CHIPOTLE MEXICAN GRILL INC

Chipotle Mexican Grill, Inc. operates in the fast-casual, quick-service, and casual dining segments of the highly competitive restaurant industry. The company owns and operates Chipotle Mexican Grill restaurants featuring a relevant menu of burritos, burrito bowls, quesadillas, tacos, and salads, made using fresh, high-quality ingredients without artificial colors, flavors or preservatives. As of December 31, 2025, Chipotle owned 4,042 restaurants including 3,938 Chipotle restaurants throughout the United States and 104 international Chipotle restaurants, with an additional 14 international partner-operated restaurants. The company manages its U.S. operations based on 11 regions and aggregates its operations to one reportable segment.

The fast-casual, quick-service, and casual dining segments of the restaurant industry are highly competitive with respect to taste, price, food quality and presentation, customer service, location, convenience, brand reputation, and cleanliness. Chipotle's competition includes a variety of restaurants in each of these segments, including locally-owned restaurants as well as national and regional chains, and competition from food delivery services has increased in recent years. Among Chipotle's main competitors are restaurant formats that claim to serve higher quality ingredients without artificial flavors, colors and preservatives, and that serve food quickly and at a reasonable price. The company's continued success depends on maintaining its compelling brand value, which is built on serving responsibly sourced, classically cooked, real food with wholesome ingredients.

Chipotle generates revenue primarily from sales by its company-owned restaurants. Total revenue is comprised of food and beverage revenue and delivery service revenue. Food and beverage revenue primarily relates to the sale of food and beverages, while delivery service revenue is comprised of delivery and related service fees charged to guests on sales made through Chipotle's app and website. The company's digital platform continues to be a strategic driver of growth, with digital sales representing 36.7% of food and beverage revenue in 2025, compared to 35.1% in 2024. Digital sales represent food and beverage revenue for company-owned restaurants generated through the Chipotle website, Chipotle app or third-party delivery aggregators and include revenue deferrals associated with Chipotle Rewards.

Chipotle's menu consists of burritos, burrito bowls (a burrito without the tortilla), quesadillas, tacos, and salads. The company strives to serve only animal products that are raised in accordance with criteria established to improve sustainability and promote animal welfare, and without the use of non-therapeutic antibiotics or added growth hormones, branding its meats as 'Responsibly Raised'. Chipotle also seeks to use responsibly grown produce, meaning produce grown by suppliers whose practices conform to its Food with Integrity standards. The company's digital platform includes the Chipotle website, Chipotle app, and third-party delivery aggregators, and it has made digital ordering convenient with continued enhancements to its app and by building more Chipotlanes, which is its drive through format for guest pick-up of digital orders. Over 16% of 2025 food and beverage revenue consisted of delivery orders for which Chipotle is reliant on third-party delivery companies.

During the year ended December 31, 2025, Chipotle opened 334 company-owned restaurants, which included 257 restaurants with a Chipotlane. Additionally, 11 partner-operated restaurants were opened in the Middle East during the year. The company repurchased $2,417,673 of stock at an average price per share of $42.54 during the year ended December 31, 2025. As of December 31, 2025, $1,710,669 remained available for repurchases of shares of common stock. On June 26, 2024, Chipotle effected a 50-for-1 stock split of its common stock. In the second quarter of 2024, the company retired all treasury stock owned. Total capital expenditures for 2025 were $666.3 million. The company had a $500,000 revolving credit facility with JPMorgan Chase Bank as administrative agent as of December 31, 2025, with no outstanding borrowings.

