10q10k10q10k.net

What changed in Chipotle Mexican Grill's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Chipotle Mexican Grill's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+227 added−221 removedSource: 10-K (2024-02-08) vs 10-K (2023-02-09)

Top changes in Chipotle Mexican Grill's 2023 10-K

227 paragraphs added · 221 removed · 162 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

24 edited+20 added−8 removed20 unchanged
Biggest changeSince December 2021, we have been participating in Management Leadership for Tomorrow’s Black Equity at Work Certification Program, which establishes a comprehensive aggregate measurement system and provides a rigorous, results-oriented approach that accelerates progress toward Black equity internally, amongst our employees, and externally by supporting Black equity within our business partners and in the communities where we operate.
Biggest changeWe also launched an internal job board across multiple communication channels to our employees to provide increased visibility and access to internal opportunities. Since December 2021, we have participated in Management Leadership for Tomorrow’s Black Equity at Work Certification Program, which establishes a comprehensive aggregate measurement system and provides a rigorous, results-oriented approach that accelerates progress toward Black equity internally, amongst our employees, and externally by supporting Black equity within our business partners and in the communities where we operate. In early 2023, we engaged an independent third-party consultant to conduct a Talent Management Equity Audit to identify places in our talent management cycle where we may need to eliminate bias and/or create more equitable policies, practices, and procedures; identify potential blockers and new opportunities to create and sustain equity in talent management; and identify key strengths and pockets of risk.
For more information about our sustainability and animal welfare initiatives, see our biennial Sustainability Report and interim Update Report on our website www.chipotle.com/about-us/sustainability. Purchasing Maintaining the high levels of quality and safety we demand in our restaurants depends in part on our ability to acquire high-quality, fresh ingredients and other necessary supplies that meet our specifications from reliable suppliers.
For more information about our sustainability and animal welfare initiatives, see our biennial Sustainability Report and interim Update Report on our website www.chipotle.com/sustainability. Purchasing Maintaining the high levels of quality and safety we demand in our restaurants depends in part on our ability to acquire high-quality, fresh ingredients and other necessary supplies that meet our specifications from reliable suppliers.
Our food safety programs are also intended to ensure that we not only continue to comply with applicable federal, state and local food safety regulations, but also establish Chipotle as an industry leader in food safety. To help achieve this goal, we have a Food Safety Advisory Council comprised of some of the nation’s foremost food safety authorities.
Our food safety programs are also intended to ensure that we not only continue to comply with applicable national, federal, state and local food safety regulations, but also establish Chipotle as an industry leader in food safety. To help achieve this goal, we have a Food Safety Advisory Council comprised of some of the nation’s foremost food safety authorities.
See “Risk Factors” in Item 1A for a discussion of risks relating to federal, state, local and international laws and regulations applicable to our business. Seasonality Seasonal factors influencing our business are described under the heading “Quarterly Financial Data/Seasonality” in Item 7.
See “Risk Factors” in Item 1A for discussion of risks relating to federal, state, local and international laws and regulations applicable to our business. Seasonality Seasonal factors influencing our business are described under the heading “Quarterly Financial Data/Seasonality” in Item 7.
Our first Chipotle restaurant opened in Denver, Colorado in 1993. Nearly 30 years later, our devotion to seeking out high-quality ingredients, raised with respect for animals, farmers, and the environment, remains at the core of our commitment to Food With Integrity.
Our first Chipotle restaurant opened in Denver, Colorado in 1993. Over 30 years later, our devotion to seeking out high-quality ingredients, raised with respect for animals, farmers, and the environment, remains at the core of our commitment to Food with Integrity.
While costs associated with compliance with these laws and regulations have increased as the number and scope of the laws have increased, the total costs incurred have not had, and are not expected to have, a material effect on our capital expenditures, results of operations or competitive position.
While costs associated with compliance with laws and regulations have increased as the number and scope of regulation have increased, the total costs incurred have not had, and are not expected to have, a material effect on our capital expenditures, results of operations or competitive position.
In addition to our U.S. registrations, we have registered trademarks for “Chipotle” and a number of other marks in Canada, the European Union and various other countries, and have filed trademark applications for “Chipotle Mexican Grill,” “Chipotle” and a number of other marks in additional countries.
In addition to our U.S. registrations, we have registered trademarks for “Chipotle” and a number of other marks in Canada, the European Union, the Middle East and various other countries, and have filed trademark applications for “Chipotle Mexican Grill,” “Chipotle” and a number of other marks in additional countries.
Our food safety and quality assurance teams work to ensure compliance with our food safety programs and practices, components of which include: natural inhibitors (to prevent microbial growth in ingredients); advanced technologies (tools that reduce or eliminate pathogens while maintaining food quality); small grower support; enhanced restaurant procedures (protocols for handling ingredients and sanitizing surfaces in our restaurants); food safety certifications; internal and third-party restaurant inspections; supplier interventions (steps to mitigate food safety risks before ingredients reach Chipotle); and ingredient traceability.
Our food safety and quality assurance teams work to ensure compliance with our food safety programs and practices, components of which include: natural inhibitors (to prevent microbial growth in ingredients); advanced technologies (tools that reduce or eliminate pathogens while maintaining food quality); enhanced restaurant procedures (protocols for handling ingredients and sanitizing surfaces in our restaurants); food safety certifications; internal and third-party restaurant inspections; small grower support during on-site audits; supplier interventions (steps to mitigate food safety risks before ingredients reach Chipotle); and ingredient traceability.
Our competition includes a variety of restaurants in each of these segments, including locally-owned restaurants, as well as national and regional chains. Competition from food delivery services, which offer meals from a wide variety of restaurants, also has increased in recent years, particularly during COVID-19, and is expected to continue to increase.
Our competition includes a variety of restaurants in each of these segments, including locally-owned restaurants, as well as national and regional chains. Competition from food delivery services, which offer meals from a wide variety of restaurants, also has increased in recent years and is expected to continue to increase.
Our mission is to win today while creating a bright future by focusing on five key fundamental strategies: Running successful restaurants with a people accountable culture that provides great Food With Integrity while delivering exceptional in-restaurant and digital experiences; Sustaining world class people leadership by developing and retaining diverse talent at every level; Amplifying technology and innovation to drive digital growth and productivity at our restaurants and support centers; Making the brand visible, relevant, and loved to improve overall guest engagement; And expanding access and convenience by accelerating new restaurant openings.
Our mission is to win today while we grow our future by focusing on five key fundamental strategies: Sustaining world class people leadership by developing and retaining diverse talent at every level ; Running successful restaurants with a people accountable culture that provides great Food with Integrity while delivering exceptional in-restaurant and digital experiences ; Making the brand visible, relevant, and loved to improve overall guest engagement; Amplifying technology and innovation to drive growth and productivity at our restaurants, support centers and in our supply chain; and Expanding access and convenience by accelerating new restaurant openings in North America and internationally.
U.S. diversity statistics were as follows: Our most recent EEO-1 consolidated report is posted on the Investors page of our website at www.ir.chipotle.com under Corporate Governance – Human Capital Information and additional details about the demographics of our employee population is included there and in our biennial Sustainability Report and interim Update Report on our website www.chipotle.com/about-us/sustainability .
As of December 31, 2023, U.S.-based employee diversity statistics were as follows: 5 Table of Contents Our most recent EEO-1 consolidated report is posted on the Investors page of our website at www.ir.chipotle.com under Corporate Governance – Human Capital Information and additional details about the demographics of our employee population is included in our biennial Sustainability Report and interim Update Report on our website www.chipotle.com/sustainability .
Our Code of Ethics and our Code of Conduct for Suppliers also are available in this section of our website.
Our Code of Ethics and our Supplier Code of Conduct also are available in this section of our website.
Total Rewards The financial, physical and mental wellness of our employees remains our top priority and we believe we have compelling compensation packages and incentive programs and a robust suite of benefit offerings that enables us to engage current team members and attract new team members: Our commitment to pay equity is evidenced by our investment in our compensation packages, including competitive wages and industry leading incentive programs, such as our annual and quarterly bonus programs, that allow us to attract and retain the top talent in the industry. Our Debt-Free Degree program that now provides Chipotle employees access to nearly 100 degrees at 10 universities, completely tuition debt free. New Career Certificates, which further enhances our Tuition Assistance benefits by providing on-demand certificate programs to help Chipotle team members advance their careers in as little as eight weeks. In 2023, we launched a program that provides our medically enrolled employees and their families with a Health Pro who can help them navigate the complex healthcare environment, helping them understand how their health benefits cover their care, how to save money, as well as get expert, high-quality medical care. Personalized mental health assistance is available to all Chipotle employees and their family members through a partnership with Health Advocate; support is available 24/7 via in-person, phone, or virtual visits with a licensed counselor.
Total Rewards The financial, physical, and mental wellness of our employees remains our top priority and we believe we have compelling compensation packages and incentive programs, and a robust suite of benefit offerings that enable us to engage current team members and attract new team members: We have made substantial investments in our compensation packages, including competitive wages and industry leading incentive programs, such as our annual and quarterly bonus programs, which allow us to attract and retain the top talent in the industry. We offer a Debt-Free Degree program that provides Chipotle employees access to nearly 100 degrees at 10 universities, completely tuition debt free. We support Career Certificates, which further enhances our Tuition Assistance benefits by providing on-demand certificate programs to help Chipotle team members advance their careers in as little as eight weeks. In 2023, we launched a program that provides our medically enrolled employees and their families with a Health Pro who can help them navigate the complex healthcare environment, helping them understand how their health benefits cover their care, how to save money, as well as get expert, high-quality medical care. In 2023, we also offered personalized mental health assistance to all Chipotle employees and their family members with support available 24/7 via in-person, phone, or virtual visits with a licensed counselor. Starting in 2024, we are partnering with SoFi to offer student loan payment matching programs via our 401(k)-retirement program.
Digital sales, which represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators includes revenue deferrals associated with Chipotle Rewards, represented 39.4% of food and beverage revenue in 2022, compared to 45.0% of food and beverage revenue in 2021.
Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators and include revenue deferrals associated with Chipotle Rewards. Digital sales represented 37.4% of food and beverage revenue in 2023, compared to 39.4% of food and beverage revenue in 2022.
We plan to disclose key results and action plans from these initiatives in our Sustainability Report. 5 Table of Contents We also retain an independent third-party compensation consultant each year to conduct a pay equity analysis of our U.S. workforce, including factors of pay (e.g., grade level, tenure in role, most recent promotion) and external market conditions (e.g., geographic location) to ensure consistency and equitable treatment amongst our employees.
We retain an independent third-party compensation consultant each year to conduct a pay equity analysis of our U.S. and Canadian workforce, including factors of pay (e.g., grade level, tenure in role, most recent promotion) and external market conditions (e.g., geographic location), to ensure consistency and equitable treatment among our employees.
As of December 31, 2022, we owned and operated 3,129 Chipotle restaurants throughout the United States, 53 international Chipotle restaurants, and five non-Chipotle restaurants. We manage our operations based on eight regions and have aggregated our operations to one reportable segment.
As of December 31, 2023, we owned and operated 3,371 Chipotle restaurants throughout the United States (“U.S.”) and 66 international Chipotle restaurants. We manage our operations based on eight regions and aggregate our operations to one reportable segment.
Although our policy is to protect and defend vigorously our rights to our intellectual property, we may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business. 7 Table of Contents Available Information We maintain a website at www.chipotle.com, including an investor relations section at ir.chipotle.com, on which we routinely post important information, such as webcasts of quarterly earnings calls and other investor events in which we participate or host, and any related materials.
Available Information We maintain a website at www.chipotle.com, including an investor relations section at ir.chipotle.com, on which we routinely post important information, such as webcasts of quarterly earnings calls and other investor events in which we participate or host, and any related materials.
We’ve also sought to increase, where practical, the number of suppliers for our ingredients to help mitigate pricing volatility and reduce our reliance on one or several suppliers, which could create supply shortages. In addition, we closely monitor industry news, trade tariffs, weather, exchange rates, foreign demand, crises and other world events that may affect our ingredient prices.
