An investment in our class A common stock involves a high degree of risk. You should carefully consider the following information
about these risks, together with the other information contained in this prospectus, before deciding to buy our class A common stock. Any of the risks we describe below could adversely affect
our business, financial condition or operating results. The market price of our class A common stock could decline if one or more of these risks and uncertainties develop into actual events.
You could lose all or part of your investment.
Risks Related to Our Business and Industry
There were 467 Chipotle stores at October 31, 2005, 162 of which have opened since January 1, 2004. We plan to increase the number of our stores
significantly in the next three years. This growth strategy and the substantial investment associated with the development of each new store may cause our operating results to fluctuate and be
unpredictable or adversely affect our profits. Our future results depend on various factors, including successful selection of new markets and store locations, market acceptance of the Chipotle
experience, consumer recognition of the quality of our food and willingness to pay our prices (which reflect our often higher ingredient costs), the quality of our operations and general economic
conditions. What's more, as has happened when other fast-casual restaurant concepts have tried to expand nationally, we may find that the Chipotle concept has limited or no appeal to
customers in new markets or we may experience a decline in the popularity of the Chipotle experience. Newly opened stores may not succeed, future markets and stores may not be successful and, even if
we're successful, our average store sales may not increase at historical rates.
As we increase our independence from McDonald's, we may face difficulties replacing services it currently provides to us and entering into new or modified arrangements with existing or new suppliers
or service providers.
We've benefited from our relationship as a consolidated or majority-owned subsidiary of McDonald's. For example, McDonald's has provided us, directly or through
its own vendor relationships, with accounting services, insurance policy coverage, banking services, health and other insurance benefits for our employees and employee benefit plans, as well as with
its expertise in certain areas of our operations, such as real estate. We also benefit from our relationship with McDonald's when we buy supplies or distribution or other services. For example,
McDonald's relationship with Coca-Cola has helped us contain our beverage costs, and we've relied on the McDonald's distribution network. As long as we are a consolidated or majority-owned
subsidiary of McDonald's, we expect to continue to have some of these advantages, and in connection with this transaction we've entered into a services agreement with McDonald's to clarify our
Following this offering, we expect that McDonald's will own about % of the combined voting power of our common stock. If McDonald's ownership interest declines
significantly in the future, as we expect it will, we'll lose an increasing amount of these benefits, many of which will not be covered by the services agreement. For example, we currently obtain
beneficial pricing from certain suppliers and service providers, and pay McDonald's for the costs they incur in administering our 401(k) plan and providing certain health benefits, including workers
compensation, for our employees. If McDonald's ceases to own more than 80% of the combined voting power of our outstanding stock, we'll need to administer our 401(k) plan and provide these health
benefits on a stand-alone basis and could incur increased costs as a result. If McDonald's ceases to own more than 50% of the combined voting power of our outstanding stock, we may have to pay more
for processing our credit and debit cards and our gift cards, our audit fees, our property insurance, our umbrella and excess liability premiums and our banking services. In some cases, current
benefits, such as the use of McDonald's distribution network, are not contractually tied to