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SEC Filings

CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
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    Expanding Store Base

        Opening additional stores in existing and new U.S. markets has contributed substantially to our restaurant sales growth. We opened 57 stores in 2002, 76 stores in 2003 and 104 stores in 2004. We plan to open at least 75 stores in 2005, of which 58 were already open and 17 were under construction on October 31, 2005. We opened more stores in 2004 in part because, in certain markets, we were able to use McDonald's real estate personnel and other resources to locate and obtain additional store sites. We did not use those resources in connection with openings in 2005. We have closed only five stores during the past three years—two in 2002 and three in 2003—and have closed only six stores in total since we began operating. As we operate more stores, our rate of expansion relative to the size of our store base will decline.

        Our operating plan calls for new store openings throughout the year and our capital needs vary based on the types of stores we build and local market conditions. We have urban stores, free-standing stores and suburban stores. Our suburban stores are either in-line, that is, located in a line of stores, or end-cap, that is, located at the end of a line of stores. In 2004, we spent on average about $906,000 ($880,000 excluding land purchases) in development and construction costs per store. On average, our free-standing stores cost about $1.2 million each, while our end-cap and in-line stores cost about $700,000 each. While free-standing and suburban end-cap stores generally cost more to build than suburban in-line stores, those stores are often located in better trade areas, are more visible and generally attract more customers in the start-up period. Urban stores, such as those in New York City and other downtown urban areas, are generally our most expensive stores, with average development and construction costs of $1.3 million in 2004. Meeting our plan in the coming years will depend on various factors, including whether a given market is new for us, the availability of appropriate sites, competition for those sites, construction schedules and costs, as well as other matters that are often outside our control, such as local zoning and licensing requirements. As we expand into central urban areas, we expect our average costs to open new stores may increase due to the more significant reconstruction work that often needs to be done at those sites.

        Historically, our new stores have opened with an initial ramp-up period typically lasting up to 24 months or more, during which they generated sales below the levels at which we expect them to normalize. However, the period of time it takes for our stores in existing markets to ramp up has consistently shortened as we've grown and customers have learned about our brand, enabling new stores in those markets to open with higher average store sales. For example, average sales for new stores in the first 90 trading days increased 29.4% to $303,390 for stores opened in 2004 from $234,450 for stores opened in 2002. In new markets, however, our ramp-up periods and average sales for new stores are less predictable as a result of our less extensive knowledge of those markets and lower brand awareness, among other factors. Another important factor in declining ramp-up periods is the ongoing evolution of our real estate selection process. As we've gained experience, we've been able to adopt more effective criteria in deciding where to build each store, and have adjusted our mix of store types to support our brand development. In addition, our national brand awareness has increased and our store opening strategies have become more effective. For example, when we open a new store, we plan a range of activities to introduce our food to the local community to help create interest in the store from the start.

    Increased Average Store Sales

        The other important driver of the growth in our restaurant sales has been increased average store sales, which we define as the average trailing 12-month sales for stores in operation for at least 12 full


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