We have also sought to increase, where practical, the number of suppliers for our ingredients to help mitigate pricing volatility and reduce our reliance on one or several suppliers, which could create supply shortages.
Maintaining a diverse, equitable and inclusive work environment is critical to our business success. Therefore, we have undertaken several actions to ensure that our diversity strategy is effective.
Diversity, Equity & Inclusion Maintaining a diverse, equitable and inclusive work environment is critical to our success as a business.
In 2022, our review included 99% of our U.S. employee population, excluding only approximately 50 of our most senior management employees, and the results did not identify preferential treatment to any class of employee; however, we identified several isolated discrepancies between actual compensation and our policies and we quickly made pay adjustments to close all identified gaps.
In 2023, our review included 99% of our U.S. and Canadian employee population, excluding only approximately 50 of our most senior management employees. The analysis identified small, isolated pay gaps for certain segments of the population, and we subsequently made pay adjustments to close those gaps.
Certain key ingredients ( certain cuts of beef, tomatoes, tortillas and adobo ) are purchased from a small number of suppliers. Quality Assurance and Food Safety We are committed to serving only safe, high quality food.
In addition, we closely monitor industry news, trade tariffs, weather, exchange rates, foreign demand, crises and other world events that may affect our ingredient prices or available supply. Certain key ingredients ( beef, tomatoes, tortillas and adobo ) are purchased from a small number of suppliers. Quality Assurance and Food Safety We are committed to serving only safe, high-quality food.
In 2022 only one restaurant voted to form a union, and we believe that our relationship with our employees is good. We also believe our efforts to manage our workforce have been effective, as evidenced by a strong culture and our employees’ demonstrated commitment to living our purpose and values.
We also believe our efforts to manage our workforce have been effective, as evidenced by a strong culture and our employees’ demonstrated commitment to living our purpose and values. Talent Acquisition We continue to invest heavily in recruiting top talent and ensuring appropriate staffing levels are maintained, especially during our two peak hiring seasons (spring and fall).
We provide our employees various learning opportunities to ensure that we maintain a diverse pipeline of talent available to regularly promote employees to leadership positions, including the following: Our Leadership Evolution and Development Program focuses on preparing a cross-functional cohort of mid-level managers for the future of work and leadership.
In 2023, we had more than 24,000 internal promotions, including 100% of U.S. based Regional Vice Presidents, 87% of Team Directors, and 87% of Field Leaders. To develop our employees, we provide the following programs: Leadership Evolution and Development: Focuses on preparing a cross-functional cohort of mid-level managers for the future of work and leadership.
Human Capital As of December 31, 2022, Chipotle employed 104,958 people worldwide, of which 103,345 individuals are employed in the U.S. and 1,613 are employed in Canada, France, Germany and the United Kingdom. In the United States, we employed 102,219 people in our restaurants and 1,126 people in our Restaurant Support Centers and field support organizations.
As of December 3 1, 2023, Chipotle employed 116,068 people worldwide and 1,088 contract workers. Of our employees, 114,042 worked in the United States , and 2,026 worked internationally across Canada, France, Germany, and the United Kingdom. Within the U.S., 112,572 employees worked in our restaurants, and 1,470 in our Restaurant Support Centers.
Removed
Our strong digital platform gave us a competitive advantage during the peaks of the COVID-19 pandemic, as more guests preferred to eat their meals at home and in-restaurant dining was prohibited or restricted. We have made digital ordering convenient with enhancements to the Chipotle app and website, such as unlimited customization, contactless delivery, and group ordering.
Added
We have made digital ordering convenient with enhancements to the Chipotle app and website, such as customization, contactless delivery, and group ordering and we have improved the overall guest experience within the app with the inclusion of order readiness messaging, wrong location detection and reminders to scan for points.
Removed
Diversity, Equity & Inclusion As a people-first company rooted in values, our purpose of Cultivating a Better World extends beyond serving nutritious food using real ingredients. It means hiring world-class individuals dedicated to investing in their future and partnering together to positively impact the communities they serve.
Added
Human Capital At Chipotle, our vision is to cultivate an environment where our employees can thrive, pursue their passion and become lifelong leaders. We believe in investing and supporting our people because they are our most important asset and give us a competitive advantage in our business.
Removed
Most notably, our diversity and inclusion strategy is to foster a culture that values and champions diversity, while leveraging the individual talents of all team members to grow our business and Cultivate a Better World.
Added
There were no union petitions or campaigns in 2023. We continue to bargain with the one restaurant that voted in 2022 to form a union, and we believe that our relationship with our employees is good.
Removed
As of December 31, 2022, approximately 50% of our U.S.-based employee population was female and approximately 70% of our U.S.-based employee population was comprised of racial and ethnic minorities.
Added
We focus on new and innovative ways to attract and engage talent for our restaurants, which includes marketing campaigns that build on our documentary-style television spots, featuring unscripted testimonials from team members about the impact Chipotle has had on their lives.
Removed
In addition to the Black Equity at Work Certification Program, in early 2023 we engaged an independent third-party consultant to conduct a Talent Management Equity Audit, which aims to identify where in the talent management cycle we may need to debias or create more equitable policies, practices, and procedures, identify potential blockers and new opportunities to creating and sustaining equity in talent management, and identify key strengths and pockets of risk.
Added
We invest in advertising on social media and highlight growth opportunities and the possible trajectory of achieving six-figure total compensation in approximately three years. Additionally, we now offer a formal Summer Internship Program to invest in students while creating opportunities for our restaurant employees to further gain exposure to our Restaurant Support Centers.
Removed
Talent Development We believe that our people and culture give us a competitive advantage in our business. In 2022, we had approximately 22,000 internal promotions. Additionally, 90% of all restaurant management roles were internal promotions including 100% of US Regional Vice President roles, 81% of Team Directors, and 74% of Field Leader positions.
Added
Notably, our rate of internal promotions for 2023 was similar within our employee populations, with approximately 50% of promoted employees identifying as female and 39% of promoted employees identifying as Hispanic or Latino. We have undertaken several actions to promote diverse, equitable and inclusive work environments.  We created a consistent and structured candidate interview process with new interview guides.
Removed
During the 9-month program, participants learn the critical capabilities of leading oneself, to leading others, to leading the business with topics designed to stretch capabilities and improve decision-making skills.  Our Executive Development Program, which focuses on developing eleven high potential Team Directors by providing them with opportunities to develop in areas such as leadership, marketing, business and finance, data and analytics, ESG and hospitality, as well as gain an in-depth understanding of various functions within the company.  Online executive coaching for mid- and senior level leaders throughout the organization.  Coordinated talent calibration across the organization to identify a diverse pipeline of emerging leaders, matching these leaders with the appropriate development programs to ensure we have a slate of ‘ready now’ internal talent for critical roles within the organization.  Development courses and programs that focus on creating an inclusive culture.
Added
This ensures quality, speed and equitable hiring practices are followed throughout internal and external candidate interviews.
Removed
Government Regulation and Environmental Matters We are subject to various federal, state and local laws and regulations that govern aspects of our business operations, including those governing: 6 Table of Contents  preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content;  employment practices and working conditions, including minimum wage rates, wage and hour practices, fair workweek and “just cause” legislation, employment of minors, discrimination, harassment, classification of employees, paid and family leave, workplace safety, immigration and overtime among others;  data privacy and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers), and health information, including state laws such as the California Privacy Rights Act (“CPRA”) and CCPA in California as well as new privacy-related legislation in Virginia, Colorado, Connecticut, Utah and a growing number of other states, and international laws such as GDPR in the European Union and the Personal Information Protection and Electronic Documents Act (“PIPEDA”) in Canada, and payment card industry standards and requirements;  health, sanitation, safety and fire standards and the sale of alcoholic beverages;  building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use;  public accommodations and safety conditions, including the Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations, online resources and other areas;  environmental matters, such as emissions and air quality, water consumption, the discharge, storage, handling, release, and disposal of hazardous or toxic substances, and local ordinances restricting the types of packaging we can use in our restaurants; and  public company compliance, disclosure and governance matters, including accounting and tax regulations, SEC and NYSE disclosure requirements.
Added
The consultant concluded that Chipotle has a robust set of processes, practices and policies to enable equitable talent recruiting, development and retention throughout the company and identified opportunities to strengthen Chipotle’s existing practices.
Added
See the Investors page of our website at www.ir.chipotle.com under Corporate Governance – Human Capital Information for additional details.  We have a holistic approach to pay equity to ensure consistent and equitable treatment among our employees.
Added
Since there are not many common roles among our 50 most senior executives, we consider both internal equity by level as well as individualized market data to help ensure we maintain pay equity among this group. 6 Table of Contents Talent Development We provide high-quality growth and development opportunities to retain top talent and support internal promotions.
Added
During the 9-month program, participants learn the critical capabilities of leading oneself, leading others, and leading the business with topics designed to stretch capabilities and improve decision-making skills.  Cultivate University: A four-day immersive leadership experience designed to upskill our new multi-unit restaurant leaders to excel in their role and execute on their Top 5 KPIs.
Added
Participants are introduced to a variety of leadership models as well as operational tools to support them in leading effective teams and driving results in their restaurants.  General Manager Upskilling: Trains our restaurant leaders in fundamental soft skills to help bolster their leadership acumen so that they can better lead their teams and create an exceptional guest experience.  Executive Development: Focuses on developing high potential Team Directors in areas such as leadership, marketing, business and finance, data and analytics, ESG and hospitality, so they gain an in-depth understanding of various functions within the company.  Teach & Taste Live seminars: Offers lunch and learn sessions on leadership topics such as effective communication, emotional intelligence, and building a culture of accountability to provide on-going professional development for employees at our Restaurant Support Centers.
Added
Each course introduces a new leadership skill and offers best practices and actionable tools to continue developing the top talent that supports our field operations.  Development courses and online programs that focus on creating a culture of belonging.  Online executive coaching for mid- and senior-level leaders throughout the organization.  Succession Planning: We utilize talent calibrations to identify a diverse pipeline of emerging leaders and define appropriate development programs.
Added
This, in addition to a credit optimization service, will help bolster our employees’ financial well-being. Culture and Engagement Giving employees the opportunity to provide anonymous feedback is a key part of our employee engagement strategy, which positively contributes to our culture. This begins with soliciting feedback regarding onboarding.
Added
As of December 31, 2023, 9 in 10 respondents in our restaurants reported a favorable onboarding experience. For our employees in field support organizations and Restaurant Support Centers, nearly 95% of respondents had a favorable view of their onboarding.
Added
Results of our surveys are shared with business partners and senior leaders, who continuously work to improve the experience for all employees.
Added
To encourage a collaborative working culture between our Restaurant Support Centers and restaurant operations, we created an Operations Council comprised of employees from restaurant and field leadership, operations, and our business partners, who work together to share feedback and implement new projects collaboratively. 7 Table of Contents Additionally, to promote an engaged culture, we respond to employees quickly via our Employee Service Center (“ESC”).
Added
The ESC is available seven days a week to resolve employee questions about things like restaurant health and safety, compliance, benefits, payroll, etc. We also maintain a confidential Respectful Workplace Hotline that allows employees to anonymously report concerns like sexual harassment, discrimination, and retaliation.
Added
Government Regulation and Environmental Matters We are subject to various federal, state and local laws and regulations that govern aspects of our business operations.
Added
Although our policy is to protect and defend vigorously our rights to our intellectual property, we may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+38 added−37 removed57 unchanged
Biggest changeWe strive to be a leader in responsible and sustainable food production and, in November 2021, we announced that we had set science-based targets validated by the Science Based Targets initiative to reduce absolute Scope 1, 2 and 3 greenhouse gas emissions 50% by 2030 from a 2019 base year.
