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CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
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particular) have increasingly made available the higher-quality food that people want, as illustrated by the proliferation of premium coffee shops, beers, specialty supermarkets and the like.

        Restaurants today come in many shapes and sizes, ranging from high-end full-service restaurants to fast-food establishments. But that hasn't always been the case. When Steve Ells opened the first Chipotle in 1993, consumers had few dining options between traditional fast-food establishments and high-end full-service restaurants. Steve was frustrated by this lack of options and thought he could fill the void. Relying on his view that "fast" didn't have to mean "fast food," Steve opened the first Chipotle store and served food made from higher-quality ingredients, using many traditional cooking methods and prepared to order rather than in advance. Steve tried to avoid formulaic approaches that were common in quick-service restaurants and looked to fine-dining restaurants for inspiration, using architectural and design elements like those one would expect in a full-service restaurant. He also chose a simple menu that allowed him to price menu items closer to fast-food prices and decided not to use waiters, so that food could be quickly served directly to the customer.

        When we opened our first store in 1993, there wasn't even an industry category to describe what we were doing. Since then, others have moved to fill the gap between fast-food establishments and full-service restaurants and a new industry segment, dubbed "fast-casual," has emerged. These restaurants combined characteristics from both full-service restaurants (the more pleasant atmosphere, higher-quality ingredients and food that's made to order) and from quick-service restaurants (chiefly accessibility, lower prices and faster service), and blended them to create something that sets fast-casual restaurants apart from both. Like many fast-casual restaurants, our stores feature last-minute food preparation and assembly with menu items ordered directly from the employees preparing the food, and rely on a variety of fresh ingredients used in creative ways, all served in stores that emphasize design. Customers of fast-casual restaurants often have to pay a bit more for the experience—the fast-casual segment charges, on average, about $7 to $10 per person. The growing demand for fast-casual restaurants (particularly among "Gen-Xers" and "baby boomers") and the increasing popularity and acceptance of various ethnic foods work to our advantage.

        And customers have been gravitating to fast-casual restaurants. In 2004, the fast-casual segment generated about $7.2 billion in sales (representing 2.3% of the industry), according to Technomic, Inc., a national consulting and research firm, and, based on the data prepared by Technomic, is the fastest growing segment of the restaurant industry. Indeed, in 2004, sales in the fast-casual segment grew 12.8%, compared to 7.2% for the industry as a whole, and Technomic has forecast such sales to grow at a compound annual growth rate of between 10.8% and 12.5% from 2004 to 2009, compared to 5.6% for the industry generally.

The Good, the Bad and the Ugly: Competition

        The fast-casual segment of the restaurant industry is highly competitive and fragmented. In addition, fast-casual restaurants compete against other segments of the restaurant industry, including in particular quick-service restaurants and casual dining restaurants. The number, size and strength of competitors vary by region. All of these restaurants compete based on a number of factors, including taste, quickness of service, value, name recognition, restaurant location and customer service. Competition within the fast-casual restaurant segment, however, focuses primarily on taste, quality and the freshness of the menu items and the ambiance and condition of each restaurant. For further information about the restaurant industry, see "—Our Industry" above.

        We compete with national and regional fast-casual and quick-service restaurants, including our parent McDonald's. Our competition also includes a variety of locally owned restaurants and the deli sections and in-store cafés of several major grocery store chains. Many of our competitors have greater financial and other resources, have been in business longer, have greater name recognition and are better established in the markets where our stores are located or are planned to be located. See "Risk Factors—Risks Relating to Our Business and Industry—Competition from restaurant companies could adversely affect us." Our competitors include a number of multi-unit, multi-market Mexican food or burrito restaurant concepts,


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