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Chipotle Mexican Grill Inc – IPO: ‘S-1/A’ on 12/23/05

On:  Friday, 12/23/05, at 1:38pm ET   ·   Private-to-Public:  Document/Exhibit ¶  –  Release Delayed   ·   Accession #:  1047469-5-28624   ·   File #:  333-129221

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/23/05  Chipotle Mexican Grill Inc        S-1/A¶                 8:2.4M                                   Merrill Corp/New/FA

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 1: S-1/A       Pre-Effective Amendment to Registration Statement   HTML   1.01M 
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 8: CORRESP   ¶ Comment-Response or Other Letter to the SEC         HTML     22K 
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 3: EX-3.2      Articles of Incorporation/Organization or By-Laws   HTML     82K 
 4: EX-5.1      Opinion re: Legality                                HTML     15K 
 5: EX-10.5     Material Contract                                   HTML     97K 
 6: EX-10.6     Exhihit 10.6                                        HTML    136K 
 7: EX-23.1     Consent of Experts or Counsel                       HTML      7K 

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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on December 23, 2005

Registration No. 333-129221

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

CHIPOTLE MEXICAN GRILL, INC.
(Exact name of registrant as specified in its charter)

1543 Wazee Street, Suite 200
Denver, CO 80202
(303) 595-4000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Montgomery F. Moran
Chipotle Mexican Grill, Inc.
1543 Wazee Street, Suite 200
Denver, CO 80202
(303) 595-4000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o                 

        If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o                 

        If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o                 

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: o                 

CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o).

(2)

Including shares of class A common stock which may be purchased by the underwriters from the selling shareholder to cover over-allotments, if any.

(3)

Previously paid.

        The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

EXPLANATORY NOTE

        We intend to have two versions of our prospectus included in this registration statement. In addition to a paper version, when we amend this prospectus to include an anticipated price range, we plan to maintain an electronic version at www.chipotleipo.com. The electronic version will be identical to the paper version except that persons viewing the electronic version of our prospectus will be able to access a selection of our print, radio and television advertisements by following a link under the caption "Prospectus Summary." The script of these items and a description of the graphics used in them is provided in Annex A beginning on page A-1.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not is an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued December 23, 2005

7,878,788 Shares

CLASS A COMMON STOCK

Chipotle Mexican Grill, Inc. is offering 6,060,606 shares of our class A common stock and McDonald's Ventures, LLC, the selling shareholder, is offering 1,818,182 shares. This is our initial public offering and no public market exists for our shares. We anticipate that the initial public offering price will be between $15.50 and $17.50 per share.

We intend to apply to list our class A common stock on the New York Stock Exchange under the symbol "CMG."

Investing in our class A common stock involves risks. See "Risk Factors" beginning on page 10.

PRICE $              A SHARE

The selling shareholder has granted the underwriters the right to purchase an additional 1,181,818 shares of class A common stock to cover over-allotments. The underwriters expect to deliver the shares of common stock to purchasers on                           , 2006.

The U.S. Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                          , 2006

TABLE OF CONTENTS

        You should rely only on the information contained in this prospectus. No one is authorized to provide you with information that is different from that in this prospectus. We and the selling shareholder are offering to sell, and seeking offers to buy, shares of our class A common stock only where those offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or any sale of our class A common stock occurs.

        Until                        , 2006 (25 days after the date of this prospectus), all dealers that buy, sell or trade our class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        Neither we nor the selling shareholder has taken any action to permit a public offering of the shares of our class A common stock outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our class A common stock and the distribution of this prospectus outside of the United States.

        When we amend this prospectus to include an anticipated price range, we plan to have a separate website, www.chipotleipo.com, where you can access an electronic version of our prospectus that includes samples of our print, radio and television advertisements.

        Except as the context otherwise requires, "Chipotle," the "Company," "we," "our" or "us" refer to Chipotle Mexican Grill, Inc. and its consolidated subsidiaries. "McDonald's" refers to McDonald's Corporation or, as the context requires, McDonald's Ventures, LLC.

        "Chipotle," "Chipotle Mexican Grill," "Chipotle Mexican Grill (in stylized font)," "Unburritable," "Food With Integrity," "Fresh Is Not Enough Anymore," "The Gourmet Restaurant Where You Eat With Your Hands," the Chili Pepper Logo design, the Foil Burrito design and the Chipotle Medallion design are U.S. registered trademarks of Chipotle.

i

PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you in making your investment decision. You should read the entire prospectus carefully, including the section describing the risks of investing in our class A common stock entitled "Risk Factors" and our financial statements and related notes included elsewhere in this prospectus, before deciding to buy our class A common stock.

CHIPOTLE MEXICAN GRILL, INC.

When a Chain Isn't a "Chain"

        When Chipotle (pronounced chi-POAT-lay) opened its first store in 1993, the idea was simple: demonstrate that food served fast didn't have to be a "fast-food" experience. We use high-quality raw ingredients, classic cooking methods and a distinctive interior design, and have friendly people to take care of each customer—features that are more frequently found in the world of fine dining. When we opened, there wasn't an industry category to describe what we were doing. Some 12 years and more than 460 stores later, we compete in a category of dining now called "fast-casual," the fastest growing segment of the restaurant industry, where customers expect food quality that's more in line with full-service restaurants, coupled with the speed and convenience of fast food.

        Our revenue was $470.7 million in 2004, a 130% increase from 2002 and a 49% increase from 2003, driven by new store openings and increased average store sales. Average store sales grew from $1,056,000 for 2002 to $1,274,000 for 2003, $1,361,000 for 2004 and $1,406,000 for the trailing 12-month period ended September 30, 2005, reflecting the growing consumer awareness of our brand. Strong growth in sales at stores open at least 13 full months, which we call comp store sales, is due mainly to an increase in the number of transactions processed at our registers. Our net income (loss) improved from a loss of $(7.7) million in 2003 to income of $6.1 million in 2004 and $33.4 million (inclusive of a non-recurring $20.3 million tax benefit) in the first nine months of 2005, and our earnings before interest, taxes, depreciation and amortization, or EBITDA, was $7.2 million in 2003, $27.9 million in 2004 and $43.7 million in the first nine months of 2005.

        McDonald's, our management and a small number of outside investors currently own Chipotle. McDonald's interest is about 91% and, after the offering, we expect McDonald's will own about 88% of the combined voting power of our outstanding stock and 69% of the economic interest in our outstanding common stock.

What We Do Really Well

        We try to do a few things really well, and we plan to keep this intentionally focused strategy as we grow. We elevate basic raw ingredients into food that's richer and more sophisticated through our recipes and cooking techniques. Similarly, our store design transforms simple materials in distinctive ways, giving our stores a style that's more architectural in nature and less dependent on standardized design elements. We respect our employees and invite them to share their ideas, which we think inspires them to take pride in their work and increases their dedication to our customers and our company.

"Food With Integrity"

        Our focus has always been on using the kinds of higher-quality ingredients and cooking techniques used in high-end restaurants to make great food accessible at reasonable prices. But our vision has evolved. While using a variety of fresh ingredients remains the foundation of our menu, we believe that "fresh is not enough, anymore." Now we want to know where all of our ingredients come from, so that we can be sure they are as flavorful as possible while understanding the environmental and societal impact of our business. We call this idea "food with integrity," and it guides how we run our business.

•

Using higher-quality ingredients.  We use a variety of ingredients that we purchase from carefully selected suppliers. We concentrate on where we obtain each ingredient, and this has become a cornerstone of our continuous effort to improve our food. Some of the ingredients we use include naturally raised pork, beef and chicken, as well as organically grown and sustainably grown produce, and we continue to investigate using even more naturally raised, organically grown and sustainably grown ingredients, in light of pricing considerations.



•

A few things, thousands of ways.  We only serve a few things: burritos, burrito bols (a burrito without the tortilla), tacos and salads. We plan to keep a simple menu, but we'll always consider sensible additions. For example, we introduced the burrito bol in 2003—just when the popularity of low-carbohydrate diets exploded—and estimate that we sold about seven million of them in that year. In 2005, we also rolled out a salad.

We believe that our focus on "food with integrity" will resonate with customers as the public becomes increasingly aware of, and concerned about, what they eat.

Our Employees Set Us Apart

        We believe that our front-line crew differentiates the Chipotle experience. Virtually all of what our crew does is in view of customers, and because the person who prepares the food is often the same person who serves it, our employees have a strong sense of pride in their work. We think this and our crew's commitment to our vision contribute to better execution and service and are reflected in our crew turnover rate, which we believe is lower than the average in our industry.

No Two Stores Are The Same

        The design of each Chipotle store reflects the same idea as our food: a limited number of basic materials used in creative ways. We design each store individually to suit the space. Even the design of our chairs and artwork is unique to Chipotle. The design of our serving line and our open kitchens also exemplify our vision, demonstrating our commitment to cooking fresh food.

Customers Who Sell For Us

        We believe the best and most recognizable brands aren't built through advertising or promotional campaigns alone, but rather through deeply held beliefs evident in how a company runs its business. By adhering to this principle, we believe that Chipotle is becoming a highly recognized brand. We believe the single greatest contributor to our success has been word-of-mouth, with our customers learning about us and telling others. For example, some of our customers have gone so far as to develop websites about Chipotle. Our advertising has a low-key and irreverent tone that has been popular with customers. Our approach has captured the attention of some of the country's most renowned news media, including the Washington Post, Food and Wine magazine, the New York Times, and several well-regarded food critics, which we think is unusual in our segment of the restaurant industry. If you are reading an electronic version of this prospectus, which is available at www.chipotleipo.com, click ‹here› for a selection of our print, radio and television advertisements.