Biggest changeIn November 2021, we announced that we had set science-based targets validated by the Science Based Targets Initiative to reduce absolute Scope 1, 2 and 3 greenhouse gas emissions 50% by 2030 from a 2019 base year, and achievement of this goal is subject to risks and uncertainties, many of which are outside of our control and may prove to be more difficult and costly than we anticipate. 17 Table of Contents In addition, statements about our sustainability-related initiatives and goals, and progress toward those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
We have experienced and may continue to experience challenges in hiring and retaining restaurant employees and in maintaining full restaurant staffing in various locations, which has resulted in longer wait times for guest orders, temporary closures of the digital make line and decreased employee satisfaction.
We have experienced and may continue to experience challenges in hiring and retaining restaurant employees and in maintaining full restaurant staffing in various locations, which has resulted in longer wait times for guest orders, temporary closures of the digital make line and decreased employee and guest satisfaction.
Risks Related to IT Systems, Cybersecurity and Data Privacy Breaches or other unauthorized access, theft, modification or destruction of guest and/or employee personal, confidential or other material information that is stored in our systems or by third parties on our behalf could adversely affect our business.
Risks Related to Cybersecurity, Data Privacy and IT Systems Breaches or other unauthorized access, theft, modification or destruction of guest and/or employee personal, confidential or other material information that is stored in our systems or by third parties on our behalf could adversely affect our business.
The delivery business has been consolidating and may continue to consolidate, which may give third-party delivery companies more leverage in negotiating the terms and pricing of contracts, which in turn could negatively impact our profits from this channel. 9 Table of Contents The restaurant industry is highly competitive.
In addition, the delivery business has been consolidating and may continue to consolidate, which may give third-party delivery companies more leverage in negotiating the terms and pricing of contracts, which in turn could negatively impact our profits from this channel. 9 Table of Contents The restaurant industry is highly competitive.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines or damage to our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal information, or to protect personal information from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines or damage to our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business.
In addition, our supply chain is subject to increased costs caused by the effects of climate change, greenhouse gases and diminishing energy and water resources. Increasing weather volatility and changes in global weather patterns can reduce crop size and crop quality, or destroy crops altogether, which could result in decreased availability or higher pricing for our produce and other ingredients.
In addition, our supply chain is subject to increased costs caused by the effects of climate change, diminishing energy and water resources. Increasing weather volatility and changes in global weather patterns can reduce crop size and crop quality, or destroy crops altogether, which could result in decreased availability or higher pricing for our produce and other ingredients.
For example, we previously reported the settlement of a complaint alleging that we violated New York City’s Fair Workweek law and Earned Safe and Sick Time Act. We also have been and are undergoing several audits of our compliance with employment law requirements in other cities, which could result in additional liabilities.
For example, we previously reported the settlement of a complaint alleging that we violated New York City’s Fair Workweek law and Earned Safe and Sick Time Act, and we also have been and are undergoing several audits of our compliance with employment law requirements, which could result in additional liabilities.
A shortage of qualified candidates who meet all legal work authorization requirements, failure to hire and retain new restaurant employees in a timely manner or higher than expected turnover levels could affect our ability to open new restaurants, grow sales at existing restaurants or meet our labor cost objectives.
A shortage of qualified candidates who meet legal work authorization requirements, failure to hire, train and retain new restaurant employees in a timely manner or higher than expected turnover levels could affect our ability to open new restaurants, grow sales at existing restaurants or meet our labor cost objectives.
The ordering and payment platforms used by these third parties, our mobile app or our online ordering site has been and could again be interrupted by technological failures, user errors, cyber-attacks or other factors, which could adversely impact sales through these channels and negatively impact our overall sales and reputation.
The ordering and payment platforms used by these third parties, our mobile app or our online ordering site have been and could again be interrupted by technological failures, user errors, cyber-attacks or other factors, which could adversely impact sales through these channels and negatively impact our overall sales and reputation.
In addition, we incur substantial startup expenses each time we open a new restaurant, and it can take up to 24 months to ramp up the sales and profitability of a new restaurant, during which time costs may be higher as we train new employees and build up a customer base.
In addition, we incur substantial startup expenses each time we open a new restaurant, and it can take up to 36 months to ramp up the sales and profitability of a new restaurant, during which time costs may be higher as we train new employees and build up a customer base.
All of these factors could have an adverse impact on our ability to attract and retain guests, which could in turn have a material adverse effect on our growth and profitability. Our digital business, which accounted for a significant portion of our 2022 total revenue, is subject to risks.
All of these factors could have an adverse impact on our ability to attract and retain guests, which could in turn have a material adverse effect on our growth and profitability. Our digital business, which accounted for a significant portion of our 2023 total revenue, is subject to risks.
Our quarterly financial results may fluctuate significantly and could fail to meet investors’ expectations for various reasons, including : neg ative publicity about the safety of our food, employment-related issues, litigation or other issues involving our restaurants; fluctuations in supply costs, particularly for our most significant ingredients, and our inability to offset the higher cost with price increases without adversely impacting guest traffic; labor availability and wages of restaurant management and employees; increases in marketing or promotional expenses; the timing of new restaurant openings and related revenues and expenses, and the operating costs at newly opened restaurants; the impact of inclement weather and natural disasters, such as freezes and droughts, which could decrease guest traffic and increase the costs of ingredients; the amount and timing of stock-based compensation; litigation, settlement costs and related legal expenses; tax expenses, asset impairment charges and non-operating costs; and variations in general economic conditions, including the impact of rising inflation and the impact of rising interest rates on consumer demand trends .
Our quarterly financial results may fluctuate significantly and could fail to meet investors’ expectations for various reasons, including : neg ative publicity about the safety of our food, employment-related issues, litigation or other issues involving our restaurants; fluctuations in supply costs, particularly for our most significant ingredients, and our inability to offset the higher cost with price increases, without adversely impacting guest traffic; our inability to purchase sufficient quantities of our key ingredients as our restaurant count grows; labor availability and wages of restaurant management and employees; increases in marketing or promotional expenses; the timing of new restaurant openings and related revenues and expenses, and the operating costs at newly opened restaurants; the impact of inclement weather and natural disasters, such as freezes and droughts, which could decrease guest traffic and increase the costs of ingredients; the amount and timing of stock-based compensation; litigation, settlement costs and related legal expenses; tax expenses, asset impairment charges and non-operating costs; and variations in general economic conditions, including the impact of rising inflation and the impact of rising interest rates on consumer demand trends .
Any report, legitimate or rumored, of food-borne illness such as E. coli, hepatitis A, norovirus or salmonella, or other food safety issue, such as food tampering or contamination, at one of our restaurants could adversely affect our reputation and have a negative impact on our sales.
Any report, legitimate or rumored, of food-borne illness such as E. coli, hepatitis A, norovirus or salmonella, or other food safety issues, such as food tampering or contamination, at one of our restaurants could adversely affect our reputation and have a negative impact on our sales.
Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef, dairy (for cheese, sour cream and queso), avocados, beans, rice, tomatoes and pork, would have a particularly adverse effect on our operating results.
Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef, dairy (for cheese, sour cream and queso), avocados, tomatoes and pork, would have a particularly adverse effect on our operating results.
The inappropriate use of social media by our guests or employees could lead to litigation or result in negative publicity that could damage our reputation. 10 Table of Contents Risks Related to Human Capital If we are not able to hire, develop and retain qualified restaurant employees and/or appropriately plan our workforce, our growth plan and profitability could be adversely affected.
Use of social media by our employees, guests and associates could lead to litigation or result in negative publicity that could damage our reputation. 10 Table of Contents Risks Related to Human Capital If we are not able to hire, develop and retain qualified restaurant employees and/or appropriately plan our workforce, our growth plan and profitability could be adversely affected.
These legal proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including those governing wage and hour, employment of minors, discrimination, harassment, wrongful termination, and vacation and family leave laws; food safety issues including food-borne illness, food contamination and adverse health effects from consumption of our food products; data security or privacy breaches; guest discrimination; personal injury in our restaurants; marketing and advertising claims, including claims that our Food With Integrity or other sustainability claims are misleading or inaccurate; infringement of patent, copyright or other intellectual property rights; violation of the federal securities laws or other concerns.
These legal proceedings have involved, and in the future may involve, allegations of illegal, unfair or inconsistent employment practices, including those governing wage and hour, employment of minors, discrimination, harassment, wrongful termination, and vacation and family leave laws; food safety issues including food-borne illness, food contamination and adverse health effects from consumption of our food products; data security or privacy breaches; guest discrimination; personal injury in our restaurants; marketing and advertising claims, including claims that our Food with Integrity or other sustainability claims are misleading or inaccurate; infringement of patent, copyright or other intellectual property rights; violation of the federal securities laws; workers’ compensation; or other concerns.
Litigation also may generate negative publicity, regardless of whether the allegations are valid, or we ultimately are not liable, which could damage our reputation, and adversely impact our sales and our relationship with our employees and guests. 15 Table of Contents We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies, ability to attract and retain talent and results of operations.
Litigation also may generate negative publicity, regardless of whether the allegations are valid, or we ultimately are not liable, which could damage our reputation, and adversely impact our sales as well as our relationships with our employees and guests. 15 Table of Contents We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies, ability to attract and retain talent and results of operations.
In addition, the issues regulated by privacy laws (such as advertising and marketing, children, biometric, employee, and health related information) have expanded, as have the number of city, state, federal and international governmental bodies and agencies that have recently passed or are currently considering privacy legislation or regulatory rulemaking.
In addition, the issues regulated by privacy laws (such as advertising and marketing, children, biometric, employee, surveillance, artificial intelligence, and health related information) have expanded, as have the number of city, state, federal and international governmental bodies and agencies that have recently passed or are currently considering privacy legislation or regulatory rulemaking.
The markets for some of our ingredients, such as beef, avocado and other produce, are particularly volatile due to factors beyond our control such as limited sources, seasonal shifts, climate conditions, recent inflationary trends, military and geopolitical conflicts and industry demand, including as a result of animal disease outbreaks, international commodity markets, food safety concerns, product recalls and government regulation.
The markets for some of our ingredients, such as beef, avocado and other produce, are particularly volatile due to factors beyond our control such as limited sources, seasonal shifts, climate conditions, inclement weather, natural disasters, recent inflationary trends, military and geopolitical conflicts and industry demand, including as a result of animal disease outbreaks, international commodity markets, food safety concerns, product recalls and government regulation.
If w e do not continue to persuade consumers of the benefits of paying higher prices for our higher- quality food, our sales and results of operations could be hurt .
If w e do not continue to persuade guests of the benefits of paying higher prices for our higher- quality food, our sales and results of operations could be hurt .
Our liability exposure for these employment laws and regulations may be higher than our restaurant peers because we are one of the largest restaurant companies that owns and operates all our restaurants, while most of our restaurant peers franchise some or a significant portion of their operations. 11 Table of Contents Increases in the cost of labor could adversely impact our business and profitability.
Our liability exposure for these employment laws and regulations may be higher than our restaurant peers because we are one of the largest restaurant companies that owns and operates all our restaurants, while most of our restaurant peers franchise some or a significant portion of their operations. 11 Table of Contents Increases in the cost of labor, including mandated minimum wage increases, could adversely impact our business and profitability.
The regulatory environment related to privacy and data security is changing at an ever-increasing pace, with new and increasingly rigorous requirements applicable to our business.
The regulatory environment related to privacy and data security is changing at an ever-increasing pace, with new, increasingly rigorous, and often unclear requirements applicable to our business.
As of December 31, 2022, we owned and operated over 3,100 Chipotle restaurants and we plan to open a significant number of new restaurants in the next several years. Our existing restaurant management systems, back office technology systems and processes, financial and management controls, information systems and personnel may not be adequate to support our continued growth.
As of December 31, 2023, we owned and operated over 3,400 Chipotle restaurants and we plan to open a significant number of new restaurants in the next several years. Our existing restaurant management systems, back-office technology systems and processes, financial and management controls, information systems and personnel may not be adequate to support our continued growth.
The market for qualified talent continues to be competitive and we must ensure that we continue to offer competitive wages, benefits and workplace conditions to retain qualified employees.
The market for qualified talent continues to be competitive and we must continue to offer competitive wages, benefits and workplace conditions to retain qualified employees.
