accordance with their best
judgment on such matters.

SHAREHOLDER PROPOSALS AND
NOMINATIONS FOR 2018 ANNUAL
MEETING
Inclusion of Proposals in Our Proxy
Statement and Proxy Card under the SEC’s
Rules
Any proposal of a shareholder intended to be included in
our proxy statement and form of proxy/voting instruction
card for the 2018 annual meeting of shareholders pursuant
to SEC Rule 14a-8 must be received by us no later than
November 30, 2017, unless the date of our 2018 annual
meeting is more than 30 days before or after May 25, 2018,
in which case the proposal must be received a reasonable
time before we begin to print and send our proxy materials.
All proposals must be addressed to Chipotle Mexican
Grill, Inc., 1401 Wynkoop Street, Suite 500, Denver,
CO 80202, Attn: Corporate Secretary.

Bylaw Requirements for Shareholder
Submission of Nominations and Proposals
A shareholder nomination of a person for election to our
Board of Directors or a proposal for consideration at our
2018 annual meeting must be submitted in accordance with
the advance notice procedures and other requirements set
forth in Article II of our bylaws. These requirements are
separate from, and in addition to, the requirements
discussed above to have the shareholder nomination or
other proposals included in our proxy statement and form
of proxy/voting instruction card pursuant to the SEC’s
rules. Our bylaws require that the proposal or nomination
must be received by our corporate Secretary at the above
address no earlier than the close of business on
January 25, 2018, and no later than the close of business
on February 24, 2018, unless the date of the 2018 annual
meeting is more than 30 days before or 60 days after
May 25, 2018. If the date of the 2018 annual meeting is
more than 30 days before or 60 days after May 25, 2018,
we must receive the proposal or nomination no earlier than
the 120th day before the meeting date and no later than the

90th day before the meeting date, or if the date of the
meeting is announced less than 100 days prior to the
meeting date, no later than the tenth day following the day
on which public disclosure of the date of the 2018 annual
meeting is made.

AVAILABILITY OF SEC FILINGS,
CORPORATE GOVERNANCE
GUIDELINES, CODE OF CONDUCT,
CODES OF ETHICS AND COMMITTEE
CHARTERS

Copies of our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K
and all amendments to those reports filed with the SEC, our
Code of Conduct, Codes of Ethics, Corporate Governance
Guidelines, the charters of the Audit Committee, the
Compensation Committee and the Nominating and
Corporate Governance Committee, and any reports of
beneficial ownership of our common stock filed by
executive officers, directors and beneficial owners of more
than 10 percent of the outstanding shares of either class of
our common stock are posted on and may be obtained on
the Investors page of our website at www.chipotle.com
without charge, or may be requested (exclusive of exhibits),
at no cost by mail to Chipotle Mexican Grill, Inc., 1401
Wynkoop Street, Suite 500, Denver, CO 80202, Attn:
Corporate Secretary.

DELIVERY OF MATERIALS TO
SHAREHOLDERS WITH SHARED
ADDRESSES

Beneficial holders who own their shares through a broker,
bank or other nominee and who share an address with
another such beneficial owner are only being sent one
Notice of Internet Availability of Proxy Materials or set of
proxy materials, unless such holders have provided
contrary instructions. If you wish to receive a separate
copy of these materials or if you are receiving multiple
copies and would like to receive a single copy, please
contact Chipotle investor relations by phone at (303) 605-
1042, by writing to Investor Relations, Chipotle Mexican
Grill, Inc., 1401 Wynkoop Street, Suite 500, Denver,
Colorado, or by email to ir@chipotle.com. We will promptly
deliver a separate copy to you upon written or oral request.

50 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT

Other Business and Miscellaneous
(continued)

ATTENDANCE AT THE MEEETING

To attend the meeting, you must be a shareholder on the record date of March 27, 2017, and obtain an admission ticket in
advance. Tickets will be available to registered and beneficial owners and to one guest accompanying each registered or
beneficial owner. You can print your own tickets and you must bring them to the meeting to gain access. Tickets can be
printed by accessing Shareholder Meeting Registration at www.proxyvote.com and following the instructions provided (you
will need the control number included on your proxy card, voter instruction form or notice).

Requests for admission tickets will be processed in the order in which they are received and must be requested no later
than 11:59 p.m. Eastern Time on May 24, 2017. Please note that seating is limited and requests for tickets will be accepted on
a first-come, first-served basis.

On the day of the meeting, each shareholder will be required to present valid picture identification such as a driver’s license
or passport with their admission ticket, and you may be denied admission if you do not. Seating will begin at 7:30 a.m. local
time and the meeting will begin at 8:00 a.m. Cameras (including cell phones with photographic capabilities), recording
devices and other electronic devices will not be permitted at the meeting. You may be required to enter through a security
check before being granted access to the meeting.

MISCELLANEOUS

If you request physical delivery of these proxy materials, we will mail along with the proxy materials our 2016 Annual
Report, including our Annual Report on Form 10-K for fiscal year 2016 (and the financial statements included in that report)
as filed with the SEC; however, it is not intended that the Annual Report on Form 10-K be a part of the proxy statement or a
solicitation of proxies.