Rapidly Improving Financial Performance

        Our simple but effective approach has helped us build a sizeable and loyal customer base and resulted in rapidly improving financial performance over the last decade. Our revenue was $470.7 million in 2004, a 130% increase from 2002, driven by new store openings and increased average store sales. During 2002, 2003 and 2004, we opened 237 stores in total. Increases in average store sales have occurred partly because the time it takes for our new stores to achieve planned sales volumes, or ramp up, has consistently shortened as we've grown and customers have learned about our brand, enabling new stores to open with higher average sales. Average sales for new stores in the first 90 trading days increased 29.4% to $303,390

2

for stores opened in 2004 from $234,450 for stores opened in 2002. We've also had strong growth in comp store sales, due mainly to an increase in the number of transactions.

Management's Passion, Not Just Experience

        Our senior management is comprised of people who bring a mix of restaurant and business experience to their work. But most importantly, the team is committed to making Chipotle's vision a part of all facets of our business. Steve Ells, our founder and Chief Executive Officer, holds a degree from the Culinary Institute of America. Monty Moran, our President and Chief Operating Officer, joined Chipotle in March 2005, previously serving as chief executive officer of a private law firm, and as general counsel of Chipotle for much of our history. Jack Hartung, our Chief Finance and Development Officer, joined Chipotle in 2002, after spending 18 years with McDonald's, where he held a variety of management positions, including vice president and chief financial officer for McDonald's Partner Brands group. Bob Wilner, our Chief Administrative Officer, joined Chipotle in 2002, and previously served as vice president of human resources for McDonald's Partner Brands group. Together, our senior management team will beneficially own about 5% of the combined voting power of our outstanding stock and 4% of the economic interest in our outstanding common stock after this offering.

Where We Go From Here

        We believe that our growth has been driven by the appeal of our food, the clarity of our vision, the increasing strength of our brand and our commitment to constantly improving our customer experience. We anticipate that our growth plans for the foreseeable future will continue to be rooted in these fundamentals as we bring the Chipotle experience to more people.

Focusing On Our Vision to Appeal to Customers

        Our menu is intentionally simple. By focusing on just a few menu items, we can concentrate our effort on doing a few things very well. We believe that by focusing on the details of quality, service and the Chipotle experience, we'll be able to bring great food and our vision to new customers and keep existing customers coming back. We believe that consumers' increasing concern about the food they eat will foster demand for higher-quality foods. We believe this, in turn, will attract the interest and capital investment of larger farms and suppliers, and help us make our food more accessible, although we'll continue to balance our interest in advancing "food with integrity" with our desire to provide great food at reasonable prices.

Expanding Our Operations and Sales

        We plan to increase both sales and profits by opening new stores and increasing comp store sales:

•

Building More Stores.  We plan to grow in a measured and disciplined way by strategically adding stores in existing and new markets. 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 believe most of our sales increases will come from opening new stores.



•

Selling More Food Every Day.  We continue to focus on ways to improve the customer experience at our existing stores so we can increase comp store sales. We believe that the best way to do this is to speed up our service to sell food to more customers. We're doing this by, for example, enhancing our staffing and training models, expanding our use of fax service lines and implementing our new online ordering system. These changes allow us to accommodate more customers and larger orders without disrupting store traffic. We'll also consider additions to our menu that could enable us to enhance sales. For example, in 2005 we rolled out a salad that uses essentially the same ingredients as our burritos and tacos. We believe that another way we can grow sales is by getting more people to try our food. We hope to keep expanding brand awareness.

3

Risks of Investing in Chipotle

        Our business involves various risks, including the rapid increase in the number of our stores; various aspects of our relationship with McDonald's, including our ability to manage relationships and obtain services McDonald's currently manages or obtains on our behalf; our lack of independent operating history as a large company; our ability to continue to grow and to manage our growth effectively; our expansion into new markets; continued competitive pressures; health and safety concerns about the ingredients we use; credit and debit card fraud; sabotage of our information systems; and our ability to continue inspiring pride in our store managers and crews and to maintain our culture. In addition, McDonald's will continue to be able to exert a controlling influence over all matters requiring shareholder approval after the offering, including the election of directors and significant business transactions. You should carefully consider the risks discussed in "Risk Factors" before deciding to invest in our class A common stock.

Share Reclassification

        Currently we have one class of common stock and three classes of preferred stock outstanding. Each share of our outstanding common stock and each share of our outstanding preferred stock will be reclassified into one-third of one share of class B common stock in connection with this offering, which will result in a decrease in the number of shares outstanding. We also plan to amend our certificate of incorporation and bylaws and increase our total authorized number of shares of capital stock. All of this will be effective when we complete this offering. After the offering, we will have no outstanding preferred stock and two classes of common stock. In this prospectus, we refer to all of these actions together as the "Reclassification." The Reclassification will take place immediately prior to the closing of this offering. Except where otherwise noted, the description of the terms of our charter documents in this prospectus reflects the terms of those documents as they will exist following the Reclassification. Throughout this prospectus, we have revised the per share data for common stock to reflect the effect of the one for three reverse common stock split that is a part of the Reclassification.

        In this offering, both we and the selling shareholder are selling shares of class A common stock, which will have fewer votes per share than our class B common stock. Under the terms of our amended certificate of incorporation, one of the features of the class B common stock is that any holder of shares of class B common stock, including the selling shareholder, will have the right to convert those shares to shares of class A common stock at any time prior to a tax-free distribution of such shares to McDonald's shareholders (including a distribution in exchange for McDonald's shares or securities). In addition, prior to any such distribution, under the amended certificate of incorporation, shares of class B common stock can only be transferred to McDonald's or its subsidiaries, and any other transfer of such shares will result in the automatic conversion of those shares to shares of class A common stock without action by the transferor or transferee. Thus, although all of the shares that the selling shareholder will receive in connection with the Reclassification will be shares of class B common stock, any shares that investors will receive from the selling shareholder in the offering will be shares of class A common stock.

Future Dispositions

        After the completion of this offering, McDonald's will beneficially own 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). McDonald's has informed us that, at some time in the future, but no earlier than the expiration of the lock-up period, it may sell all or a portion of its ownership interest in us or may make a tax-free distribution to its shareholders of all or a portion of that interest, including a distribution in exchange for McDonald's shares or securities (or another similar transaction). Any such sale, distribution or exchange (or other similar transaction) would be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions, and, in the case of a tax-free transaction, McDonald's receipt of a private letter ruling from the Internal Revenue Service

4

and/or an opinion of counsel that such sale, distribution or exchange (or other similar transaction) would be tax-free to McDonald's and its shareholders. The conditions to such a sale, distribution or exchange (or other similar transaction) may not be satisfied, or McDonald's may decide not to consummate such a sale, distribution or exchange (or other similar transaction). McDonald's has no obligation to pursue or consummate any further dispositions of its ownership interest in us by any specified date or at all, whether or not these conditions are satisfied. A sale or other disposition of our common stock by McDonald's could depress the price of our class A common stock.

Incorporation and Principal Executive Offices

        The first Chipotle restaurant opened in 1993. We have been a subsidiary of McDonald's since February 1998, and McDonald's beneficially owns about 91% of our voting stock. McDonald's acquired a controlling stake in us at the same time that our predecessor, World Foods Inc., a Colorado corporation formed in 1996, merged with Chipotle Mexican Grill, Inc., a Delaware corporation. Chipotle Mexican Grill, Inc., was the surviving entity in the merger. Our main office is located at 1543 Wazee Street, Suite 200, Denver, Colorado, and our telephone number is (303) 595-4000.

5

THE OFFERING

        The numbers of shares of common stock that will be outstanding after this offering is based on 26,434,013 shares outstanding at December 15, 2005, including non-vested shares subject to forfeiture, after giving effect to the reclassification of each share of our outstanding common stock and each share of our outstanding preferred stock into one-third of one share of our class B common stock in the Reclassification, which will result in a decrease in the number of shares outstanding, and excludes:

•

228,666 shares of class A common stock issuable upon the exercise of options outstanding at September 30, 2005 at a weighted average exercise price of $16.25 per share; and



•

shares of class A common stock reserved for future issuance under our Chipotle 2006 Stock Incentive Plan.

        Except as otherwise indicated, all information in this prospectus gives effect to the Reclassification and assumes no exercise of the underwriters' option to purchase up to an additional 1,181,818 shares of class A common stock from the selling shareholder to cover over-allotments.

6

SUMMARY CONSOLIDATED FINANCIAL DATA

        Our summary consolidated financial data shown below should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2002, 2003 and 2004 have been derived from our audited consolidated financial statements included elsewhere in this prospectus, and the summary consolidated statements of operations data for the nine months ended September 30, 2004 and 2005 and the balance sheet data at September 30, 2005 have been derived from our unaudited consolidated financial statements and include all adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the results of the interim periods.