Our success depends in large part on our ability to persuade consumers that food made with ingredients that were raised or grown according to our Food With Integrity principles is worth paying a higher price relative to prices of some of our competitors, particularly quick-service restaurants.
Our success depends in large part on our ability to persuade guests that food made with ingredients that were raised or grown according to our Food with Integrity principles are worth paying a higher price relative to prices of some of our competitors, particularly quick-service restaurants.
As a result of any 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 restaurant sales or comparable restaurant sales in any particular future period may decrease. ITEM 1B . UNRESOLVED STAFF COMMENTS None. 18 Table of Contents
As a result of any 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 restaurant sales or comparable restaurant sales in any future period may decrease. ITEM 1B . UNRESOLVED STAFF COMMENTS None.
At any given point in time, our price-earnings ratio may trade at more than twice the price-earnings ratio of the S&P 500. Also, the trading market for our common stock has been volatile at times, including as a result of adverse publicity events.
At any given point in time, our price-earnings ratio may trade at more than twice the price-earnings ratio of the S&P 500. Also, the trading market for our common stock has been volatile at times, including because of adverse publicity events.
New social media and internet-based communication platforms are developing rapidly, and we need to continuously innovate and evolve our marketing strategies to maintain our brand relevance and broad appeal to guests.
Social media and internet-based communication platforms are evolving rapidly, and we need to continuously innovate and evolve our marketing strategies to maintain our brand relevance and broad appeal to guests.
Maintaining appropriate staffing in our restaurants requires precise workforce planning, which planning has become more complex due to predictive scheduling laws (also called “fair workweek” or “secure scheduling”) and “just cause” termination legislation in certain geographic areas where we operate, and the so-called “great resignation” trend.
Maintaining appropriate staffing in our restaurants requires precise workforce planning, which has become more complex due to predictive scheduling laws (also called “fair workweek” or “secure scheduling”) and “just cause” termination legislation in certain geographic areas where we operate.
All of these regulations impose additional obligations on us and our failure to comply with any of these regulations could subject us to penalties and other legal liabilities, which could adversely affect our business and results of operations and potentially cause us to close or reduce operating hours of some restaurants in these jurisdictions.
All of these regulations impose additional obligations on us and our failure to comply with any of these regulations could subject us to penalties and other legal liabilities, which could adversely affect our ability to attract and retain employees and our results of operations, and potentially cause us to close or reduce operating hours of some restaurants in these jurisdictions.
It is impossible for us to fully predict or control social media backlash, which could harm our business, prospects, financial condition, and results of operations, regardless of the information’s accuracy. Use of social media is an important element of our marketing efforts.
It is impossible for us to fully predict or control social media backlash, and the inappropriate use of social media by our guests or employees could harm our business, prospects, financial condition, and results of operations, regardless of the information’s accuracy. Use of social media is an important element of our marketing efforts.
Where not limited by preemption, many states have passed or are considering adopting stricter versions of federal privacy laws (e.g., state level statutes similar to the Telephone Consumer Protection Act of 1991 (“TCPA”), the Health Insurance Portability and Accountability Act, and the Children’s Online Privacy Protection Act of 1998 (“COPPA”)).
Where not limited by preemption and where there are perceived shortcomings in federal laws, many states have passed or are considering adopting stricter versions of federal privacy laws (e.g., state level statutes similar to the Telephone Consumer Protection Act of 1991, the Health Insurance Portability and Accountability Act, and the Children’s Online Privacy Protection Act of 1998).
We believe the market price of our common stock generally has traded at a higher price-earnings ratio than stocks of most of our peer companies as well as the overall market, which typically has reflected market expectations for higher future operating results.
The market price of our common stock may be more volatile than the market price of our peers. We believe the market price of our common stock generally has traded at a higher price-earnings ratio than stocks of most of our peer companies as well as the overall market, which typically has reflected market expectations for higher future operating results.
In 2022, 39.4% of our food and beverage revenue was derived from digital orders, which includes third-party delivery and customer pickup in-restaurant and through our Chipotlanes. Approximately 19% of our 2022 food and beverage revenue consisted of delivery orders for which we are reliant on third-party delivery companies.
In 2023, 37.4% of our food and beverage revenue was derived from digital orders, which includes third-party delivery and customer pickup in-restaurant and through our Chipotlanes. Approximately 18% of our 2023 food and beverage revenue consisted of delivery orders for which we are reliant on third-party delivery companies.
Risks Related to Our Growth and Business Strategy If we are unable to meet our projections for new restaurant openings, or efficiently maintain the attractiveness of our existing restaurants, our profitability could suffer. Our growth depends on our ability to open new restaurants and operate them profitably.
Risks Related to Our Growth and Business Strategy If we are unable to meet our projections for new restaurant openings, or efficiently maintain the attractiveness of our existing restaurants, our profitability could suffer. Our growth depends on our ability to open new restaurants at an aggressive rate and operate them profitably as soon as possible.
The rapid increase in inflation during 2022 and widespread concern about a prolonged economic downturn may lead consumers to decrease their discretionary spending. A significant decrease in our guest traffic or average transactions would negatively impact our financial performance.
Persistent inflation and concern about a prolonged economic downturn may lead consumers to decrease their discretionary spending. A significant decrease in our guest traffic or average transactions would negatively impact our financial performance.
Our business is subject to extensive federal, state, local and international laws and regulations, including those relating to: preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content; employment practices and working conditions, including minimum wage rates, wage and hour practices, fair workweek/secure scheduling and “just cause” legislation, employment of minors, discrimination, harassment, classification of employees, paid and family leave, workplace safety, immigration and overtime among others; data privacy and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers), and health information, including state laws such as CPRA and CCPA in California as well as new privacy-related legislation in Virginia, Colorado, Connecticut, Utah and a growing number of other states, privacy laws aimed at protecting children, such as TCPA and COPPA, and international laws such as GDPR in the European Union and PIPEDA in Canada, and payment card industry standards and requirements; health, sanitation, safety and fire standards and the sale of alcoholic beverages; building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use; public accommodations and safety conditions, including the Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations, online resources and other areas; environmental matters, such as emissions and air quality, water consumption, the discharge, storage, handling, release, and disposal of hazardous or toxic substances, and local ordinances restricting the types of packaging we can use in our restaurants; and public company compliance, disclosure and governance matters, including accounting and tax regulations, SEC and NYSE disclosure requirements.
Our business is subject to extensive federal, state, local and international laws and regulations, including those relating to: preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content; employment practices and working conditions, including minimum wage rates, wage and hour practices, meal and rest breaks, fair workweek/secure scheduling and “just cause” legislation, employment of minors, discrimination, harassment, classification of employees, paid and family leave, workplace safety, immigration and overtime among others; privacy and data security (including regulations governing the protection of personal information, advertising and marketing, access by children, biometrics, surveillance, artificial intelligence, health-related information and financial information), such as California Privacy Rights Act and CCPA in California and privacy-related legislation in a growing number of other states, and international laws such as GDPR in the European Union and Personal Information Protection and Electronic Documents Act in Canada; health, sanitation, safety and fire standards and the sale of alcoholic beverages; building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use; public accommodations and safety conditions, including the Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations, online resources and other areas; environmental matters, such as emissions and air quality; water consumption; the discharge, storage, handling, release and disposal of hazardous or toxic substances; local ordinances restricting the types of packaging we can use in our restaurants; and claims we make about our sustainability practices and achievements; and public company compliance, disclosure and governance matters, including accounting and tax regulations, SEC and NYSE disclosure requirements.
In addition, we may be at a higher risk for food safety incidents than some competitors due to our greater use of fresh, unprocessed produce, handling of raw chicken in our restaurants, our reliance on employees cooking with traditional methods rather than automation, and our avoidance of frozen ingredients.
We may be at a higher risk for food safety incidents than some competitors due to our greater use of fresh, unprocessed produce, handling of raw chicken in our restaurants, our reliance on employees cooking with traditional methods and the lack of added preservatives and frozen ingredients in our menu items.
Our business has been and could continue to be adversely impacted by increases in labor costs caused by factors such as federal, state and local laws governing matters such as minimum wages, meal and rest breaks and changes to eligibility for overtime pay; regulations regarding scheduling and benefits; increased health care and workers’ compensation insurance costs; higher wages and costs of other benefits necessary to attract, hire and retain high-quality employees with the right skill sets in a highly competitive job market; and increased wages, benefits and costs related to the COVID-19 pandemic.
Our profitability has been and could continue to be adversely impacted by increases in labor costs, including wages and benefits, which are some of our most significant costs, including increases triggered by federal, state and local laws governing matters such as minimum wages, meal and rest breaks and changes to eligibility for overtime pay; regulations regarding scheduling and benefits; increased health care and workers’ compensation insurance costs; and higher wages and benefit costs necessary to attract, hire and retain high-quality employees with the right skill sets in a highly competitive job market.
Our efforts to mitigate future price risk through forward contracts, strong partnerships with key suppliers, careful planning and other activities may not fully insulate us from increases in commodity costs, which could have an adverse impact on our profitability.
Our efforts to mitigate future price risk through forward contracts, strong partnerships with key suppliers, directly managing key raw material procurement, diversifying our supply base and other activities may not fully insulate us from increases in commodity costs, which could have an adverse impact on our profitability.
In addition, several jurisdictions, including New York City, Philadelphia, Chicago, Seattle, Oregon, San Francisco, San Jose and Berkeley have implemented fair workweek or “secure scheduling” legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees, and additional jurisdictions are considering similar legislation.
New York City, Philadelphia, Chicago, Seattle, etc.) have implemented fair workweek or “secure scheduling” legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees, and additional jurisdictions are considering similar legislation.
In 2022, a number of lawsuits were filed against us and governmental audits initiated alleging violations of federal and state employment laws, including wage and hour claims, and we could be involved in similar or even more significant litigation and legal proceedings in the future.
We are party to a number of pending lawsuits and governmental audits alleging violations of federal and state employment laws, including wage and hour claims, and we could be involved in similar or even more significant litigation and legal proceedings in the future.
If we are not able to successfully persuade consumers that consuming food made in accordance with our Food With Integrity principles is better for them and the environment, or if consumers are not willing to pay the prices we charge, our sales could be adversely affected, which would negatively impact our results of operations.
If we are not able to successfully persuade guests that consuming food made in accordance with our Food with Integrity principles is better for them and the environment, or if guests do not agree with the overall value proposition of our menu, our sales could be adversely affected, which would negatively impact our results of operations.
These platforms have dramatically increased the speed and scale of dissemination and accessibility of information, including negative publicity related to food safety incidents and negative guest and employee experiences. Accurate and inaccurate or misleading information can be widely disseminated before there is any meaningful opportunity to respond or address an issue.
These platforms have dramatically increased the speed and scale of dissemination and accessibility of information, including negative comments about our food quality or safety, negative guest or employee experiences and videos depicting inappropriate behavior of employees and guests. Accurate, inaccurate or misleading information can be widely disseminated before there is any meaningful opportunity to respond or address an issue.
We incur legal costs to defend these cases, and we could incur losses from these and similar cases, and the amount of such losses or costs could be material.
We incur legal costs to defend these types cases, and we could incur losses from these and similar cases, and the amount of such losses or costs could be material. In addition, several jurisdictions (e.g.
We could be party to litigation or other legal proceedings that could adversely affect our business, results of operations and reputation. We have been and likely will continue to be subject to litigation and other legal proceedings that may adversely affect our business.
We have been and likely will continue to be subject to litigation and other legal proceedings that may adversely affect our business.
The techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until attacks are launched or have been in place for a period of time.
Additionally, the techniques and sophistication used to conduct cyber-attacks and compromise information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time. The rapid evolution and increased adoption of artificial intelligence technologies amplifies these concerns.
If the cost of one or more ingredients significantly increases, we may choose to temporarily suspend serving menu items that use those ingredients, such as guacamole or one of our proteins, rather than pay the increased cost. Any such changes to our available menu may negatively impact our restaurant traffic and could adversely impact our sales and brand.
If the cost of one or more ingredients significantly increases, we may choose to temporarily suspend serving menu items that use those ingredients, such as guacamole or one of our proteins, rather than pay the increased cost.
