deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our
reputation or investor perceptions of us. We also expect that it will be difficult and expensive to obtain director and officer liability insurance, and we may be required to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our
board of directors or as executive officers. Advocacy efforts by shareholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or
estimate the amount of additional costs we may incur or the timing of such costs.
Risks Relating to Our Affiliation with McDonald's
We're controlled by McDonald's, whose interests may conflict with yours.
Upon completion of this offering, McDonald's will beneficially own no shares of our class A common stock, but will own about 90% of our outstanding
class B common stock, representing 88% of the combined voting power of our outstanding stock and 69% of the economic interest in our outstanding
common stock (or 87% and 65%, respectively, if the underwriters' over-allotment option is exercised in full). Accordingly, as it has since 1998 when we became its subsidiary, McDonald's
will continue to exercise significant influence over our business policies and affairs, including the composition of our board of directors and any action requiring the approval of our shareholders,
including the adoption of amendments to our certificate of incorporation, the issuance of additional shares of equity securities, the payment of dividends and the approval of mergers or a sale of
substantially all of our assets. The concentration of ownership may also make some transactions, including mergers or other changes in control, more difficult or impossible without the support of
McDonald's. McDonald's interests may conflict with your interests as a shareholder. For additional information about our relationships with McDonald's, you should read the information under the
headings "Principal Shareholders" and "Certain Relationships and Related Party Transactions."
Various conflicts of interest between McDonald's and us could arise. Many of our officers own stock in McDonald's, in some cases more than the amount of Chipotle
common stock they own. In addition, one of our directors, Mats Lederhausen, is Managing Director of our controlling shareholder, McDonald's Ventures, LLC. Ownership interests of directors or officers
of McDonald's in the common stock of Chipotle, or a person's service as either a director or officer of both companies, could create or appear to create potential conflicts of interest when those
directors and officers are faced with decisions that could have different implications for McDonald's and Chipotle. These decisions could, for example, relate to:
over corporate opportunities;
between us and McDonald's;
retention or recruiting;
dividend policy; and
services and arrangements from which Chipotle benefits as a result of its relationship with McDonald's.
conflicts of interest could also arise if we enter into any new commercial arrangements with McDonald's in the future. Our directors and officers who have interests in both
McDonald's and us may also face conflicts of interest with regard to the allocation of their time between McDonald's and Chipotle.