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(1)

We are not a separate taxable entity for federal and most state income tax purposes and our results of operations are included in McDonald's consolidated federal and state income tax returns; however, the provision for income taxes is calculated on a separate return basis. At December 31, 2004, we had incurred total net operating losses, or NOLs, of $139.4 million since our inception as a "C" corporation on January 1, 1996. We incurred $118.0 million of these NOLs after McDonald's acquisition of over 80% of our equity. The remaining $21.4 million of these NOLs relates to separate return limitation year ("SRLY") losses before McDonald's acquired over 80% of our equity and will begin to expire in 2012. Through December 31, 2004, we recorded a valuation allowance to offset our deferred tax assets, including those related to the NOLs, net of deferred tax liabilities. During the nine months ended September 30, 2005, we determined that it was more likely than not that we would realize our deferred tax assets and we reversed our valuation allowance, resulting in a net tax benefit of $10.8 million in our results of operations. During the nine months ended September 30, 2005, we also realized $8.5 million of SRLY losses which reduced goodwill but did not impact our results of operations.

(2)

Historical earnings (loss) per common share and shares used in computing historical earnings (loss) per common share do not reflect the effect of the Reclassification nor the conversion of stock appreciation rights into stock options.

(3)

The adjusted earnings (loss) per common share and shares used in computing adjusted earnings (loss) per common share presented give retroactive effect to the one for three reverse common stock split to be executed as part of the Reclassification and to the conversion of stock appreciation rights into stock options.

(4)

Includes company-operated stores only. We also have three franchisees who operated five, seven and eight stores at the end of 2002, 2003 and 2004, respectively, and eight stores at September 30, 2004 and 2005.

(5)

Includes company-operated stores only. We define "average store sales" as the average trailing 12-month sales for company-owned stores in operation for at least 12 full months. As average store sales are computed using the same periods for all of our stores, they do not include sales during the stub portion of the month in which a store begins operating.

(6)

Includes company-operated stores only. Represents the change in period-over-period sales for the comparable store base. A store becomes comparable in its 13^th month of operation. As comp store sales are computed using the same periods for all of our stores, they do not include sales during the stub portion of the month in which a store begins operating.

(7)

Includes company-operated and franchised stores.

(8)

Represents net income (loss) before deductions for interest, income taxes, depreciation and amortization. We believe that EBITDA is useful to investors as a measure of comparative operating performance, as it is less susceptible to variances in actual performance resulting from depreciation,

8

amortization and other non-cash charges and more reflective of changes in pricing decisions, cost controls and other factors that affect operating performance. We also present EBITDA because we believe it is useful to investors as a way to evaluate our ability to incur and service debt, make capital expenditures and meet working capital requirements. EBITDA is not intended as a measure of our operating performance, as an alternative to net income or as an alternative to any other performance measure in conformity with U.S. generally accepted accounting principles or as an alternative to cash flow provided by operating activities as a measure of liquidity. The following is a reconciliation of net income (loss) to EBITDA:

*

See note (1) above.

(9)

The pro forma balance sheet data at September 30, 2005 reflect the Reclassification and the conversion of stock appreciation rights into stock options.

(10)

The pro forma as adjusted balance sheet data at September 30, 2005 reflect the Reclassification, the conversion of stock appreciation rights into stock options and the application of the estimated net proceeds we will receive from this offering, based on an assumed initial public offering price of $16.50 per share (the midpoint of the range shown on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

9

RISK FACTORS

        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

The planned rapid increase in the number of our stores may make our future results unpredictable.

        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 relationship.

        Following this offering, we expect that McDonald's will own about 88% 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

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the level of McDonald's ownership, and the relevant suppliers and service providers could decide to stop giving us beneficial pricing even if McDonald's still owns a substantial equity stake in us.

        As we begin to increase our independence from McDonald's, we may have to seek new suppliers and service providers or enter into new arrangements with our existing ones, and we may encounter difficulties or be unable to negotiate pricing or other terms as favorable as those we currently enjoy, which could harm our business and operating results. However, because we currently have not begun to negotiate new or amended contracts with suppliers and service providers, we cannot now quantify with greater certainty potential increases in our expenses. Furthermore, as a public company, in each of 2006 and future years we expect to incur a few million dollars of legal, accounting and other expenses that we did not previously incur as a subsidiary of McDonald's. See "Certain Relationships and Related Party Transactions."

We have no independent operating history as a large company, which makes our future business prospects difficult to evaluate.

        We have been a subsidiary of McDonald's since 1998, which has affected the way we operate and manage our business. Because we have no independent operating history as a large company, our historical results may not be indicative of our future performance. Our future results depend on various factors, including those identified in these risk factors. We may not remain profitable.

Our growth rate depends primarily on our ability to open new stores and is subject to many unpredictable factors.

        We may not be able to open new stores as quickly as planned. We've experienced delays in opening some stores and that could happen again. Delays or failures in opening new stores could materially and adversely affect our growth strategy and our expected results. As we operate more stores, our rate of expansion relative to the size of our store base will decline. In addition, one of our biggest challenges is locating and securing an adequate supply of suitable new store sites. Competition for those sites in our target markets is intense, and lease costs are increasing (particularly for urban locations). Our ability to open new stores also depends on other factors, including:

•

obtaining financing and negotiating leases with acceptable terms;



•

hiring and training qualified operating personnel in the local market;



•

managing construction and development costs of new stores at affordable levels, particularly in competitive markets;



•

the availability of construction materials and labor;



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the availability of, and our ability to obtain, adequate supplies of ingredients that meet our quality standards;



•

securing required governmental approvals (including construction, parking and other permits) in a timely manner; and



•

the impact of inclement weather, natural disasters and other calamities, such as hurricanes Katrina and Rita in 2005.

Our failure to manage our growth effectively could harm our business and operating results.

        Our plans call for a significant number of new stores. Our existing store management systems, financial and management controls and information systems may be inadequate to support our expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain store managers and crew. We may not respond quickly enough to the changing demands that our expansion will impose on our management, crew and existing infrastructure. We also place a lot of importance on our culture, which we believe has been an important contributor to

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our success. As we grow, however, we may have difficulty maintaining our culture or adapting it sufficiently to meet the needs of our operations. Our failure to manage our growth effectively could harm our business and operating results.

New stores, once opened, may not be profitable, and the increases in average store sales and comp store sales that we've experienced in the past may not be indicative of future results.

        Historically, our new stores have opened with an initial ramp-up period typically lasting 24 months or more, during which they generated sales and income below the levels at which we expect them to normalize. This is in part due to the time it takes to build a customer base in a new market, higher fixed costs relating to increased construction and occupancy costs and other start-up inefficiencies that are typical of new stores. New stores may neither be profitable nor have results comparable to our existing stores. In addition, our average store sales and comp store sales likely will not continue to increase at the rates achieved over the past several years. Our ability to operate new stores profitably and increase average store sales and comp store sales will depend on many factors, some of which are beyond our control, including:

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executing our vision effectively;



•

initial sales performance of new stores;



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competition, either from our competitors in the restaurant industry or our own stores;



•

changes in consumer preferences and discretionary spending;



•

consumer understanding and acceptance of the Chipotle experience;



•

road construction and other factors limiting access to new stores;



•

general economic conditions, which can affect store traffic, local labor costs and prices we pay for the ingredients and other supplies we use; and



•

changes in government regulation.

        If we fail to open stores as quickly as planned, or if new stores don't perform as planned, our business and future prospects could be harmed. In addition, changes in our average store sales or comp store sales could cause our operating results to vary adversely from expectations, which could cause the price of our common stock to fluctuate substantially.

Our expansion into new markets may present increased risks due to our unfamiliarity with those areas.

        Some of our new stores are planned for markets where we have little or no operating experience. Those markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets. As a result, those new stores may be less successful than stores in our existing markets. Consumers in a new market may not be familiar with the Chipotle brand, and we may need to build brand awareness in that market through greater investments in advertising and promotional activity than we originally planned. We may find it more difficult in new markets to hire, motivate and keep qualified employees who can project our vision, passion and culture. Stores opened in new markets may also have lower average store sales than stores opened in existing markets, and may have higher construction, occupancy or operating costs than stores in existing markets. What's more, we may have difficulty in finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of ingredients meeting our quality standards. Sales at stores opened in new markets may take longer to ramp up and reach expected sales and profit levels, and may never do so, thereby affecting our overall profitability.

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We may not persuade customers of the benefits of paying our prices for higher-quality food.

        Our success depends in large part on our ability to persuade customers that food made with higher-quality ingredients is worth the prices they will pay at our stores relative to prices offered by some of our competitors, particularly those in the quick-service segment. We may not successfully educate customers about the quality of our food, and they may not care even if they do understand our approach. That could require us to change our pricing, advertising or promotional strategies, which could materially and adversely affect our results or the brand identity that we've tried to create.

Changes in customer tastes and preferences, spending patterns and demographic trends could cause sales to decline.

        Changes in customer preferences, general economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing restaurants affect the restaurant industry. Our success depends to a significant extent on consumer confidence, which is influenced by general economic conditions and discretionary income levels. Our sales may decline during economic downturns, which can be caused by various economic factors such as high gasoline prices, or during periods of uncertainty, such as those that followed the terrorist attacks on the United States in 2001. Similarly, hurricanes Katrina and Rita are affecting consumer confidence and are likely to affect our supply costs, near-term construction costs for our new stores and may affect our sales going forward. Any material decline in consumer confidence or a decline in family "food away from home" spending could cause our sales, operating results, business or financial condition to decline. If we fail to adapt to changes in customer preferences and trends, we may lose customers and our sales may deteriorate.

Competition from other restaurant companies could adversely affect us.