If the third-party delivery companies we utilize increase their fees or give greater priority or promotions on their platforms to other restaurants, our delivery business and our sales may be negatively impacted.
If the third-party delivery companies we utilize increase their fees or give greater priority or promotions on their platforms to other restaurants, our delivery business and our sales may be negatively impacted. These delivery companies maintain control over data regarding our guests who use their platform and over the guest experience.
If any of the risks and uncertainties described below actually occur or continue to occur, our business, financial condition and results of operations, and the trading price of our common stock could be materially and adversely affected.
If any of the risks and uncertainties described below occur or continue to occur, our business, financial condition and results of operations, and the trading price of our common stock could be materially and adversely affected. The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties we face.
The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties we face. Our business is also subject to general risks and uncertainties that affect many other companies, including, but not limited to, overall economic and industry conditions.
Our business is also subject to general risks and uncertainties that affect many other companies, including, but not limited to, overall economic and industry conditions.
If we are unable to attract, develop, retain and incentivize sufficiently experienced and capable management personnel, our business and financial results may suffer. The market price of our common stock may be more volatile than the market price of our peers.
If we are unable to attract, develop, retain and incentivize sufficiently experienced and capable management personnel, our business and financial results may suffer.
If any of our critical IT systems were to become unreliable, unavailable, compromised or otherwise fail, and we were unable to recover in a timely manner, we could experience an interruption in our operations that could have a material adverse impact on our profitability. 13 Table of Contents Our inability or failure to execute a comprehensive business continuity plan at our restaurant support centers following a disaster or force majeure event could have a material adverse impact on our business.
If any of our critical IT systems were to become unreliable, unavailable, compromised or otherwise fail, and we were unable to recover in a timely manner, we could experience an interruption in our operations that could have a material adverse impact on our profitability.
In addition, in an effort to increase same-restaurant sales and improve our operating performance, we continue to improve our existing restaurants through remodels, upgrades and regular upkeep.
In addition, we continue to improve our existing restaurants through remodels, upgrades and regular upkeep.
In 2022, we implemented several menu price increases to partially offset the increases in delivery, labor and other costs; however, our higher menu prices may cause some guests to shift their purchases to other restaurants offered on the platform. These delivery companies maintain control over data regarding our guests who use their platform and over the guest experience.
In 2023, we implemented menu price increases to partially offset the increases in ingredients, labor and other costs; however, our higher menu prices may cause some guests to shift their purchases to other restaurants offered on the platform.
These factors also could cause us to, among other things, reduce the number and frequency of new restaurant openings, close restaurants or delay remodeling of our existing restaurant locations. Further, poor economic conditions may force nearby businesses to shut down, which could reduce traffic to our restaurants or cause our restaurant locations to be less attractive.
These factors also could cause us to, among other things, reduce the number and frequency of new restaurant openings, close restaurants or delay remodeling of our existing restaurant locations.
For example, a number of lawsuits previously have been filed against us alleging violations of federal and state laws regarding employee wages and payment of overtime, meal and rest breaks, employee classification, employee record-keeping and related practices with respect to our employees.
We incur substantial costs to comply with these laws and regulations and non-compliance could expose us to significant liabilities. For example, we have had lawsuits filed against us alleging violations of federal and state laws regarding employee wages and payment of overtime, meal and rest breaks, employee classification, employee record-keeping and related practices with respect to our employees.
We also compete with non-traditional market participants, such as convenience stores, grocery stores, coffee shops, meal kit delivery services, and “ghost” or “dark” kitchens, where meals are prepared at separate takeaway premises rather than a restaurant.
We also compete with non-traditional market participants, such as “convenience meals” in the form of entrées, side dishes or meal preparation kits from the deli or prepared foods sections of grocery stores, meal kit delivery services, and “ghost” or “dark” kitchens, where meals are prepared at separate takeaway premises rather than a restaurant.
We remain in regular contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain; however, in 2022 costs for certain supplies and ingredients, such as avocados, packaging, dairy, tortillas, beef and chicken increased materially and rapidly, and inflationary pressures could continue and/or spread to more categories as inflation increases continue across the global supply chain .
We remain in regular contact with our key suppliers and to date we have not experienced significant prolonged disruptions in our supply chain; however, inflationary pressures for certain supplies and ingredients could continue as inflation increases continue across the global supply chain.
If consumer or dietary preferences change, if our marketing efforts are unsuccessful, or if our restaurants are unable to compete successfully with other restaurant outlets, our business could be adversely affected.
Increased competition could have an adverse effect on our sales, profitability and development plans. If guest or dietary preferences change, if our marketing efforts are unsuccessful, or if our restaurants are unable to compete successfully with other restaurant outlets, our business could be adversely affected.
These legal proceedings may involve claims brought by employees, guests, government agencies, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.
These legal proceedings may involve claims brought by employees, guests, government agencies, suppliers, shareholders or others through private actions, administrative proceedings, regulatory actions or other litigation, including litigation on a class or collective basis on behalf of what can be a large group of potential claimants.
As a result, if we fail to meet market expectations for our operating results in the future, any resulting decline in the price of our common stock could be significant. Risks Related to Environmental, Social and Governance Factors If we are unable to achieve our social and environmental sustainability goals, our reputation and results of operations could be adversely affected.
As a result, if we fail to meet market expectations for our operating results in the future, any resulting decline in the price of our common stock could be significant.
In addition, state and local laws such as the recently passed California AB 257 (the “FAST Act”) may require wage increases and working hour and working condition standards that would restrict our flexibility to respond to market conditions and increase our costs without corresponding benefits.
In addition, state and local laws may require wage increases and standards on working hours and other factors that would restrict our flexibility to respond to market conditions and increase our costs without corresponding benefits.
Risks Related to Supply Chain Increases in the costs of ingredient and other materials, including increases caused by inflation, global conflicts, the COVID-19 pandemic and climate risks, could adversely affect our results of operations. Supply chain risk could increase our costs and limit the availability of ingredients and supplies that are critical to our restaurant operations.
Risks Related to Supply Chain Increases in the costs of ingredients and other materials, including increases caused by inflation, global conflicts and climate risks, or the failure to procure sufficient ingredients could adversely affect our results of operations.
Complex local, state, federal and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These privacy and data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement.
These privacy and data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement.
We may be forced to source ingredients from new geographic regions, which could impact quality and increase costs. These factors are beyond our control and, in many instances, unpredictable. Climate change and government regulation relating to climate change also could result in construction delays for new restaurants and interruptions to the availability or increases in the cost of utilities.
We may be forced to source ingredients from new geographic regions, which could impact quality and taste, and increase our costs. These factors are beyond our control and, in many instances, unpredictable.
If a third-party delivery driver fails to make timely deliveries or fails to deliver the complete order, our guests may attribute the bad customer experience to Chipotle and could stop ordering from us.
We use our mobile app to drive convenience and increase brand engagement with our guests. If a third-party delivery driver fails to make timely deliveries or fails to deliver the complete order, our guests may attribute the bad customer experience to Chipotle and our reputation and sales could be negatively impacted.
Although we believe we have potential alternative suppliers and sufficient reserves of ingredients, shortages or interruptions in our supply of ingredients could adversely affect our financial results. 14 Table of Contents Legal and Regulatory Risks A violation of Chipotle’s Deferred Prosecution Agreement could have an adverse effect on our business and reputation.
Although we believe we have potential alternative suppliers and sufficient reserves of ingredients, shortages or interruptions in our supply of ingredients could adversely affect our financial results. Legal and Regulatory Risks We could be party to litigation or other legal proceedings that could adversely affect our business, results of operations and reputation.
In addition, we have a single or a limited number of suppliers for some of our ingredients, including salt, certain cuts of beef, tomatoes, tortillas and adobo .
Ongoing global conflicts have disrupted and could continue to disrupt some shipping routes, which could result in shortages or delays of certain ingredients. In addition, we have a single or a limited number of suppliers for some of our ingredients, including certain oils, tomatoes, tortillas and adobo.
Virginia, Colorado, Connecticut and Utah have enacted similar data privacy legislation that will take effect in 2023, and several other states and countries are considering expanding or passing privacy laws in the near term.
Other states passed similar privacy legislation that took effect in 2023, and other states and countries passed or are considering expanding or passing comprehensive privacy laws.
As our reliance on technology has grown, the scope and severity of risks posed to our systems from cyber threats has increased. In addition, as more business activities have shifted online and more people are working remotely, we have experienced an increase in cybersecurity threats and attempts to breach our security networks.
As our reliance on technology has grown, the scope and severity of risks posed to our systems from cyber threats has increased.
Shortages or interruptions in the supply of ingredients could adversely affect our operating results. Our business is dependent on frequent and consistent deliveries of ingredients that comply with our Food With Integrity specifications.
Our business is dependent on frequent and consistent deliveries of ingredients that comply with our Food with Integrity specifications, such as dairy (for cheese, sour cream and queso).
Private service providers also have implemented mandatory privacy requirements impacting businesses, like Chipotle, that wish to utilize services available on their platforms. Taken together, Chipotle faces rapidly increasing compliance costs in order to modify its operations and business practices to comply with applicable laws, regulations and other requirements.
Defending against such claims can be costly and strain internal resources. Taken together, Chipotle faces rapidly increasing compliance costs in order to modify its operations and business practices to comply with applicable laws, regulations and other requirements.
Any such claim or proceeding, or any adverse publicity resulting from such an event, may have a material adverse effect on our business and we may incur significant remediation costs. 12 Table of Contents We may incur increased costs to comply with privacy and data protection laws and, if we fail to comply, we could be subject to government enforcement actions, private litigation and adverse publicity.
We may incur increased costs to comply with privacy and data protection laws and, if we fail to comply, we could be subject to government enforcement actions, private litigation and adverse publicity. Complex local, state, federal and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data.
Our quarterly financial results may fluctuate significantly, including due to factors that are not in our control.
Further, poor economic conditions may force nearby businesses to shut down, which could reduce traffic to our restaurants or cause our restaurant locations to be less attractive. 18 Table of Contents Our quarterly financial results may fluctuate significantly, including due to factors that are not in our control.
Removed
We may be more susceptible than our competitors to significant negative consequences from food safety incidents due to several highly publicized food safety incidents involving E. coli, C. perfringens bacteria and norovirus that were connected to a number of our restaurants between 2015 to 2018.
Added
In addition, several jurisdictions (e.g., California, New York City and Seattle) have implemented minimum wages for delivery drivers, and other jurisdictions are considering similar wage regulations, which could increase delivery fees and decrease our digital sales.
Removed
These incidents and the related negative publicity had a significant negative impact on our sales and profitability for those years.
Added
Our aggressive pace of opening new restaurants can make it increasingly difficult to recruit and hire sufficient numbers of qualified employees to manage and work in our restaurants, to maintain an effective system of internal controls for a dispersed workforce and to train employees to deliver a consistently high-quality product and customer experience, which could materially harm our business and results of operations.
Removed
Because of consumer perceptions of our restaurants in the wake of these incidents, any future food safety incidents associated with our restaurants—even incidents that would be considered minor at our competitors—may have a more significant negative impact on our sales and our ability to retain guests.

… 70 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−1 removed0 unchanged
Biggest changeWe lease our main office and substantially all of the properties on which we operate restaurants. We own 17 properties and operate restaurants on all of them. For additional information regarding the lease terms and provisions, see Note 1. “Description of Business and Summary of Significant Accounting Policies” and Note 9.
Biggest changeWe own 17 properties and operate restaurants on all of them. For additional information regarding the lease terms and provisions, see Note 1. “Description of Business and Summary of Significant Accounting Policies” and Note 9. “Leases” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” 20 Table of Contents
ITEM 2. PROPE RTIES As of December 31, 2022, there were 3,187 restaurants operated by Chipotle and our consolidated subsidiaries, 3 ,182 of which were Chipotle restaurants. Our main office is located at 610 Newport Center Drive, Newport Beach, CA 92660 and our telephone number is (949) 524-4000.
