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CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/05/2005
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        As discussed in "Certain Relationships and Related Party Transactions—Services Agreement," we expect to enter into an agreement with McDonald's pursuant to which McDonald's will continue to provide us, for a mutually agreed-upon fee, with certain services it has historically provided. In addition, we may in the future repurchase Chipotle franchises from our franchisees in connection with their obligation to dispose of either that franchise or their McDonald's franchise within 24 months after relevant triggering events. We are not obligated to repurchase any of these franchises. See "Certain Relationships and Related Party Transactions—Agreements With Franchisees."

Off-Balance Sheet Arrangements

        At December 31, 2004 and September 30, 2005, we had no off-balance sheet arrangements or obligations.

Quantitative and Qualitative Disclosure about Market Risk

        We're exposed to interest rate risk in two ways. First, we've invested our excess cash under an agreement with McDonald's. Under that agreement, McDonald's has agreed to pay us interest on those cash investments at the 30-day commercial paper rate plus 50 basis points. Changes in interest rates affect the interest income we earn and, therefore, impact our cash flows and results of operations. At December 31, 2004, we had deposited $0.7 million with McDonald's under this agreement, bearing interest at 2.66% on that date. We're also exposed to interest rate risk as a result of our interest-bearing obligations. Such exposures currently are limited to borrowings we've made under our $30 million line of credit with McDonald's, which bears interest at the U.S. prime rate plus 100 basis points. At September 30, 2005, we had $4.6 million outstanding under this line of credit with McDonald's, bearing interest at 7.5% on that date. We expect that this line of credit will be terminated in connection with this offering and that we will repay any outstanding amounts.

        We're also exposed to commodity price risks. Many of the ingredients we use to prepare our food, as well as our packaging materials, are commodities that are affected by weather, seasonality and other factors outside our control. We work closely with our suppliers and use a mix of forward, fixed and formula pricing protocols. Though we do not have long-term supply contracts or guaranteed purchase amounts, our pricing protocols with suppliers can remain in effect for periods ranging from one month to a year, depending on the outlook for prices of the particular ingredient. 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, weather, crises and other world events that may affect supply prices. Long-term increases in ingredient prices could adversely affect our future results if we could not increase menu prices at the same pace for competitive or other reasons. Similarly, if we believe the ingredient price increase to be short in duration we may choose not to pass on the cost increases, which could adversely affect our short-term financial results.


        Over the past five years, inflation has not significantly affected our operating results. The impact of inflation could, however, significantly affect our operations in the following ways:

    Food, beverage and packaging costs as a percentage of revenue has fluctuated in the past, generally in response to changes in availability of our main ingredients. Based on current market conditions, we believe that the cost of our main ingredients should not experience significant volatility, except for short-term chicken prices, which have increased as a result of the damage to chicken farms caused by hurricane Katrina. In addition, diesel prices could also experience further increases as a result of the shut-down of several oil refineries by hurricanes Katrina and Rita, which could cause our other ingredient costs to increase.


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