        We operate in the fast-casual segment of the restaurant industry. This segment is highly competitive with respect to, among other things, taste, price, food quality and presentation, service, location and the ambiance and condition of each restaurant. We also compete with restaurants in the quick-service segment. Our competition includes a variety of locally owned restaurants and national and regional chains. Our competitors offer dine-in, carry-out and delivery services. Many of our competitors have existed longer and often have a more established market presence with substantially greater financial, marketing, personnel and other resources than Chipotle. Our parent, McDonald's, operates in the quick-service segment of the restaurant industry. Among our main competitors are a number of multi-unit, multi-market Mexican food or burrito restaurant concepts, some of which are expanding nationally. As we expand further in existing markets, our existing stores may face competition from our new stores that begin operating in those markets.

        Several of our competitors compete by offering menu items that are specifically identified as low in carbohydrates, better for customers or otherwise targeted at particular consumer preferences. Many of our competitors in the fast-casual and quick-service segments of the restaurant industry also emphasize lower-cost, "value meal" menu options, a strategy we don't pursue. Our sales may be adversely affected by these products and price competition.

        Moreover, new companies may enter our markets and target our customers. For example, additional competitive pressures have come more recently from the deli sections and in-store cafés of several major grocery store chains, including those targeted at customers who want higher-quality food, as well as from convenience stores and casual dining outlets. These competitors may have, among other things, lower operating costs, better locations, better facilities, better management, more effective marketing and more efficient operations.

        All of these competitive factors may adversely affect us and reduce our sales and profits.

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Additional instances of avian flu, "mad cow" disease or other food-borne illnesses could adversely affect the price and availability of chicken, beef or other meat, cause the temporary closure of some stores and result in negative publicity, thereby resulting in a decline in our sales.

        In 2004 and 2005, Asian and European countries experienced outbreaks of avian flu, and incidents of "mad cow" disease have occurred in Canadian and U.S. cattle herds. These problems, other food-borne illnesses (such as e-coli, hepatitis A, trichinosis or salmonella) and injuries caused by food tampering have in the past, and could in the future, adversely affect the price and availability of affected ingredients and cause customers to shift their preferences, particularly if we choose to pass any higher ingredient costs along to consumers. As a result, our sales may decline.

        Instances of food-borne illnesses, whether at our stores or those of our competitors, could also result in negative publicity about us or the restaurant industry, which could adversely affect sales. If we react to negative publicity by changing our menu or other key aspects of the Chipotle experience, we may lose customers who do not accept those changes, and may not be able to attract enough new customers to produce the revenue needed to make our stores profitable. In addition, we may have different or additional competitors for our intended customers as a result of making these changes and may not be able to compete successfully against those competitors. If our customers become ill from food-borne illnesses, we could be forced to temporarily close some stores. For example, in June 2004, Texas health officials investigated reports that customers and employees had become ill with flu-like symptoms after spending time in one of our stores, and we closed that store for less than a week. A decrease in customer traffic as a result of these health concerns or negative publicity, or as a result of a change in our menu or dining experience or a temporary closure of any of our stores, could materially harm our business.

Changes in food and supply costs could adversely affect our results of operations.

        Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Any increase in the prices of the ingredients most critical to our menu, such as beef, chicken, cheese, avocados, beans, tomatoes and pork, could adversely affect our operating results. Although we try to manage the impact that these fluctuations have on our operating results, we remain susceptible to increases in food costs as a result of factors beyond our control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, product recalls and government regulations. For example, higher diesel prices have in some cases resulted in the imposition of surcharges on the delivery of commodities to our distributors, which they have generally passed on to us to the extent permitted under our arrangements with them. In 2004, hurricanes in some parts of the United States damaged tomato crops and drove prices higher. Similarly, in 2005, hurricane Katrina destroyed a number of chickens raised by one of our chicken suppliers and increased our short-term chicken prices. Both hurricanes Katrina and Rita have resulted in higher diesel and gasoline prices, are affecting consumer confidence and are likely to affect our supply costs, near-term construction costs for our new stores and may affect our sales going forward. We do not have long-term supply contracts or guaranteed purchase amounts. As a result, we may not be able to anticipate or react to changing food costs by adjusting our purchasing practices or menu prices, which could cause our operating results to deteriorate. In addition, because we provide moderately priced food, we may choose not to, or be unable to, pass along commodity price increases to our customers.

We may have experienced a security breach with respect to certain customer credit and debit card data, and we have incurred and may continue to incur substantial costs as a result of this matter. We may also incur costs resulting from other security risks we may face in connection with our electronic processing and transmission of confidential customer information.

        In August 2004, the merchant bank that processes our credit and debit card transactions (the "acquiring bank") informed us that we may have been the victim of a possible theft of credit and debit card data. Together with two forensic auditing firms, we investigated the alleged theft and reviewed our information systems and information security procedures. We also reported the problem to federal law

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enforcement authorities and have been cooperating in their investigation. While to date we have not discovered conclusive evidence that a theft occurred, we identified some store practices that may have made information systems at our stores vulnerable during periods before August 2004. Notably, without our knowledge, the card processing software we used inadvertently retained credit and debit card "Track 2" data, consisting of, among other items, the customer's name, card number, card expiration date and card verification number. In addition, the internet gateways on our computers in some stores may not have been fully secure at all times. As a result, outside parties may have gained access to stored information. We began accepting credit cards in 1999, and it is possible that all of the cards we processed since then may have been vulnerable. In the three months prior to being notified of the problem, we processed between 1.3 million and 1.5 million credit and debit card charges each month.

        To date, we have received claims through the acquiring bank with respect to fewer than 2,000 purportedly fraudulent credit and debit card charges allegedly arising out of this matter in an aggregate amount of about $1.2 million. We've also incurred $1.3 million of expense in connection with fines imposed by the Visa and MasterCard card associations on the acquiring bank. In 2004, we recorded charges of $4.0 million to establish a reserve for claims seeking reimbursement for purportedly fraudulent credit and debit card charges, the cost of replacing cards, monitoring expenses and fees, and fines imposed by Visa and MasterCard. All of the reimbursement claims are being disputed, although we've not formally protested all of the charges. At November 30, 2005, after charging these expenses against the reserve, the remaining reserve was $1.9 million, which does not take into account a fine of $0.4 million assessed by MasterCard in December 2005 that we expect to charge against that reserve. In addition to the reserve, we've also incurred about $1.5 million of additional expenses in this matter, including $1.3 million for legal fees, bringing our total expense relating to this matter to $5.5 million. We have not reserved any additional amounts to date in 2005.

        We may in the future become subject to additional claims for purportedly fraudulent transactions arising out of this matter. As long as a credit or debit card is active, fraudulent charges may be made using that card until the card's expiration date. We may also be subject to lawsuits or other proceedings by various interested parties, including banks and credit unions that issue cards, cardholders (either individually or as part of a class action lawsuit) and federal and state regulators. The statutes of limitation for pursuing some of these potential claims may extend for six years or more in some cases, depending on the circumstances. Moreover, the application of the law and the rules and procedures of the major card associations in these circumstances is generally untested. Any lawsuit or other proceeding will likely be complex, costly and protracted, which could in turn divert financial and management resources from execution of our business plan. We have no way to predict the level of claims or the number or nature of proceedings that may be asserted against us, nor can we quantify the costs that we may incur in connection with investigating, responding to and defending any of them. If we litigate these matters, we may not be able to defend against penalties successfully. The ultimate outcome of this matter could differ materially from the amounts we've recorded in our reserve and could have a material adverse effect on our financial results and condition. Consumer perception of our brand could also be negatively affected by these events, which could further adversely affect our results and prospects.

        Despite the changes we've made to our information systems as a result of this matter, we still need to periodically upgrade our software. We rely on commercially available software and other technologies to provide security for processing and transmission of customer credit card data. About 44% of our current sales are attributable to credit card transactions, and we expect credit card usage to increase. Our systems could be compromised in the future, which could result in the misappropriation of customer information or the disruption of our systems. Either of those consequences could have a material adverse effect on our reputation and business or subject us to additional liabilities.

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Failure to receive frequent deliveries of higher-quality food ingredients and other supplies could harm our operations.

        Our ability to maintain our menu depends in part on our ability to acquire ingredients that meet our specifications from reliable suppliers. Shortages or interruptions in the supply of ingredients caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather or other conditions could adversely affect the availability, quality and cost of our ingredients, which could harm our operations. If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be adversely affected. We currently depend on three or four suppliers for our pork, chicken and beef supplies. It could be more difficult to replace our pork suppliers if we were no longer able to rely on them. We do not have long-term contracts with any of our suppliers. In addition, we've relied on the McDonald's distribution network. As we begin to increase our independence from McDonald's, we may have to seek new suppliers and service providers. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our stores, which could cause a store to remove items from its menu. If that were to happen, affected stores could experience significant reductions in sales during the shortage or thereafter, if our customers change their dining habits as a result. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe.

        In addition, our approach to competing in the restaurant industry depends in large part on our continued ability to adhere to the principle of "food with integrity." We use a substantial amount of naturally raised and sustainably grown ingredients, and try to make our food as fresh as we can, in light of pricing considerations. As we increase our use of these ingredients, the ability of our suppliers to expand output or otherwise increase their supplies to meet our needs may be constrained. Our inability to obtain a sufficient and consistent supply of these ingredients on a cost-effective basis, or at all, could cause us difficulties in aligning our brand with the principle of "food with integrity." That could make us less popular among our customers and cause sales to decline.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.