ITEM 2. PROPE RTIES As of December 31, 2023, there were 3,437 restaurants operated by Chipotle and our consolidated subsidiaries. Our main office is located at 610 Newport Center Drive, Suite 1100, Newport Beach, CA 92660 and our telephone number is (949) 524-4000. We lease our main office and substantially all of the properties on which we operate restaurants.
Removed
“Leases” in our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

56 edited+7 added−13 removed42 unchanged
Biggest changeThese decreases were partially offset by a $21.5 million increase in employee wages primarily due to headcount growth; $20.5 million increase in outside services expense related to corporate initiatives; and $12.5 million associated with the biennial All Managers’ Conference that was held in March 2022. 24 Table of Contents Depreciation and Amortization Year ended December 31, Percentage 2022 2021 change (dollars in millions) Depreciation and amortization $ 286.8 $ 254.7 12.6% As a percentage of total revenue 3.3% 3.4% (0.1%) Depreciation and amortization decreased as a percentage of total revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.
Biggest changeGeneral and Administrative Expenses Year ended December 31, Percentage 2023 2022 change (dollars in millions) General and administrative expense $ 633.6 $ 564.2 12.3% As a percentage of total revenue 6.4% 6.5% (0.1%) 26 Table of Contents Following is a summary of the change in General and administrative expense for the periods indicated: Year ended (dollars in millions) For the period ending December 31, 2022 $ 564.2 Change from: Performance bonuses 31.1 Stock-based compensation, primarily performance-based awards 24.3 Outside services related to corporate initiatives 14.5 Wages, primarily due to headcount growth 10.9 Conferences, primarily biennial All Managers’ Conference (8.9) Other (2.5) For the period ending December 31, 2023 $ 633.6 Depreciation and Amortization Year ended December 31, Percentage 2023 2022 change (dollars in millions) Depreciation and amortization $ 319.4 $ 286.8 11.4% As a percentage of total revenue 3.2% 3.3% (0.1%) Depreciation and amortization decreased 0.1% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants and, to a lesser extent, the reduction of useful lives for certain leasehold improvements.
Those estimates are based on a number of assumptions, including but not limited to growth in restaurant cash flow dollars, growth in comparable restaurant sales and average restaurant level margin, and different assumptions may have resulted in different conclusions regarding the probability of achieving future levels of performance relevant to the payout levels for the awards.
Those estimates are based on a number of assumptions, including but not limited to growth in restaurant cash flow dollars, growth in comparable restaurant sales and average restaurant level operating margin, and different assumptions may have resulted in different conclusions regarding the probability of achieving future levels of performance relevant to the payout levels for the awards.
We made the policy election to combine lease and non-lease components, we also consider fixed common area maintenance (“CAM”) part of our fixed future lease payments. Fixed CAM is also included in our operating lease liability.
We made the policy election to combine lease and non-lease components. We consider fixed common area maintenance (“CAM”) part of our fixed future lease payments; therefore, fixed CAM is also included in our operating lease liability.
If our estimates or underlying assumptions, including discount rate and sublease income change in the future, our operating results may be materially impacted. 28 Table of Contents Stock-based Compensation We recognize compensation expense for equity awards over the requisite service period based on the award’s fair value.
If our estimates or underlying assumptions, including discount rate and sublease income change in the future, our operating results may be materially impacted. 30 Table of Contents Stock-based Compensation We recognize compensation expense for equity awards over the requisite service period based on the award’s fair value.
Discussions of 2020 items and year-to-year comparisons of 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons of 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2022.
While we believe that our reserves are adequate, issues raised by a tax authority may be resolved at an amount different than the related reserve and could materially increase or decrease our income tax provision in future periods. ‎ 29 Table of Contents
While we believe that our reserves are adequate, issues raised by a tax authority may be resolved at an amount different than the related reserve and could materially increase or decrease our income tax provision in future periods. ‎ 31 Table of Contents
Source data: FactSet ‎ 21 Table of Contents ITEM 6 . RESERVED ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion together with our consolidated financial statements and related notes included in Item 8.
Source data: FactSet ‎ 23 Table of Contents ITEM 6 . RESERVED ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion together with our consolidated financial statements and related notes included in Item 8.
Additionally, as of December 31, 2022, we had $500.0 million of undrawn borrowing capacity under a line of credit facility. We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future.
Borrowing Capacity As of December 31, 2023, we had $500.0 million of undrawn borrowing capacity under a line of credit facility. Use of Cash We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the New York Stock Exchange under the symbol “CMG.” As of February 7, 2023, there were approximately 1,313 shareholders of record. This does not include persons whose stock is in nominee or “street name” accounts through brokers.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the New York Stock Exchange under the symbol “CMG.” As of February 5, 2024, there were approximately 1,508 shareholders of record. This does not include persons whose stock is in nominee or “street name” accounts through brokers.
“Financial Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2022 items and year-to-year comparisons of 2022 to 2021.
“Financial Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2023 items and year-to-year comparisons of 2023 to 2022.
We intend to continue to retain earnings for use in the operation and expansion of our business and to repurchase shares of common stock (subject to market conditions), and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. ‎ 20 Table of Contents COMPARISON OF CUMULATIVE TOTAL RETURN The following graph compares the cumulative annual stockholders return on our common stock from December 31, 2017, through December 31, 2022, to that of the total return index for the S&P 500 and the S&P 500 Restaurants Index assuming an investment of $100 on December 31, 2017.
We intend to continue to retain earnings for use in the operation and expansion of our business and to repurchase shares of common stock (subject to market conditions), and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. ‎ 22 Table of Contents COMPARISON OF CUMULATIVE TOTAL RETURN The following graph compares the cumulative annual stockholders return on our common stock from December 31, 2018, through December 31, 2023, to that of the total return index for the S&P 500 and the S&P 500 Restaurants Index assuming an investment of $100 on December 31, 2018.
A relative increase of 100 basis points in our estimated ultimate redemption rate for future redemptions would have resulted in a reduction of food and beverage revenue on our consolidated statement of income and comprehensive income of approximately $0.7 million for the year ended December 31, 2022.
A relative increase of 100 basis points in our estimated ultimate redemption rate for future redemptions would have resulted in a reduction of food and beverage revenue on our consolidated statement of income and comprehensive income of approximately $0.9 million for the year ended December 31, 2023.
Purchases of Equity Securities by the Issuer The table below reflects shares of common stock we repurchased during the fourth quarter of 2022.
Purchases of Equity Securities by the Issuer The table below reflects shares of common stock we repurchased during the fourth quarter of 2023.
Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way, worldwide health pandemics, fluctuations in food or packaging costs, or the timing of menu price increases or promotional activities and other marketing initiatives.
Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way, worldwide health pandemics, impact of inflation on consumer spending, fluctuations in food or packaging costs, or the timing of menu price increases or promotional activities and other marketing initiatives.
A relative decrease of 100 basis points to our gift card breakage rate would have resulted in a reduction of food and beverage revenue on our consolidated statement of income and comprehensive income of approximately $0.5 million for the year ended December 31, 2022.
A relative decrease of 100 basis points to our gift card breakage rate would have resulted in a reduction of food and beverage revenue on our consolidated statement of income and comprehensive income of approximately $0.6 million for the year ended December 31, 2023.
(2) The December total includes an additional $200 million in authorized repurchases approved on December 7, 2022 and announced February 7, 2023. There is no expiration date for this program. The authorization to repurchase shares will end when we have repurchased the maximum amount of shares authorized, or we have determined to discontinue such repurchases.
(2) The December total includes an additional $200 million in authorized repurchases approved on December 14, 2023 and announced February 6, 2024. There is no expiration date for this program. The authorization to repurchase shares will end when we have repurchased the maximum amount of shares authorized, or we have determined to discontinue such repurchases.
Income Taxes Our provision for income taxes, deferred tax assets and liabilities and any related valuation allowance requires the use of estimates based on our management’s interpretation and application of complex tax laws and accounting guidance. We are primarily subject to income taxes in the United States.
Income Taxes Our provision for income taxes, deferred tax assets and liabilities and any related valuation allowance requires the use of estimates based on our management’s interpretation and application of complex tax laws and accounting guidance. We are primarily subject to income taxes in the U.S.
In 2022, we spent on average about $1.2 million in development and construction costs per new restaurant, or about $1.1 million net of landlord reimbursements of $0.1 million. In 2023, we expect to incur about $485 million in total capital expenditures.
In 2023, we spent on average about $1.4 million in development and construction costs per new restaurant, or about $1.2 million net of landlord reimbursements of $0.2 million. In 2024, we expect to incur about $635.0 million in total capital expenditures.
Occupancy Costs Year ended December 31, Percentage 2022 2021 change (dollars in millions) Occupancy costs $ 460.4 $ 416.6 10.5% As a percentage of total revenue 5.3% 5.5% (0.2%) Occupancy costs decreased as a percentage of total revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to sales leverage, partially offset by increased rent expense associated with new restaurants.
Occupancy Costs Year ended December 31, Percentage 2023 2022 change (dollars in millions) Occupancy costs $ 503.3 $ 460.4 9.3% As a percentage of total revenue 5.1% 5.3% (0.2%) Occupancy costs decreased 0.2% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to sales leverage, partially offset by increased rent expense associated with new restaurants.
As of December 31, 2022, $413.9 million remained available for repurchases of shares of our common stock, which includes the $200.0 million additional authorization approved by our Board of Directors on December 7, 2022. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
As of December 31, 2023, $424.1 million remained available for repurchases of shares of our common stock, which includes the $200.0 million additional authorization approved by our Board of Directors on December 14, 2023. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
Had we arrived at different assumptions of stock price volatility or expected lives of our SOSARs, or if we changed our assumptions regarding the probability of achieving future levels of performance with respect to performance share awards, our stock-based compensation expense and results of operations may be materially different.
If we change our estimates of stock price volatility or expected lives of our SOSARs, or if we change our assumptions regarding the probability of achieving future levels of performance with respect to performance share awards, our stock-based compensation expense and results of operations may be materially impacted.
In addition, we generally have the right to pay for the purchase of food, beverages and supplies sometime after the receipt of those items, within ten days, thereby reducing the need for incremental working capital to support our growth. Our total capital expenditures for 2022 were $479.2 million.
In addition, we generally have the right to pay for the purchase of food, beverages and supplies sometime after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support our growth. 28 Table of Contents Our total capital expenditures for 2023 were $560.7 million.
Year ended December 31, 2022 2021 Beginning of period 2,966 2,768 Chipotle openings 235 215 Pizzeria Locale openings 1 - Chipotle permanent closures (3) (10) Chipotle relocations (12) (7) Total restaurants at end of period 3,187 2,966 Results of Operations Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.
Year ended December 31, 2023 2022 Beginning of period 3,187 2,966 Chipotle openings 270 235 Non-Chipotle openings 1 1 Chipotle permanent closures (3) (3) Chipotle relocations (12) (12) Non-Chipotle permanent closures (6) - Total restaurants at end of period 3,437 3,187 Results of Operations Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.
“Description of Business and Summary of Significant Accounting Policies” of our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters.
“Financial Statements and Supplementary Data.” Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters.
During the year ended December 31, 2022, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 76.1% of total revenue, a decrease from 77.4% during the year ended December 31, 2021.
Digital sales represented 37.4% of total food and beverage revenue. Restaurant Operating Costs . During the year ended December 31, 2023, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 73.8% of total revenue, a decrease from 76.1% during the year ended December 31, 2022.
Revenue Year ended December 31, Percentage 2022 2021 change (dollars in millions) Food and beverage revenue $ 8,558.0 $ 7,457.2 14.8% Delivery service revenue 76.7 89.9 (14.7%) Total revenue $ 8,634.7 $ 7,547.1 14.4% Average restaurant sales (1) $ 2.8 $ 2.6 6.1% Comparable restaurant sales increase 8.0% 19.3% (1) Average restaurant sales refer to the average trailing 12-month food and beverage sales for restaurants in operation for at least 12 full calendar months.