Total revenue increased 5.4% to $11,925.6 million for the year ended December 31, 2025, compared to $11,313.9 million in 2024. Comparable restaurant sales decreased 1.7% for the year, attributable to lower transactions of 2.9%, partially offset by a 1.2% increase in average check. Net income was $1,535,761 thousand for 2025, compared to $1,534,110 thousand in 2024. Diluted earnings per share was $1.14 in 2025, a 2.7% increase from $1.11 in 2024. Cash provided by operating activities was $2.1 billion for the year ended December 31, 2025, consistent with $2.1 billion in 2024. As of December 31, 2025, Chipotle had a cash and marketable investments balance of $1.1 billion, non-marketable investments of $106.0 million, and $35.4 million of restricted cash.

For 2026, management is anticipating comparable restaurant sales to be about flat. The company expects to open approximately 350 to 370 restaurants in 2026, which includes 10 to 15 international partner-operated restaurants. Chipotle expects around 80% of its new company-owned restaurants will include a Chipotlane. In 2026, the company expects to incur about $834.1 million in total capital expenditures, with approximately $531.8 million related to construction of new restaurants before any reductions for landlord reimbursements, and approximately $266.9 million related to investments in existing restaurants including remodeling and similar improvements, new equipment and hardware, and technology to optimize efficiencies.

Chipotle's Recipe for Growth strategy includes expanding its global reach by scaling with intention through proven, company-owned and partner operated markets, as well as strategic new regions. As of December 31, 2025, the company had 14 international partner-operated Chipotle restaurants in the Middle East in partnership with the Alshaya Group, and has plans to open more partner-operated Chipotle restaurants in the Middle East, Mexico and Asia. The company is also modernizing its business model with industry-leading technology, including leveraging AI and relaunching its Rewards Program, to elevate the experience for guests and teams. Chipotle continues to invest in technology and tools to modernize the back of house of its restaurants and to improve the team member experience, including investments in automation technology through investments in companies like Hyphen and Vebu.

Chipotle estimates that the tariffs enacted in 2025 will impact food, beverage and packaging costs by about 15 basis points on an ongoing basis, though these estimates could vary based on future tariff policy changes. Food, beverage and packaging costs decreased 0.2% as a percentage of total revenue for the year ended December 31, 2025 compared to 2024, primarily due to a 0.6% benefit from menu price increases and cost of sales efficiencies, partially offset by 0.4% of inflation (primarily beef and chicken) and a 0.2% impact from tariffs enacted in 2025. Labor costs increased 0.4% as a percentage of total revenue for 2025 compared to 2024, primarily due to a 0.7% impact from lower sales volumes and 0.4% from restaurant wage inflation, partially offset by a 0.5% benefit from menu price increases.

Chipotle expects to open approximately 350 to 370 restaurants in 2026, working towards its long-term goal of 7,000 restaurants in the U.S. and Canada. The company expects the average investment cost for new restaurants opening in 2026 will be slightly higher than the average investment costs for those opened in 2025. Chipotle continues to invest in technology infrastructure, including investments in its digital platform, AI, and back-of-house technology to modernize operations. As of December 31, 2025, Chipotle employed 130,301 people worldwide and 1,233 contract workers. The company continues to focus on talent acquisition and retention, with nearly 90% of in-restaurant leadership roles filled through internal promotions in 2025.

In 2026, Chipotle expects to incur about $834.1 million in total capital expenditures, with approximately $531.8 million related to construction of new restaurants before any reductions for landlord reimbursements, and approximately $266.9 million related to investments in existing restaurants including remodeling and similar improvements, new equipment and hardware, and technology to optimize efficiencies. The company also expects a portion of its incurred capital expenditures to be for additional corporate initiatives including investments in technology to boost innovation, enhance the guest experience, and improve operations. As of December 31, 2025, $1,710,669 remained available for repurchases of shares of common stock under the remaining repurchase authorizations. Chipotle is not required to pay any dividends and has not declared or paid any cash dividends on its common stock, and does not anticipate paying any cash dividends in the foreseeable future.