        Our quarterly operating results may fluctuate significantly because of various factors, including:

•

the impact of inclement weather, natural disasters and other calamities, such as hurricanes Katrina and Rita in 2005;



•

the timing of new store openings and related revenues and expenses;



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operating costs at our newly opened stores, which are often materially greater during the first several months of operation;



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labor availability and wages of store management and crew;



•

profitability of our stores, especially in new markets;



•

changes in comp store sales and customer visits, including as a result of the introduction of new menu items;



•

variations in general economic conditions, including those relating to changes in gasoline prices;



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negative publicity about the ingredients we use or the occurrence of food-borne illnesses or other problems at our stores;



•

changes in consumer preferences and discretionary spending;



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increases in infrastructure costs; and

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•

fluctuations in supply prices.

        Seasonal factors also cause our revenue to fluctuate from quarter to quarter. Our revenue is typically lower during the winter months and the holiday season and during periods of inclement weather (because fewer people are eating out) and higher during the spring, summer and fall months (for the opposite reason). Our revenue will also vary as a result of the number of trading days, that is, the number of days in a quarter when a store is open.

        As a result of these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year. Average store sales or comp store sales in any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease.

Our success depends substantially upon the continued retention of certain key personnel.

        We believe that our success has depended and continues to depend to a significant extent on the efforts and abilities of our senior management team. We do not have, and do not expect to enter into, employment agreements with members of our senior management team. Our failure to retain members of that team could adversely affect our ability to build on the efforts they've undertaken with respect to our business. Specifically, the loss of Steve Ells, our founder and Chief Executive Officer, Monty Moran, our President and Chief Operating Officer, Jack Hartung, our Chief Finance and Development Officer, or Bob Wilner, our Chief Administrative Officer, could adversely affect us.

Our business could be adversely affected by increased labor costs or difficulties in finding the right teams for our stores.

        Labor is a primary component of our operating costs, and we believe good managers and crew are a key part of our success. We devote significant resources to recruiting and training our store managers and crew. Increased labor costs due to factors like competition, increased minimum wage requirements and employee benefits would adversely impact our operating costs. Our success also depends in part on the energy and skills of our employees and our ability to hire, motivate and keep qualified employees, including especially store managers and crew members. Our failure to find and keep enough employees who are a good fit with our culture could delay planned store openings, result in higher employee turnover or require us to change our culture, any of which could have a material adverse effect on our business and results of operations. Restaurant operators have traditionally experienced relatively high employee turnover rates. Any increase in our turnover rates for managers or crew could be costly.

Our franchisees could take actions that harm our reputation and reduce our royalty revenues.

        We do not exercise control over the day-to-day operations of our franchised stores. While we try to ensure that franchised stores meet the same operating standards that we demand of company-operated stores, one or more franchised stores may not do so. Any operational shortcomings of our franchised stores are likely to be attributed to our system-wide operations and could adversely affect our reputation and have a direct negative impact on the royalty revenues we receive from those stores.

We expect to need capital in the future, and we may not be able to raise that capital on acceptable terms.

        Developing our business will require significant capital in the future. We have funded our operations and growth primarily through capital investments by McDonald's and, to a lesser degree, our minority shareholders, and in some cases short-term borrowings from McDonald's that we repaid through private placements of our equity securities. However, McDonald's has no obligation to continue providing us with capital in the future. To meet our capital needs, we expect to rely on our cash flow from operations, the proceeds from this offering and third-party financing, such as the revolving credit facility we're negotiating. Third-party financing may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating

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performance, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions such as financial covenants under our credit facility. These factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital could impede our growth.

We're subject to all of the risks associated with leasing space subject to long-term non-cancelable leases and, with respect to the real property that we own, owning real estate.

        Our leases generally have initial terms of between five and 20 years, and generally can be extended only in five-year increments (at increased rates) if at all. All of our leases require a fixed annual rent, although some require the payment of additional rent if store sales exceed a negotiated amount. Generally, our leases are "net" leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases. If an existing or future store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close stores in desirable locations. Also, because we purchase real property for various store locations from time to time, we're subject to all of the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends and supply or demand for the use of the stores, which may result from competition from similar restaurants in the area as well as strict, joint and several liability for environmental contamination at or from the property, regardless of fault.

Governmental regulation may adversely affect our ability to open new stores or otherwise adversely affect our existing and future operations and results.

        We are subject to various federal, state and local regulations. Each of our stores is subject to state and local licensing and regulation by health, alcoholic beverage, sanitation, food and workplace safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses or approvals for new stores, which could delay planned store openings. In addition, stringent and varied requirements of local regulators with respect to zoning, land use and environmental factors could delay or prevent development of new stores in particular locations.

        We are subject to the U.S. Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas. We may in the future have to modify stores, for example by adding access ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons. The expenses associated with these modifications could be material.

        Our operations are also subject to the U.S. Fair Labor Standards Act, which governs such matters as minimum wages, overtime and other working conditions, along with the U.S. Americans with Disabilities Act, family leave mandates and a variety of similar laws enacted by the states that govern these and other employment law matters. In addition, federal proposals to introduce a system of mandated health insurance and flexible work time and other similar initiatives could, if implemented, adversely affect our operations.

        In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition and advertising practices in the food industry. Restaurants operating in the quick-service and fast-casual segments have been a particular focus. As a result, we may in the future become subject to initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional content of our food, that could increase our expenses.

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We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.

        Our intellectual property is material to the conduct of our business. Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including our name and logos and the unique ambiance of our stores. If our efforts to protect our intellectual property are inadequate, or if any third party misappropriates or infringes on our intellectual property, either in print or on the internet, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance. We may also encounter claims from prior users of similar intellectual property in areas where we operate or intend to conduct operations. This could harm our image, brand or competitive position and cause us to incur significant penalties and costs.

We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us to material money damages and other remedies.

        Our customers occasionally file complaints or lawsuits against us alleging that we're responsible for some illness or injury they suffered at or after a visit to our stores, or that we have problems with food quality or operations. We're also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters, and we could become subject to class action or other lawsuits related to these or different matters in the future. For example, we're currently investigating issues that may arise in connection with the possible theft of certain credit and debit card data. We're also subject to "dram shop" statutes, which generally allow persons injured by intoxicated people to recover damages from the place that wrongfully served those people alcohol. Regardless of whether any claims against us are valid, or whether we're ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage for any claims could materially and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also materially and adversely affect our reputation or prospects, which in turn could adversely affect our results.

        In addition, the restaurant industry has been subject to a growing number of claims based on the nutritional content of food products they sell and disclosure and advertising practices. We may also be subject to this type of proceeding in the future and, even if not, publicity about these matters (particularly directed at the quick-service and fast-casual segments of the industry) may harm our reputation or prospects and adversely affect our results.

We will incur increased costs as a result of being a public company.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The U.S. Sarbanes-Oxley Act of 2002 and related rules of the U.S. Securities and Exchange Commission, or SEC, and the New York Stock Exchange regulate corporate governance practices of public companies. We expect that compliance with these public company requirements will increase our costs and make some activities more time-consuming. For example, we'll create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC reporting requirements. A number of those requirements will require us to carry out activities we have not done previously. For example, under Section 404 of the Sarbanes-Oxley Act, for our annual report on Form 10-K for 2006 we'll need to document and test our internal control procedures, our management will need to assess and report on our internal control over financial reporting and our independent accountants will need to issue an opinion on that assessment and the effectiveness of those controls. Furthermore, if we identify any issues in complying with those requirements (for example, if we or our accountants identified a material weakness or

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significant 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."

Conflicts of interest between McDonald's and us could be resolved in a manner unfavorable to us.

        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:

•

disagreement over corporate opportunities;



•

competition between us and McDonald's;



•

management stock ownership;



•

employee retention or recruiting;



•

our dividend policy; and



•

the services and arrangements from which Chipotle benefits as a result of its relationship with McDonald's.

        Potential 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.

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        In addition, under our tax allocation agreement with McDonald's, McDonald's (as our parent) has the sole authority to file federal income tax returns and most state income tax returns on our behalf and is responsible for administering that agreement until the consummation of this offering. Assuming McDonald's economic interest in our outstanding common stock falls to less than 80%, this arrangement is expected to terminate for federal and some state income tax purposes for taxable periods following the offering. However, the tax allocation agreement will remain in effect for taxable years prior to this offering. Consequently, this may result in conflicts of interest between McDonald's and us. For example, McDonald's (as our parent) may choose to contest, compromise or settle any adjustment or deficiency proposed by the relevant taxing authority in a manner that may be beneficial to McDonald's and detrimental to us and for which we may be required to reimburse McDonald's under the tax allocation agreement. The tax allocation agreement will continue to apply to, and govern, the sharing of tax liabilities between McDonald's and us for state tax purposes for those states in which we and McDonald's will continue to file tax returns on a combined basis following the offering.

The corporate opportunity provisions in our amended certificate of incorporation could enable McDonald's to benefit from corporate opportunities that might otherwise be available to Chipotle.

        Our amended certificate of incorporation will contain provisions related to corporate opportunities that may be of interest to both McDonald's and us. It will provide that if a corporate opportunity is offered to:

•

one of our officers or employees who is also a director (but not an officer or employee) of McDonald's, that opportunity will belong to us unless expressly offered to that person primarily in his or her capacity as a director of McDonald's, in which case it will belong to McDonald's;



•

one of our directors who is also an officer or employee of McDonald's, that opportunity will belong to McDonald's unless expressly offered to that person primarily in his or her capacity as our director, in which case it will belong to us; and



•

any person who is either (1) an officer or employee of both us and McDonald's or (2) a director of both us and McDonald's (but not an officer or employee of either one), that opportunity will belong to McDonald's unless expressly offered to that person primarily in his or her capacity as our director, in which case such opportunity shall belong to us.