You are respectfully urged to enter your vote instruction via the Internet as explained on the Notice of Internet Availability
of Proxy Materials that was mailed to you, or if you are a holder of record and have received a proxy card, via telephone as
explained on the proxy card. We will appreciate your prompt response.

By order of the Board of Directors

/s/ Steve Ells
Chief Executive Officer and Director

March 30, 2017

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2017 PROXY STATEMENT 51

[THIS PAGE INTENTIONALLY LEFT BLANK]

MANAGEMENT TEAM

(cid:54)(cid:87)(cid:72)(cid:89)(cid:72)(cid:3)(cid:40)(cid:79)(cid:79)(cid:86)
(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:111)(cid:70)(cid:72)(cid:85)

Jack Hartung
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:111)(cid:70)(cid:72)(cid:85)

Mark Crumpacker
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:50)(cid:73)(cid:111)(cid:70)(cid:72)(cid:85)

Curt Garner
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BOARD OF DIRECTORS

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Chairman of the Board

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Director
Independent Financial Consultant and Strategic Advisor

(cid:51)(cid:68)(cid:88)(cid:79)(cid:3)(cid:55)(cid:17)(cid:3)(cid:38)(cid:68)(cid:83)(cid:83)(cid:88)(cid:70)(cid:70)(cid:76)(cid:82)
Director
Executive Vice President, General Counsel, Time Warner

(cid:45)(cid:82)(cid:75)(cid:81)(cid:3)(cid:54)(cid:17)(cid:3)(cid:38)(cid:75)(cid:68)(cid:85)(cid:79)(cid:72)(cid:86)(cid:90)(cid:82)(cid:85)(cid:87)(cid:75)(cid:13)
Director
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(cid:51)(cid:68)(cid:87)(cid:85)(cid:76)(cid:70)(cid:78)(cid:3)(cid:45)(cid:17)(cid:3)(cid:41)(cid:79)(cid:92)(cid:81)(cid:81)(cid:13)
Director
Executive Vice President, Strategic Planning and Acquisitions,
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(cid:39)(cid:68)(cid:85)(cid:79)(cid:72)(cid:81)(cid:72)(cid:3)(cid:45)(cid:17)(cid:3)(cid:41)(cid:85)(cid:76)(cid:72)(cid:71)(cid:80)(cid:68)(cid:81)(cid:13)
Director
Senior Vice President, Human Resources, Syntex Corp. (retired)

Neil W. Flanzraich
Lead Independent Director
Executive Chairman, Cantex Pharmaceuticals; private investor

(cid:54)(cid:87)(cid:72)(cid:83)(cid:75)(cid:72)(cid:81)(cid:3)(cid:42)(cid:76)(cid:79)(cid:79)(cid:72)(cid:87)(cid:87)(cid:13)
Director
Senior Executive Leader at Google[x] and Advisor to Google 
Ventures

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Director
Senior Vice President, Corporate Development, Liberty Media

Kimbal Musk
Director
Entrepreneur and Co-Founder of the Kitchen

Ali Namvar
Director
Partner, Pershing Square Capital Management, L.P.

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Director
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(retired)

* - not standing for re-election at the 2016 annual meeting of shareholders

STOCK EXCHANGE LISTING

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(cid:54)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:29)(cid:3)(cid:38)(cid:48)(cid:42)

AUDITORS
(cid:40)(cid:85)(cid:81)(cid:86)(cid:87)(cid:3)(cid:9)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)(cid:47)(cid:47)(cid:51)(cid:3)(cid:95) Denver, Colorado

STOCK TRANSFER AGENT
By mail:
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(cid:20)(cid:20)(cid:20)(cid:19)(cid:3)(cid:38)(cid:72)(cid:81)(cid:87)(cid:85)(cid:72)(cid:3)(cid:51)(cid:82)(cid:76)(cid:81)(cid:87)(cid:72)(cid:3)(cid:38)(cid:88)(cid:85)(cid:89)(cid:72)(cid:15)(cid:3)(cid:54)(cid:88)(cid:76)(cid:87)(cid:72)(cid:3)(cid:20)(cid:19)(cid:20)
Mendota Heights, MN 55120

By phone:
1-800-401-1957

Online:
www.shareowneronline.com

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with the SEC, at no cost on the investor relations page of our website at ir.chipotle.com, or by writing to the Corporate Secretary, Chipotle Mexican Grill, Inc., 1401 Wynkoop Street, Suite 500, Denver, CO 80202

FOOD WITH INTEGRITY

In July, we launched A Love Story, a short film that’s a parable of how 

the fast food industry has devolved over the years. In it, the moment 
We prepare our delicious ingredients simply, using classic 
young Ivan saw Evie, it was love at first sight. Needing money to ask 
cooking techniques, without added sugar, artificial 
her to a movie, Ivan starts innocently competing with Evie’s food 
sweeteners, flavors, or colors. This includes meat raised 
stand. The result devolves into a thirty-year-long fast food rivalry. 
without antibiotics or added hormones, pasture-raised  
Using every trick in the book, they unwittingly abandon their integrity 
dairy, and only non-GMO ingredients.
to win customers. But when they can no longer recognize their 

monstrous creations, they ultimately discover what truly matters, 

their love for real food...and each other.

- Watch it at - 

CHIPOTLE.COM/A-LOVE-STORY