Chipotle faces several headwinds and constraints that management has explicitly flagged. The company has experienced and may continue to experience challenges in hiring and retaining restaurant employees and in maintaining full restaurant staffing in various locations, which may result in longer wait times for guest orders, temporary closures of the digital make line and decreased employee and guest satisfaction. The aggressive pace at which Chipotle opens new restaurants can make it increasingly difficult to recruit and hire sufficient numbers of qualified employees. The company's ability to open and profitably operate new restaurants is subject to risks such as the identification and availability of desirable locations, negotiation of acceptable lease terms, obtaining required governmental permits, availability of capable contractors, and increases in the cost and decreases in the availability of labor and building material. Chipotle's timeline for completing construction has gotten longer due to landlord reluctance to commit to building in light of fluctuating interest rates, tight money supply and general economic conditions, and due to backlogs and long wait times for permits and utility hookups.

Chipotle faces structural headwinds from macroeconomic factors largely outside its control. Restaurant dining generally is dependent upon consumer discretionary spending, which may be affected by macroeconomic conditions such as unemployment, inflation, interest rate changes, taxes, access to credit, public health crises, trade disputes, and geopolitical instability. The company's operating results are subject to factors including rising real estate costs in certain markets, supply chain disruptions, climate change and extreme weather affecting costs and availability of ingredients, changes in tax laws and government regulations such as the One Big Beautiful Bill Act enacted in the U.S. in July 2025, inflation and interest rate fluctuations, tariffs imposed on commodities or goods including recent tariffs imposed or threatened to be imposed by the U.S. on other countries and any retaliation measures, and natural or man-made disasters disrupting major markets. Chipotle may need to increase menu prices in response to increased inflation, higher taxes, new tariffs on imported goods, wage increases due to a tighter job market and other macro-economic factors, and higher menu prices may lead consumers to reduce spending or switch to competitors.

Food safety and food-borne illness concerns pose a material risk to Chipotle's business, as the company uses fresh, unprocessed produce, handles raw chicken in its restaurants, relies on employees cooking with traditional methods, and does not use artificial preservatives or frozen ingredients, which may increase risk relative to competitors. The company is heavily dependent on information technology systems, and failures or interruptions in these systems could harm its ability to effectively operate its business, with digital sales representing 36.7% of food and beverage revenue in 2025. Breaches or other unauthorized access to guest or employee personal information stored in Chipotle's systems or those of third parties could damage its reputation and expose it to potential liabilities. Increases in the cost of labor, including mandated minimum wage increases and increases in the cost of health benefits, could adversely impact profitability, as labor costs were $2,991,680 thousand in 2025, representing 25.1% of total revenue. The company faces risks from increases in ingredient costs, with food, beverage and packaging costs of $3,526,992 thousand in 2025 representing 29.6% of total revenue, and the company estimates that tariffs enacted in 2025 will impact these costs by about 15 basis points on an ongoing basis. Chipotle's ability to meet its new restaurant opening goals is subject to risks including the identification and availability of desirable locations, negotiation of acceptable lease terms, and increases in the cost and decreases in the availability of labor and building material, as the company plans to open approximately 350 to 370 restaurants in 2026.

Management's message emphasizes Chipotle's Recipe for Growth strategy, which leans into what uniquely differentiates the brand with a focus on accelerating growth and sharpening competitiveness. The strategy is grounded in five key areas: protecting and strengthening the core by driving operational and culinary excellence to deliver exceptional value; evolving brand messaging and accelerating menu innovation and new occasions that drive demand; modernizing the business model with industry-leading technology including leveraging AI and relaunching the Rewards Program; expanding global reach by scaling with intention through proven, company-owned and partner operated markets as well as strategic new regions; and cultivating the best talent in the industry that is energized and focused on speed and agility. For 2026, management is anticipating comparable restaurant sales to be about flat, and expects to open approximately 350 to 370 restaurants in 2026, which includes 10 to 15 international partner-operated restaurants, with around 80% of new company-owned restaurants expected to include a Chipotlane. Management also expects to incur about $834.1 million in total capital expenditures in 2026.