        In following these procedures, any person who is offered a corporate opportunity will have satisfied his or her fiduciary duties to our shareholders and us. In addition, our amended certificate of incorporation will provide that any corporate opportunity that belongs to McDonald's or to us, as the case may be, may not be pursued by the other, unless and until the party to whom the opportunity belongs determines not to pursue the opportunity and so informs the other party. Furthermore, so long as the material facts of any transaction between us and McDonald's have been disclosed to or are known by our board of directors or relevant board committee, and the board or such committee (which may, for quorum purposes, include directors who are directors or officers of McDonald's) authorizes the transaction by an affirmative vote of a majority of the disinterested directors, then McDonald's will have satisfied its fiduciary duties and will not be liable to us or our shareholders for any breach of fiduciary duty or duty of loyalty relating to that transaction. These provisions create the possibility that a corporate opportunity that may be pertinent to us may be used for the benefit of McDonald's.

Future sales or distributions of our shares by McDonald's could depress our class A common stock price.

        After this offering, and subject to the lock-up period described below, McDonald's may sell all or a portion of the shares of our class B common stock that it owns (which shares would be converted automatically into class A shares in connection with any sale prior to a tax-free distribution) or distribute those shares to its shareholders, including a distribution in exchange for McDonald's shares or securities (or another similar transaction). Sales by McDonald's in the public market or distributions to its

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shareholders of substantial amounts of our common stock, or the filing by McDonald's of a registration statement relating to a substantial amount of our common stock, could depress our class A common stock price. McDonald's has informed us that, at some time in the future, but no earlier than the expiration of the lock-up period, it may sell all or a portion of its ownership interest in us or may make a tax-free distribution, including a distribution in exchange for McDonald's shares or securities (or another similar transaction), to its shareholders of all or a portion of that interest. McDonald's is not, however, subject to any contractual obligation to maintain its ownership position in our shares, except that it has agreed not to sell or otherwise dispose of any of our shares of common stock for a period ending 180 days (subject to extension) after the date of this prospectus without the prior written consent of Morgan Stanley & Co. Incorporated and SG Cowen & Co., LLC, on behalf of the underwriters, subject to specified limited exceptions and extensions described in "Underwriters." Consequently, McDonald's may decide not to maintain its ownership of our common stock once the lock-up period expires.

        In addition, McDonald's will have the right, subject to some conditions, to require us to file registration statements covering its shares or to include its shares in other registration statements that we may file. By exercising their registration rights and selling a large number of shares, McDonald's could cause the price of our class A common stock to decline.

Risks Related to Ownership of Our Class A Common Stock

There is no existing market for our class A common stock and we do not know if one will develop. Even if a market does develop, the stock prices in the market may not exceed the offering price.

        Prior to this initial public offering, there has not been a public market for our class A common stock. Furthermore, because McDonald's will beneficially own most of our common stock immediately following this offering as described above under "—Risks Relating to our Affiliation with McDonald's—We're controlled by McDonald's whose interest may conflict with yours," only a limited number of our class A shares are likely to be actively traded and an active market in our class A shares may not develop. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the New York Stock Exchange or otherwise, or how liquid that market may become. If an active trading market does not develop, you may have difficulty selling any class A shares that you buy.

        The initial public offering price for the class A common stock will be determined by negotiations among us, McDonald's and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our class A common stock at prices equal to or greater than the price you pay in this offering.

Our class A common stock price may be volatile and you may lose all or part of your investment.

        The market price of our class A common stock could fluctuate significantly, and you may not be able to resell your shares at or above the offering price. Those fluctuations could be based on various factors in addition to those otherwise described in this prospectus, including:

•

our operating performance and the performance of our competitors;



•

the public's reaction to our press releases, our other public announcements and our filings with the SEC;



•

changes in earnings estimates or recommendations by research analysts who follow Chipotle or other companies in our industry;



•

variations in general economic conditions;



•

the number of shares to be publicly traded after this offering;

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•

actions of our current shareholders, including sales of common stock by McDonald's or our directors and executive officers;



•

the arrival or departure of key personnel;



•

matters affecting McDonald's, which will remain our principal shareholder following this offering; and



•

other developments affecting us, our industry or our competitors.

        In addition, in recent years the stock market has experienced significant price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the market price of our class A common stock. The price of our class A common stock could fluctuate based upon factors that have little or nothing to do with our company or its performance, and those fluctuations could materially reduce our class A common stock price.

Because holders of the shares of class B common stock will control the majority of the voting power of our common stock, investors in this offering will not be able to determine the outcome of shareholder votes with respect to most events.

        Our class A common stock will have one vote per share, and our class B common stock will have ten votes per share, other than with respect to a limited number of matters specified in our amended certificate of incorporation (such as approval of transactions by which a third party might acquire control of us). Following this offering, holders of shares of class B common stock will collectively control 97% of the combined voting power of our outstanding common stock other than with respect to those matters. For example, the holders of shares of class B common stock will be able to direct the election of all of the members of our board of directors, who will determine our strategic plans, approve major financing decisions and appoint top management. In addition, the holders of the class B common stock may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to holders of our class A common stock or adversely affect us or other investors, including investors in this offering. Although substantially all of the class B common stock will be beneficially owned by McDonald's following the offering and such shares will only be transferable to McDonald's or one of its subsidiaries, McDonald's may in the future decide to distribute all or a portion of its interest in the class B common stock to its shareholders through a tax-free distribution. Following any such distribution, none of the outstanding shares of class B common stock will be subject to transfer restrictions.

Future sales of our common stock, or the perception that such sales may occur, could depress our class A common stock price.

        Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, following this offering could depress the market price of our class A common stock. This would include sales by McDonald's, as detailed above under "—Future sales or distributions by McDonald's could depress our stock price." We and all of our executive officers and directors and certain other equity holders, including McDonald's, have agreed with the underwriters not to offer, sell, dispose of or hedge any shares of our class A common stock or securities convertible into or exchangeable for shares of our class A common stock (including shares of our class B common stock), subject to specified limited exceptions and extensions described elsewhere in this prospectus, during the period ending 180 days (subject to extension) after the date of this prospectus, except with the prior written consent of Morgan Stanley & Co. Incorporated and SG Cowen & Co., LLC, on behalf of the underwriters. Our certificate of incorporation will authorize us to issue up to 200,000,000 shares of class A common stock, of which 7,878,788 shares will be outstanding and 228,666 shares will be issuable upon the exercise of outstanding stock options, and up to 30,000,000 shares of class B common stock, of which 24,615,831 shares will be

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outstanding, upon completion of this offering. Of the outstanding shares, 7,878,788 class A shares and none of the class B shares, including the class A shares sold in this offering, are freely tradable. About            of the outstanding shares will be eligible for resale after the expiration of the lock-up period. Shares of our common stock held by our affiliates will continue to be subject to the volume and other restrictions of Rule 144 under the U.S. Securities Act of 1933, or the Securities Act. Morgan Stanley & Co. Incorporated and SG Cowen & Co., LLC may, in their sole discretion and at any time without notice, release all or any portion of the class A shares or the class B shares subject to the lock-up.

        In addition, immediately following this offering, we intend to file a registration statement registering under the Securities Act the shares of common stock reserved for issuance under our employee stock option plan. See the information under the heading "Shares Eligible for Future Sale" for a more detailed description of the shares that will be available for future sales upon completion of this offering.

We do not intend to pay dividends for the foreseeable future.

        We've never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our class A common stock. See "Dividend Policy."

Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party.

        Our certificate of incorporation and bylaws contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding common stock. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our shareholders' receiving a premium over the market price for their common stock. See "Description of Capital Stock."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

        This prospectus, including particularly the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains forward-looking statements. Such forward-looking statements include the discussions of our business strategies and our expectations concerning future operations, margins, profitability, liquidity, and capital resources. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "thinks," "estimates," "seeks," "expects," "predicts," "potential" and similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. These risks and other factors include those listed under "Risk Factors" and elsewhere in this prospectus. Those factors, among others, could cause our actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this prospectus, you should carefully understand that the forward-looking statements are not guarantees of performance or results.

        All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this prospectus as a result of new information, future events or developments, except as required by the federal securities laws.

        Industry data and other statistical information used in this prospectus are based on independent publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above. Although we believe these sources are reliable, we've not independently verified the information.

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USE OF PROCEEDS

        We estimate that our net proceeds from our sale of 6,060,606 shares of class A common stock in this offering at an assumed initial public offering price of $16.50 per share (the midpoint of the range shown on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be about $90.8 million. We will not receive any proceeds from the sale of shares by the selling shareholder, including with respect to any sale of shares resulting from an exercise by the underwriters of their option to purchase additional shares from the selling shareholder.

        We intend to use the net proceeds from the sale of the common stock to repay the balance outstanding under our $30 million revolving line of credit with McDonald's, to provide additional long-term capital to support the growth of our business (primarily through opening new stores), to continue to maintain our existing stores and for general corporate purposes. At September 30, 2005, the balance outstanding under our revolving line of credit was $4.6 million, and the annual interest rate with respect to those borrowings on that date was 7.5% (representing the U.S. prime rate on that date plus 100 basis points). This revolving line of credit expires on June 30, 2006. We expect that it will be terminated in connection with this offering. The amounts and timing of our actual expenditures will depend on numerous factors, including the status of our expansion efforts, sales and marketing activities and competition. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the proceeds from this offering.