Revenue Year ended December 31, Percentage 2023 2022 change (dollars in millions) Food and beverage revenue $ 9,804.1 $ 8,558.0 14.6% Delivery service revenue 67.5 76.7 (11.9%) Total revenue $ 9,871.6 $ 8,634.7 14.3% Average restaurant sales (1) $ 3.0 $ 2.8 6.9% Comparable restaurant sales increase 7.9% 8.0% Transactions 5.0% 0.9% Average check 2.9% 7.1% Menu price increase 5.2% 12.0% Check mix (2.3%) (4.9%) (1) Average restaurant sales refer to the average trailing 12-month food and beverage sales for restaurants in operation for at least 12 full calendar months.
We expect approximately $350 million in capital expenditures related to our construction of new restaurants, before any reductions for landlord reimbursements. For new restaurants to be opened in 2023, we anticipate average development costs will remain consistent with 2022 due to a significant portion including Chipotlanes.
We expect approximately $430.0 million in capital expenditures related to our construction of new restaurants, before any reductions for landlord reimbursements. For new restaurants to be opened in 2024, we anticipate average development costs will remain consistent with 2023.
If the estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially. 27 Table of Contents Operating lease assets and liabilities are recognized at time of lease inception. Operating lease liabilities represent the present value of lease payments not yet paid.
If the estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially. 29 Table of Contents Operating lease assets and liabilities are recognized at the lease commencement date, which is the date we control the use of the property. Operating lease liabilities represent the present value of lease payments not yet paid.
Overview As of December 31, 2022, we operated 3,129 Chipotle restaurants throughout the United States, 53 international Chipotle restaurants, and five non-Chipotle restaurants. We manage our U.S. operations based on eight regions and have aggregated our operations to one reportable segment.
Overview As of December 31, 2023, we operated 3,371 Chipotle restaurants throughout the United States, and 66 international Chipotle restaurants. We manage our U.S. operations based on eight regions and aggregate our operations to one reportable segment.
If a greater amount of claims occurs compared to what we have estimated, or if medical costs increase beyond what we expected, our accrued liabilities might not be sufficient. Actual claims experience could also be more favorable than estimated. Unanticipated changes may produce materially different amounts of expense than that reported under these programs.
If a greater amount of claims occurs compared to what we have estimated, or if medical costs increase beyond what we expected, our accrued liabilities might not be sufficient. Actual claims experience could also be more favorable than estimated.
Liquidity and Capital Resources As of December 31, 2022, we had a cash and marketable investments balance of $1.2 billion, excluding restricted cash of $25.0 million and non-marketable investments of $55.8 million.
Liquidity and Capital Resources Cash and Investments As of December 31, 2023, we had a cash and marketable investments balance of $1.8 billion, non-marketable investments of $75.4 million, and $25.6 million of restricted cash.
“Financial Statements and Supplementary Data.” Cash Flows Cash provided by operating activities was $1.32 billion for the year ended December 31, 2022, compared to $1.28 billion for the year ended December 31, 2021. The increase was primarily due to higher net earnings partially offset by net cash used by changes in operating assets and liabilities .
“Financial Statements and Supplementary Data.” Cash Flows Cash provided by operating activities was $1.8 billion for the year ended December 31, 2023, compared to $1.3 billion for the year ended December 31, 2022. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities .
We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or factors. Leases We determine if a contract contains a lease at inception.
We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or factors. Leases The majority of our operating leases consist of restaurant locations and office space.
W e believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies: Comparable restaurant sales Restaurant operating costs as a percentage of total revenue New restaurant openings 2022 Financial Highlights, year-over-year: Total revenue increased 14.4% to $8.6 billion Comparable restaurant sales increased 8.0% Diluted earnings per share was $32.04, a 39.9% increase from $22.90, which includes a $0.74 after-tax impact from expenses related to certain legal proceedings, expenses related to the 2018 performance share COVID-19 related modification, corporate restructuring costs, employee separation costs, restaurant asset impairment and closure costs, and other costs, partially offset by an unrealized gain on investments Sales Trends.
W e believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies: Comparable restaurant sales Restaurant operating costs as a percentage of total revenue New restaurant openings 2023 Financial Highlights, year-over-year: Total revenue increased 14.3% to $9.9 billion Comparable restaurant sales increased 7.9% Diluted earnings per share was $44.34, a 38.4% increase from $32.04, which includes a $0.52 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs, accelerated depreciation and corporate restructuring, partially offset by a reduction in contingencies related to certain legal proceedings.
Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
Cultivate Next Fund . In April 2022 we announced the formation of the Cultivate Next Fund, a venture that will make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The venture fund has an initial size of $50.0 million and will be financed almost entirely by Chipotle.
Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The Fund has an initial size of $50.0 million, which is financed almost entirely by Chipotle. As of December 31, 2023, we have made $33.0 million in investments through this Fund.
Reserves/Contingencies for Litigation and Other Matters We are involved in various claims and legal actions that arise in the ordinary course of business. We record an accrual for legal contingencies when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss.
We record an accrual for legal contingencies when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss.
Our material operating leases consist of restaurant locations and office space. Our leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods.
We determine if a contract contains a lease at inception. Our leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods.
During the year ended December 31, 2022, we opened 236 new restaurants, which included 202 restaurants with a Chipotlane. We expect to open approximately 255-285 new restaurants in 2023 (including 10 to 15 relocations), which assumes utility, construction, permit and material supply delays do not worsen. We expect that at least 80% of our new restaurants will include a Chipotlane.
We expect to open approximately 285-315 new restaurants in 2024 (including 5 to 10 relocations), which assumes developer, permit, inspection, and utility delays do not worsen. We expect that at least 80% of our new restaurants will include a Chipotlane. Cultivate Next Fund .
Assuming no significant declines in comparable restaurant sales, we expect we will generate positive cash flow for the foreseeable future. Should our business deteriorate due to changing conditions, there are actions we can take to further conserve liquidity.
Assuming no significant declines in comparable restaurant sales, we expect we will generate positive cash flow for the foreseeable future.
Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months . In-restaurant sales increased 26.4% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Sales Trends. Comparable restaurant sales increased 7.9% for the year ended December 31, 2023. The increase is primarily attributable to higher transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months .
This decrease was partially offset by inflation across the menu, primarily related to higher costs for avocados, packaging, dairy, beef and chicken. 23 Table of Contents Labor Costs Year ended December 31, Percentage 2022 2021 change (dollars in millions) Labor costs $ 2,198.0 $ 1,917.8 14.6% As a percentage of total revenue 25.5% 25.4% 0.1% Labor costs increased as a percentage of total revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to wage inflation, mostly offset by sales leverage.
Labor Costs Year ended December 31, Percentage 2023 2022 change (dollars in millions) Labor costs $ 2,441.0 $ 2,198.0 11.1% As a percentage of total revenue 24.7% 25.5% (0.8%) Labor costs decreased 0.8% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, including 1.4% from sales leverage, partially offset by 0.8% due to restaurant wage inflation.
We expect approximately $135 million in capital expenditures related to investments in existing restaurants including remodeling and similar improvements, new equipment and hardware, technology to optimize efficiencies .
We expect approximately $130.0 million in capital expenditures related to investments in existing restaurants including remodeling and similar improvements, new equipment and hardware, technology to optimize efficiencies . Finally, we expect a portion of our incurred capital expenditures to be for additional corporate initiatives including investments in technology to boost innovation, enhance the guest experience, and improve operations.
Company/Index 2017 2018 2019 2020 2021 2022 Chipotle Mexican Grill, Inc. $ 100 $ 149 $ 290 $ 480 605 $ 480 S&P 500 100 94 121 140 178 144 S&P 500 Restaurants 100 108 132 152 184 166 *$100 invested on December 31, 2017, in stock or index, including reinvestment of dividends. Fiscal year ending December 31, 2022.
Company/Index 2018 2019 2020 2021 2022 2023 Chipotle Mexican Grill, Inc. $ 100 $ 194 $ 321 $ 405 $ 321 $ 536 S&P 500 100 129 150 190 153 191 S&P 500 Restaurants 100 122 141 170 153 172 *$100 invested on December 31, 2018, in stock or index, including reinvestment of dividends. Fiscal year ending December 31, 2023.
Interest and Other Income, Net Year ended December 31, Percentage 2022 2021 change Interest and other income (expense), net $ 21.1 $ 7.8 170.2% As a percentage of total revenue 0.2% 0.1% 0.1% Interest and other income (expense), net increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a gain on our investments in Tractor Beverages, Inc. of $10.4 recognized in the second quarter of 2022, and, to a lesser extent, increased interest income on our investments in US Treasury securities, money market funds and time deposits due to increased interest rates in 2022 as compared to 2021.
Interest and Other Income, Net Year ended December 31, Percentage 2023 2022 change (dollars in millions) Interest and other income, net $ 62.7 $ 21.1 196.7% As a percentage of total revenue 0.6% 0.2% 0.4% Interest and other income, net increased in dollar terms for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increased interest income on our investments in U.S.
The change was primarily due to increased treasury stock repurchases of $363.7 million and, to a lesser extent, $19.1 million of elevated payments of tax withholdings related to stock compensation for the year ended December 31, 2022. Critical Accounting Estimates We describe our significant accounting policies in Note 1.
Cash used in financing activities was $660.7 million for the year ended December 31, 2023, compared to $929.4 million for the year ended December 31, 2022. The change was primarily due to decreased treasury stock repurchases of $237.8 million and, to a lesser extent, $29.8 million of lower payments of tax withholdings related to stock-based compensation.
Treasury security maturities and, to a lesser extent, increased capital expenditures of $36.7 million primarily related to costs associated with new restaurant development. Cash used in financing activities was $929.4 million for the year ended December 31, 2022, compared to $548.6 million for the year ended December 31, 2021.
The change was primarily associated with increased capital expenditures of $81.6 million primarily related to costs associated with new restaurant development and, to a lesser extent, a $34.4 million increase in investment purchases net of investment maturities.
Cash used in investing activities was $830.0 million for the year ended December 31, 2022, compared to $522.0 million for the year ended December 31, 2021. The change was primarily associated with a $267.3 million increase in U.S. Treasury security purchases net of U.S.
Cash used in investing activities was $946.0 million for the year ended December 31, 2023, compared to $830.0 million for the year ended December 31, 2022.
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 45,448 $ 1,512.59 45,448 $ 344,061,582 Purchased 10/1 through 10/31 November 53,236 $ 1,464.22 53,236 $ 266,112,344 Purchased 11/1 through 11/30 December 35,071 $ 1,487.43 35,071 $ 413,946,701 Purchased 12/1 through 12/31 Total 133,755 $ 1,486.74 133,755 (1) Shares were repurchased pursuant to repurchase programs announced on July 26, 2022.
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 52,611 $ 1,840.49 52,611 $ 271,538,394 Purchased 10/1 through 10/31 November 13,084 $ 2,092.54 13,084 $ 244,159,596 Purchased 11/1 through 11/30 December 8,828 $ 2,271.49 8,828 $ 424,106,921 Purchased 12/1 through 12/31 Total 74,523 $ 1,935.80 74,523 (1) Shares were repurchased pursuant to repurchase programs announced on July 26, 2023 and October 26, 2023.
As of December 31, 2022, we have made $11.0 million in investments through this fund. Restaurant Activity The following table details restaurant unit data for the years indicated.
In December 2023, our Board approved an additional $50.0 million financial commitment to this Fund. As of December 31, 2023, none of this additional $50.0 million has been invested. 24 Table of Contents Restaurant Activity The following table details restaurant unit data for the years indicated.
Finally, we expect a portion of our incurred capital expenditures to be for additional corporate initiatives including investments in technology to boost innovation, enhance the guest experience, and improve operations. 26 Table of Contents The following table summarizes current and long-term material cash requirements as of December 31, 2022, which we expect to fund primarily with operating cash flows : Payments Due by Fiscal Year Total 2023 2024-2025 2026-2027 Thereafter (dollars in millions) Operating leases (1) $ 5,430 $ 394 $ 842 $ 815 $ 3,379 Purchase obligations (2) 2,174 870 663 641 - Total $ 7,604 $ 1,264 $ 1,505 $ 1,456 $ 3,379 (1) See Note 9.