        A $1 change, up or down, in the midpoint of the range shown on the cover page of this prospectus would change our estimated net proceeds by $6.1 million. Similarly, a change in the number of shares of class A common stock we sell would increase or decrease our net proceeds. We believe that our intended use of proceeds would not be affected by changes in either our initial public offering price or the number of shares of class A common stock we sell. However, if our net proceeds were significantly reduced and we were not able to find alternate sources of financing, our growth rate could be slowed. See "Risk Factors."

DIVIDEND POLICY

        We did not declare or pay any cash dividends on our common stock in 2002, 2003 or 2004. We anticipate that we'll retain any future earnings for the operation and expansion of our business. Accordingly, we do not anticipate declaring or paying any cash dividends on our common stock for the foreseeable future.

        Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our consolidated capitalization at September 30, 2005:

•

on an actual basis to reflect the one for three reverse common stock split, which is part of the Reclassification; and



•

on a pro forma as adjusted basis to reflect the Reclassification, the conversion of stock appreciation rights into stock options and the application of the estimated net proceeds that we will receive from this offering, based on an assumed initial public offering price of $16.50 per share (the midpoint of the range shown on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(1)

Total debt consists of $4.6 million outstanding under our line of credit with McDonald's and $2.4 million of deemed landlord financing. The pro forma as adjusted amount gives effect to the repayment of our balance outstanding under the McDonald's line of credit.

(2)

Excludes 228,666 shares of common stock issuable on the exercise of outstanding stock options, 153,333 shares of outstanding non-vested common stock and 771,334 shares of common stock reserved for future issuance under the Chipotle Executive Stock Option Plan. We do not intend to grant additional options under this plan following the consummation of this offering.

        The pro forma as adjusted number of shares of common stock to be outstanding is based on            shares outstanding at September 30, 2005, after giving effect to the Reclassification, and excludes:

•

228,666 shares of class A common stock issuable upon the exercise of options outstanding at September 30, 2005 at a weighted average exercise price of $16.25 per share;



•

153,333 shares of non-vested common stock outstanding at September 30, 2005;



•

shares of class A common stock reserved for future issuance under our Chipotle 2006 Stock Incentive Compensation Plan; and



•

148,966 shares of class A common stock issuable upon the exercise of options to be issued upon the conversion of stock appreciation rights outstanding at September 30, 2005.

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DILUTION

        If you invest in our class A common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our class A common stock (the midpoint of the range shown on the cover page of this prospectus) and the pro forma net tangible book value per share of our class A common stock upon the completion of this offering.

        Our net tangible book value at September 30, 2005 was about $280.0 million, or $10.65 per share of class B common stock (after giving effect to the Reclassification). The net tangible book value per share represents the amount of our net worth, or total tangible assets less total liabilities, divided by 26,280,680 shares of our class B common stock outstanding as of that date (after giving effect to the Reclassification).

        After giving effect to the Reclassification, the conversion of stock appreciation rights into stock options and the issuance and sale of 6,060,606 shares of our class A common stock in this offering and our receipt of about $90.8 million in net proceeds from such sale, based on an assumed public offering price of $16.50 per share (the midpoint of the range shown on the cover page of this prospectus), and after deducting the underwriting discounts and commissions payable by us and our estimated expenses of the offering, our as adjusted net tangible book value per share at September 30, 2005 would have been about $371.4 million, or $11.48 per share. This amount represents an immediate increase in net tangible book value of $0.83 to existing shareholders and an immediate dilution in net tangible book value of $5.02 per share to purchasers of our common stock in this offering. Dilution per share is determined by subtracting the net tangible book value per share as adjusted for this offering from the amount of cash paid by a new investor for a share of our common stock.

        The following table illustrates the per share dilution:

        The following table summarizes, at September 30, 2005, after giving effect to the Reclassification and this offering as described above:

•

the number of shares of common stock purchased from us;



•

the total consideration paid to us before deducting underwriting discounts and commissions of $            and estimated offering expenses payable by us of about $            ; and



•

the average price per share paid by existing shareholders and to be paid by new investors purchasing shares of common stock in this offering, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us:

        The foregoing tables include options granted to our officers, directors and affiliates under our stock option plans to purchase an aggregate of              shares of class A common stock that are outstanding or that are to be granted effective upon the consummation of this offering under our stock option plans or outstanding shares of non-vested stock that are subject to forfeiture, but do not include options granted to other employees under such plans to purchase an additional aggregate of             shares of class A common stock under such plans. See "Management—Executive Compensation—Stock Option Plans."

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SELECTED CONSOLIDATED FINANCIAL DATA

        Our selected consolidated financial data shown below should be read together with our "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and respective notes included elsewhere in this prospectus. The selected consolidated statements of operations data for the years ended December 31, 2002, 2003 and 2004 and the consolidated balance sheet data at December 31, 2003 and 2004 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated balance sheet data at December 31, 2002 have been derived from audited consolidated financial statements not included in this prospectus. Our consolidated financial statements for the years ended December 31, 2002, 2003 and 2004 have been audited and reported upon by Ernst & Young LLP, an independent registered public accounting firm. The selected consolidated statements of operations data for the years ended December 31, 2000 and 2001 and the consolidated balance sheet data at December 31, 2000 and 2001 have been derived from unaudited financial statements not included in this prospectus. The selected consolidated statements of operations data for the nine months ended September 30, 2004 and 2005 and the balance sheet data at September 30, 2005 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus and include all adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the results of the interim periods. The data shown below are not necessarily indicative of results to be expected for any future period.

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(1)

We are not a separate taxable entity for federal and most state income tax purposes and our results of operations are included in McDonald's consolidated federal and state income tax returns; however, the provision for income taxes is calculated on a separate return basis. At December 31, 2004, we had incurred total NOLs of $139.4 million since our inception as a "C" corporation on January 1, 1996. We incurred $118.0 million of these NOLs after McDonald's acquisition of over 80% of our equity. The remaining $21.4 million of these NOLs relates to SRLY losses before McDonald's acquired over 80% of our equity and will begin to expire in 2012. Through December 31, 2004, we recorded a valuation allowance to offset our deferred tax assets, including those related to the NOLs, net of deferred tax liabilities. During the nine months ended September 30, 2005, we determined that it was more likely than not that we would realize our deferred tax assets and we reversed our valuation allowance, resulting in a net tax benefit of $10.8 million in our results of operations. During the nine months ended September 30, 2005, we also realized $8.5 million of SRLY losses, which reduced goodwill but did not impact our results of operations.

(2)

Historical earnings (loss) per common share and shares used in computing historical earnings (loss) per common share do not reflect the effect of the Reclassification nor the conversion of stock appreciation rights into stock options.

(3)

The adjusted earnings (loss) per common share and shares used in computing adjusted earnings (loss) per common share presented give retroactive effect to the one for three reverse common stock split to be executed as part of the Reclassification and to the conversion of stock appreciation rights into stock options.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion together with "Selected Consolidated Financial Data" and our consolidated financial statements and related notes included elsewhere in this prospectus. The discussion contains forward-looking statements involving risks, uncertainties and assumptions that could cause our results to differ materially from expectations. Factors that might cause such differences include those described under "Risk Factors," "Special Note Regarding Forward-Looking Statements" and elsewhere in this prospectus.

Overview

        Our revenue was $470.7 million in 2004, a 130% increase from 2002 and a 49% increase from 2003, driven by new store openings and increased average store sales. During that three-year period, we opened a total of 237 stores. Increases in average store sales have occurred partly because the time it takes for our new stores to ramp up has consistently shortened as we've grown and customers have learned about our brand, enabling new stores to open with higher average store sales. We've also historically had strong growth in comp store sales, due mainly to an increase in the number of transactions processed at our registers.

        As our revenue has increased, our expenses have increased as well. The most important factor affecting our food, beverage and packaging costs and other restaurant operating costs is the price of ingredients critical to our menu, especially beef, chicken, cheese, avocados and beans. These five ingredients have historically accounted for a substantial portion of our food, beverage and packaging costs. Other important ingredients that we use include tomatoes and pork. The absolute increase in our expenses mostly reflected our growth, but other factors also contributed, such as changes in commodity costs driven by export / import restrictions affecting meat supplies and weather conditions that affected growing seasons and drove some prices higher.

        Since we became a subsidiary of McDonald's and began substantially expanding our operations in 1998, McDonald's has provided a significant portion of the capital needed to operate our business and open new stores. Generally McDonald's has done this through direct equity investments, although it has also in some cases provided us with short-term borrowings that we repaid through private placements of our equity securities. After we become a public company, we expect that McDonald's will stop financing us, and we'll fund our growth with cash flow from operations and other sources. We also currently benefit from our McDonald's relationship in other ways, such as pricing benefits for some products and services. If McDonald's ownership interest declines significantly, we'll lose an increasing amount of these benefits. That will further increase our costs significantly. See "Risk Factors—Risks Related to Our Business and Industry—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."

How We Make Money: Restaurant Sales

        Restaurant sales represent sales of food and drinks in stores operated by Chipotle, and does not include revenue from stores operated by franchisees (which represented less than 1% of our revenue in each of the last three years). Restaurant sales increased considerably in the last three years, from $203.9 million in 2002, to $314.0 million in 2003 and $468.6 million in 2004. For the first nine months of 2005, they were $452.6 million, 32.4% higher than the same period in 2004. Several factors affect our restaurant sales in any period, including mainly the number of stores in operation and average store sales. Various factors influence sales at a given store or group of stores, including increased customer recognition of our brand, our operational effectiveness, pricing, marketing and promotional efforts, local competition and trade area demographics.

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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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months. The following graphs show our average store sales in each of the last three years and for the trailing 12-month period ended September 30, 2004 and 2005.

        Average store sales have increased partly because ramp-up periods have become consistently shorter as new stores have opened with higher average sales for the reasons described under "—Expanding Store Base" above. Average store sales increases have also been driven by strong growth in comp store sales, due mainly to increased numbers of transactions at our stores, as described below. While we believe most of our sales increases will come from opening new stores, we'll continue to focus on ways to improve the customer experience at our existing stores so we can increase comp store sales. For additional information about how we intend to do that, see "What We Do—Where We Go From Here—Expanding Our Operations and Sales—Selling More Food Every Day."

        Comp Stores Sales Growth.    Comp store sales refer to year-over-year sales comparisons for stores in operation for at least 12 full months and do not include sales during the portion of the month in which a store begins operating. Historically, increases in comp store sales, which were 8.7% in the first nine months of 2005, 13.3% in 2004, 24.4% in 2003 and 17.0% in 2002, accounted for a substantial portion of our restaurant sales growth. In 2003, 43.6% of our restaurant sales growth resulted from comp store sales increases, as compared to 26.8% in 2004 and 26.6% in the first nine months of 2005.

        We believe that our strong historical comp store sales growth was mainly due to the growing appeal of our core menu items, increasing consumer understanding and appreciation of our passion for good, higher-quality food and our focus on building customer relationships "one burrito at a time." Comp store sales in 2004 and the first nine months of 2005 grew at a slower rate than prior years and represented a smaller percentage of the growth in our total restaurant sales than in prior years. This slower growth is due to new store average sales in the first 12 months increasing over time and baseline restaurant volumes increasing due to the cumulative impact of positive comp store sales in each of the last three years and the first nine months of 2005. As a result of the effects of these trends, we believe that comp stores sales likely will not continue to increase at the rates achieved over the past several years. Comp store sales also increase when we introduce modest price increases to our menu. In each of 2002, 2003 and 2004, we raised our prices both to adjust for inflation and to cover food, beverage and packaging cost increases and other operating costs. For example, we raised prices in some markets where we began to use more expensive, naturally raised chicken in 2003 and 2004. Our focus on "food with integrity" may cause us to charge higher prices in some cases because right now there are limited supplies of naturally raised and sustainably grown ingredients. See "Risk Factors—Risks Related to Our Business and Industry—New stores, once opened, may not be profitable, and the increases in average store sales and comp store sales that we've experienced in the past may not be indicative of future results."

        Discounting.    Unlike many of our competitors in the restaurant industry, we do not offer discounts or "value meal" options. Instead, we have promotions that allow customers to sample our food for free. We believe that one of the most important ways for us to increase sales is getting people to try our food and

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learn about the quality of our ingredients and preparation methods. We include the cost of the food we give away in our other operating costs.

Seasonality

        Our revenue fluctuates as a result of seasonal and other factors. See "—Quarterly Financial Data" below.

Franchise Royalties and Fees

        We have three franchisees that, in the aggregate, operate eight of our stores. Franchise royalties and fees represented less than 1% of our revenue in each of the last three years and first nine months of 2005. Although franchising is currently not an important component of our strategy, we constantly try to improve our performance and we may decide to license more stores to franchisees in the future. In the near term, however, we do not expect that we'll have significant increases in these revenues. In addition, if McDonald's ceases to own a majority of our outstanding common voting stock or if we cease to be an affiliate of McDonald's, under the terms of our franchise agreements, our franchisees (each of whom is also a McDonald's franchisee) must either sell either their Chipotle franchise to someone who agrees to perform their obligations under the franchise agreements (at fair market value determined in the manner provided in the franchise agreements) or sell their McDonald's franchise within 24 months after the relevant triggering event. If our franchisees don't sell either franchise within the 24-month period, their franchise agreements with McDonald's will terminate automatically.

How We Spend Money: Food, Beverage and Packaging Costs, Labor, Other Restaurant Operating Costs and Other Expenses

        We have four basic types of expense: food, beverage and packaging costs; labor; other restaurant operating costs (consisting of occupancy costs and other operating costs); and other expenses (consisting of general and administrative expenses, depreciation and amortization, pre-opening costs and gains or losses on asset disposals). As we do more business, open more stores and hire more people, our food, beverage and packaging costs, labor and other restaurant operating costs increase. We've grown considerably over the last three years, and our combined food, beverage and packaging costs, labor and other restaurant operating costs have followed pace, increasing from $182.7 million in 2002 to $268.0 million in 2003, and to $394.1 million in 2004. These expenses for the first nine months of 2005 were $370.5 million, 29.8% higher than the same period in 2004. Our other expenses have also increased, from $39.6 million in 2002 to $55.4 million in 2003, and to $70.5 million in 2004. Other expenses for the first nine months of 2005 were $60.7 million. As we continue to grow, we expect that other expenses will also increase, but may decline as a percentage of revenue.

Food, Beverage and Packaging Costs

        Food, beverage and packaging costs are the largest component of our expenses and represented about 33.1% of total revenue in 2002, 33.3% in 2003, 32.7% in 2004 and 32.3% in the first nine months of 2005. The most important factor affecting our food, beverage and packaging costs is the price volatility of our key ingredients. Our food, beverage and packaging costs change as a result of fluctuations in commodity and material costs, but also depend in part on the success of our cost management efforts. Since we use higher-quality ingredients that we purchase from carefully selected suppliers, and are increasing our use of more expensive, naturally raised and sustainably grown ingredients, our expenses are often higher than those of other restaurants that use a higher proportion of commodity-priced ingredients.

        Like the rest of the restaurant industry, our expenses fluctuate from time to time due to external events. In 2003, our food expense was affected by higher avocado prices reflecting a poor growing season due to inclement weather and pestilence. In 2004, prices for chicken (our most-used meat ingredient) rose significantly due to a ban by Asian countries on their chicken exports following outbreaks of avian flu. The

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more limited worldwide chicken supply, combined with continued high demand, drove prices upward. Beef prices have also been higher in the past year due to U.S. restrictions on Canadian imports in the wake of incidents of "mad cow" disease in Canadian cattle herds. Weather is also a factor, especially when severe conditions limit the growing season or crop quality. This happened in 2004, when hurricanes in some parts of the United States damaged tomato crops and drove prices higher. Unlike many other restaurants, we decided not to limit our use of tomatoes (and not to pass the cost increase on to customers). These and other cost increases negatively affected our margins in 2004. Similarly, hurricanes Katrina and Rita in the fall of 2005 have resulted in higher short-term chicken prices and higher diesel prices, which may affect our suppliers, causing them to increase the price of other ingredients.

        We try to minimize the volatility of our food expense by working closely with our suppliers and using a mix of forward, fixed and formula pricing protocols. Under forward pricing protocols, our suppliers and we agree on prices for the ingredients or other raw materials that they sell to us at specified times in the future (possibly weeks or months in advance). Whether the price goes up, down or remains stable over the period, we pay that agreed-upon price at the time we make our purchase. Under fixed pricing protocols, we agree a fixed price with our supplier for the duration of that protocol. Under formula pricing protocols, the prices we pay are based on a specified formula related to the prices for the goods; for example, prices may be tied to the spot price for the ingredient or raw materials in the commodities market on the date of purchase. 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 also sometimes buy supplies at current market or spot prices.

        We've also tried to expand, where necessary, the number of suppliers for our ingredients and other raw materials to assure supply and freshness and mitigate pricing volatility. Our focus on "food with integrity" has constrained our sourcing flexibility to some extent. We've been careful in expanding that initiative so that we don't outpace available supply. Some of our ingredients come from small farms that have facilities that must comply with federal or industry standards for classification as natural, and they may face economic or other limits on their growth. We believe that consumers' increasing concern about where and how food is raised, environmental management and animal husbandry will foster demand for these foods, which will in turn attract the interest and capital investment of larger farms and suppliers. That said, we understand that we'll continue to be at the forefront of this trend and must balance our interest in advancing "food with integrity" with our desire to provide great food at reasonable prices. If our focus resonates with consumers, it should improve our sourcing flexibility, although we'd expect that these kinds of ingredients and other raw materials will remain more expensive than commodity-priced equivalents for some time to come.

        Beverage and packaging costs, while smaller than food costs, are also a significant portion of these costs. McDonald's relationship with Coca-Cola has helped us contain our beverage costs and as long as we are a consolidated subsidiary of McDonald's, we expect to continue to have that pricing advantage. See "Risk Factors—Risks Relating to Our Business and Industry—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." Food, beverage and packaging costs also include freight costs, which can be higher than those of some of our competitors in part because we rely primarily on perishable ingredients rather than on processed food products. These costs have also been affected by higher diesel prices that have in some cases resulted in the imposition of surcharges on the delivery of commodities to our distributors, which they have generally passed on to us to the extent permitted under our arrangements with them.

Labor Costs

        Labor costs are the second-largest component of our expenses, and represented 32.5% of total revenue in 2002, 29.8% in 2003, 29.6% in 2004 and 28.5% in the first nine months of 2005. Labor costs

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