The following table summarizes current and long-term material cash requirements as of December 31, 2023, which we expect to fund primarily with operating cash flows : Payments Due by Fiscal Year Total 2024 2025-2026 2027-2028 Thereafter (dollars in millions) Operating leases (1) $ 6,343 $ 447 $ 971 $ 938 $ 3,987 Purchase obligations (2) 2,090 969 768 352 1 Total $ 8,433 $ 1,416 $ 1,739 $ 1,290 $ 3,988 (1) See Note 9.
Other Operating Costs Year ended December 31, Percentage 2022 2021 change (dollars in millions) Other operating costs $ 1,311.9 $ 1,197.1 9.6% As a percentage of total revenue 15.2% 15.9% (0.7%) Other operating costs include, among other items, marketing and promotional costs, delivery expense, bank and credit card processing fees, restaurant utilities, technology costs, and maintenance costs.
Other Operating Costs Year ended December 31, Percentage 2023 2022 change (dollars in millions) Other operating costs $ 1,428.7 $ 1,311.9 8.9% As a percentage of total revenue 14.5% 15.2% (0.7%) Other operating costs decreased 0.7% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, including 0.6% of sales leverage and 0.2% of lower delivery expenses, partially offset by 0.1% of higher maintenance costs.
Food, Beverage and Packaging Costs Year ended December 31, Percentage 2022 2021 change (dollars in millions) Food, beverage and packaging $ 2,602.2 $ 2,308.6 12.7% As a percentage of total revenue 30.1% 30.6% (0.5%) Food, beverage and packaging costs decreased as a percentage of total revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the benefit of menu price increases.
The following is a summary of the change in restaurant sales for the period indicated: Year ended (dollars in millions) For the period ending December 31, 2022 $ 8,634.7 Change from: Comparable restaurant sales 636.3 Restaurant not yet in comparable base opened in 2023 242.1 Restaurant not yet in comparable base opened in 2022 356.3 Other 2.2 For the period ending December 31, 2023 $ 9,871.6 Food, Beverage and Packaging Costs Year ended December 31, Percentage 2023 2022 change (dollars in millions) Food, beverage and packaging $ 2,912.6 $ 2,602.2 11.9% As a percentage of total revenue 29.5% 30.1% (0.6%) 25 Table of Contents Food, beverage and packaging costs decreased 0.6% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, including 1.6% from menu price increases and 0.6% from lower avocado costs, partially offset by 1.6% due to inflation across several ingredient costs, primarily beef, tortillas and queso.
Benefit/(Provision) for Income Taxes Year ended December 31, Percentage 2022 2021 change (dollars in millions) Benefit/(provision) for income taxes $ (282.4) $ (159.8) 76.8% Effective income tax rate 23.9% 19.7% n/m* *Not meaningful The effective income tax rate for the year ended December 31, 2022, was higher than the effective income tax rate for the year ended December 31, 2021, primarily due to a decrease in tax benefits related to option exercises and equity vesting, a reduction in return to provision benefits, and a net increase in uncertain tax position reserves. 25 Table of Contents Quarterly Financial Data/Seasonality Seasonal factors cause our profitability to fluctuate from quarter to quarter.
Treasury securities, money market funds and time deposits, partially offset by a gain on our investments in Tractor Beverages, Inc. of $10.4 million recognized in the second quarter of 2022. 27 Table of Contents Provision for Income Taxes Year ended December 31, Percentage 2023 2022 change (dollars in millions) Provision for income taxes $ (391.8) $ (282.4) 38.7% Effective income tax rate 24.2% 23.9% n/m* *Not meaningful The effective income tax rate increased 0.3% for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a 0.4% decrease in excess tax benefits from equity vesting and exercises.
Pre-opening costs Year ended December 31, Percentage 2022 2021 change Pre-opening costs $ 29.6 $ 21.3 39.0% As a percentage of total revenue 0.3% 0.3% 0.0% Pre-opening costs increased in dollar terms for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to higher wages and rent on increased openings of 236 new restaurants of in 2022 compared to 215 in 2021.
Impairment, Closure Costs, and Asset Disposals Year ended December 31, Percentage 2023 2022 change (dollars in millions) Impairment, closure costs, and asset disposals $ 38.4 $ 21.1 81.5% As a percentage of total revenue 0.4% 0.2% 0.2% Impairment, closure costs, and asset disposals increased in dollar terms for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to elevated impairment of operating lease assets and leasehold improvements and higher charges related to the replacement of certain leasehold improvements and, to a lesser extent, the replacement of certain kitchen equipment.
The decrease was driven primarily by sales leverage and, to a lesser extent, lower delivery expenses associated with lower volume of delivery transactions, partially offset by wage inflation and higher commodity inflation primarily from avocados, packaging, dairy, beef and chicken. 22 Table of Contents Restaurant Development.
The decrease was driven primarily by sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food ingredients and, to a lesser extent, wage inflation. Restaurant Development. During the year ended December 31, 2023, we opened 271 new restaurants, which included 238 restaurants with a Chipotlane.
Removed
Comparable restaurant sales increased 8.0% for the year ended December 31, 2022. The increase is primarily attributable to an increase in menu prices and, to a lesser extent, an increase in transactions, partially offset by a decrease in group size from the continued resurgence of our in-restaurant business.
Added
Beginning in April 2024, California legislation will require national restaurant chains, including Chipotle, to pay a minimum $20 per hour wage to restaurant workers in California This will increase wages in California nearly 20% and will result in wage inflation increasing from the low to mid-single digit range to the mid-single-digit range.
Removed
The increase was primarily due to menu price increases, a shift in consumer behaviors related to COVID-19 from digital sales to in-restaurant sales across the country, and new restaurant openings. In-restaurant sales represent food and beverage revenue generated on-premise and include revenue deferrals associated with Chipotle Rewards.
Added
We expect to increase menu prices in California to mitigate higher wage costs resulting from this legislation.
Removed
Digital sales represented 39.4% of food and beverage revenue for the year ended December 31, 2022, compared to 45.0% of food and beverage revenue for the year ended December 31, 2021. The decrease in digital sales as a percentage of food and beverage revenue is primarily related to the increase of in-restaurant sales discussed above.
Added
These elevated impairments include the impact of closing all Pizzeria Locale restaurants.
Removed
Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators and includes revenue deferrals associated with Chipotle Rewards. We updated the definition of digital sales in the first quarter of 2022 to include revenue deferrals related to Chipotle Rewards.
Added
Quarterly Financial Data/Seasonality Seasonal factors cause our profitability to fluctuate from quarter to quarter.
Removed
We made this change to allow for a reconciliation to total food and beverage revenue as we now present in-restaurant sales. Restaurant Operating Costs .
Added
Critical Accounting Estimates We describe our significant accounting policies in Note 1. “Description of Business and Summary of Significant Accounting Policies” of our consolidated financial statements included in Item 8.
Removed
The significant factors contributing to the total revenue increase for the year ended December 31 , 2022 compared to the year ended December 31, 2021, were comparable restaurant sales increases and new restaurant openings.
Added
For restaurant assets, we test impairment at the individual restaurant asset group level, which includes leasehold improvements, property and equipment and operating lease assets. The fair value measurement for asset impairment is generally based on Level 3 inputs.
Removed
Total revenue increased due to comparable restaurant sales increase of $568.6 million and restaurants not yet in the comparable base of $519.4 million, of which $210.5 million was due to restaurants opened in 2022.
Added
If we change our estimates for the cost of claims incurred and unpaid, or if actual claims differ from these estimates, our insurance expense and results of operations may be materially impacted. Reserves/Contingencies for Litigation and Other Matters We are involved in various claims and legal actions that arise in the ordinary course of business.
Removed
Other operating costs decreased as a percentage of total revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to lower delivery expenses associated with lower volume of delivery transactions and, to a lesser extent, sales leverage.
Removed
These decreases were partially offset by higher costs across several expenses, most notably higher utilities primarily related to inflation in natural gas and electricity and higher maintenance costs.
Removed
General and Administrative Expenses Year ended December 31, Percentage 2022 2021 change (dollars in millions) General and administrative expense $ 564.2 $ 606.9 (7.0%) As a percentage of total revenue 6.5% 8.0% (1.5%) General and administrative expenses decreased in dollar terms for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the following: a $81.5 million decrease in stock-based compensation and related taxes, primarily attributable to the timing of vesting of the December 2020 modification of 2018 performance awards related to COVID-19; a $13.7 million decrease in performance bonuses and related taxes; and a $12.4 million decrease in litigation expense in 2022 compared to 2021.
Removed
For the purpose of reviewing restaurant assets to be held and used for potential impairment, assets are grouped together at the market level, or in the case of a potential relocation or closure, at the restaurant level.
Removed
We manage our restaurants as a group with common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. The fair value measurement for asset impairment is generally based on Level 3 inputs.
Removed
A relative increase of 100 basis points in our performance payout percentage estimates for all active performance share awards as of December 31, 2022 would have resulted in increased general and administrative expense on our consolidated statement of income and comprehensive income of approximately $0.8 million for the year ended December 31, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 31 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 31 Consolidated Balance Sheets as of December 31, 2022 and 2021 33 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2022, 2021 and 2020 34 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020 35 Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 36 Notes to Consolidated Financial Statements 37 Note 1 – Description of Business and Summary of Significant Accounting Policies 37 Note 2 – Supplemental Balance Sheet Information 42 Note 3 – Revenue Recognition 43 Note 4 – Fair Value of Financial Instruments 44 Note 5 – Equity Investments 46 Note 6 – Income Taxes 46 Note 7 – Shareholders’ Equity 49 Note 8 – Stock-Based Compensation and Employee Benefit Plans 49 Note 9 – Leases 53 Note 10 – Earnings Per Share 54 Note 11 – Commitments and Contingencies 54 Note 12 – Debt 55 Note 13 – Related Party Transactions 55
Biggest changeFinancial Statements and Supplementary Data 33 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 33 Consolidated Balance Sheets as of December 3 1, 2023 and 2022 35 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 36 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021 37 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 38 Notes to Consolidated Financial Statements 39 Note 1 – Description of Business and Summary of Significant Accounting Policies 39 Note 2 – Supplemental Balance Sheet Information 45 Note 3 – Revenue Recognition 46 Note 4 – Fair Value Measurements 47 Note 5 – Equity Investments 49 Note 6 – Income Taxes 49 Note 7 – Shareholders’ Equity 52 Note 8 – Stock-Based Compensation and Employee Benefit Plans 52 Note 9 – Leases 56 Note 10 – Earnings Per Share 57 Note 11 – Commitments and Contingencies 57 Note 12 – Debt 57 Note 13 – Related Party Transactions 58
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 30 Item 8.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 32 Item 8.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed7 unchanged
Biggest changeWe also could experience shortages of key ingredients if our suppliers need to close or restrict operations due to the impact of COVID-19 due to industry-wide shipping and freight delays. Changing Interest Rates We are exposed to interest rate risk through fluctuations of interest rates on our investments.
Biggest changeWe also could experience shortages of key ingredients for many unforeseen reasons, such as crop damage due to inclement weather, if our suppliers need to close or restrict operations, or due to industry-wide shipping and freight delays. Changing Interest Rates We are exposed to interest rate risk through fluctuations of interest rates on our investments.
However, a substantial majority of our operations and investment activities are transacted in the U.S., and therefore our foreign currency risk is not material at this date . 30 Table of Contents
However, a substantial majority of our operations and investment activities are transacted in the U.S., and therefore our foreign currency risk is not material at this date . 32 Table of Contents
As of December 31, 2022, we had $1.3 billion in cash and cash equivalents, current and long-term investments, and restricted cash, nearly all of which are interest bearing. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.
As of December 31, 2023, we had $1.9 billion in cash and cash equivalents, current and long-term investments, and restricted cash, of which the substantial majority are interest bearing. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.

Other CMG 10-K year-over-year comparisons