UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 22, 2018
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 22, 2018
CHIPOTLE MEXICAN GRILL, INC.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Delaware
1-32731
84-1219301
(State or other jurisdiction
of incorporation)
of incorporation)
(Commission
File Number)
File Number)
(I.R.S. Employer
Identification No.)
Identification No.)
Denver, CO 80202
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (303) 595-4000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.05.
Costs Associated With Exit or Disposal Activities.
As announced on May 23, 2018, Chipotle Mexican Grill, Inc. has made a determination to open a headquarters office in Newport Beach, California, consolidate certain corporate administrative functions in its existing office in Columbus, Ohio, and close its existing headquarters office in Denver, Colorado, as well as an additional corporate office in New York, New York. During the week of June 18, 2018, substantially all affected employees were informed whether they will be extended an opportunity to continue with Chipotle in the new organization, and for those not continuing, of the transition assistance being provided by Chipotle. These communications were largely completed by June 22, 2018.In connection with the office moves and related organizational and personnel changes, Chipotle expects to incur certain one-time cash and non-cash expenses related to employee relocation and transition costs, lease exit costs in connection with office leases in Denver and New York, and other transition activities, of between an estimated $70 and $80 million in the aggregate. Cash charges will consist of an estimated $40 to $45 million of employee and other related costs and an estimated $20 to $25 million in office-related costs, and will primarily be paid during 2018 and the first half of 2019. Non-cash charges of an estimated $10 million primarily consist of additional asset-related costs, as well as costs associated with the modification of equity awards for employees.
Chipotle also announced on June 27, 2018 that it will close between 55 and 65 restaurants, including five Pizzeria Locale restaurants, beginning in the second quarter of 2018 and continuing over the next several quarters. The restaurant closures will result in cash charges of between approximately $15 and $25 million in the aggregate, and non-cash charges of approximately $25 million net of deferred rent credits, which are expected to be incurred beginning in the second quarter of 2018 and through the first half of 2019.
Certain of the statements made above in this Item 2.05, including statements regarding anticipated and estimated employee relocations and reductions, office transitions, related expenses, and the timing of those actions, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words and phrases such as “expects,” “will,” “anticipated”, “estimated” and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements herein are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the potential for increased employee transition costs or difficulty retaining key employees, including as a result of market pressures or a reluctance to relocate to a new geographic area; difficulties in identifying or coming to terms with potential assignees or subtenants for leased office space; and other risk factors described from time to time in the reports, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, we file with the Securities and Exchange Commission.
Item 9.01.
Financial Statements and Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Chipotle Mexican Grill, Inc.
June 28, 2018 By:
/s/ Jack Hartung
Name: Jack Hartung
Title: Chief Financial Officer
Exhibit 99.1
PR Contact: Laurie Schalow
(303) 222-5912
Lschalow@chipotle.com
IR Contact: Coralie Witter
(303) 605-1087
cwitter@chipotle.com
CHIPOTLE ANNOUNCES GROWTH STRATEGIES
FOCUSED ON WINNING TODAY AND CULTIVATING A BETTER
FUTURE
Denver, Colorado – June 27, 2018 – Chipotle Mexican Grill, Inc. (NYSE: CMG) today announced its plans to execute a growth driven turnaround and outlined its path to real performance which includes a clear strategy, strong enabling structure and a new supporting culture. The company shared the following five focus areas to drive sales and transactions on its special investor call:
•
Becoming a more culturally relevant and engaging brand to grow love and loyalty;
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Digitizing and modernizing the restaurant experience to be more convenient and enjoyable for customers;
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Running great restaurants with great hospitality and throughput;
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Being disciplined and focused to enhance the company’s powerful economic model; and
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Building a great supporting culture as Chipotle innovates and executes across digital, access, menu and the restaurant experience.
“All our efforts will focus on making the brand more engaging, visible, and culturally relevant while our restaurant teams are dedicated to providing an excellent guest experience with great hospitality and real food cooked to perfection. Specifically, this will include three big initiatives – revamping our marketing communications and plans, leveraging our second make line to grow digital sales and expand access, and engaging with our customers by launching a new loyalty program in 2019,” said Brian Niccol, chief executive officer.The company plans to grow the business by leveraging its strengths of great tasting, classically-cooked food made from real ingredients, its compelling value proposition, strong new restaurant unit economics, and an efficient digitized second make line. By modernizing and digitizing restaurants, customers will have easier access to Chipotle and experience improved order accuracy.
“We believe our digital business has a long runway for growth and ultimately can be a multi-billion-dollar business,” added Niccol.As part of its growth plan, Chipotle will add excitement around the menu by building a pipeline of delicious menu items that drive new customer visits, are operationally easy to execute, and enhance the ability to drive great throughput. Chipotle is also modernizing its organizational structure by consolidating its work force in two office locations and adding experienced talent in key areas such as marketing, CRM, menu innovation, digital, data analytics and human resources.
“I can easily see a future where Chipotle more than doubles the business to $10 billion in revenue. We will execute flawlessly in our existing restaurants, add more high-performing restaurants, build brand relevance and engagement, expand digital capabilities for team members and customers, and build an organization with top tier talent that can win today and cultivate a better future,” said Niccol.
Expectations are that all of these initiatives across marketing, digital, consumer access, menu, analytics, and operations combined will create a flywheel that can sustainably drive transactions, improve unit economics, accelerate earnings growth and create significant shareholder value.
“While it’s too early to predict the timing and precise impact each of these strategies will have on results, I’m confident that these strategies will lead to higher average unit volumes and margins in the future. We know that the combination of great operations, clever marketing, and pushing further into our digital initiatives can drive near term sales growth,” said Jack Hartung, chief financial officer.
Restructuring Charges
The restructuring to execute on the strategy will require changes to the organization and to the culture, which will result in non-recurring charges during the second quarter, and over the next several quarters. These non-recurring costs primarily relate to the moving of offices, the restructuring of the organization, and closing underperforming restaurants. In aggregate, Chipotle expects these costs, together with a small amount of other unusual items, to be in the range of $115 million to $135 million.
Chipotle plans to release second quarter results after the market closes on July 26, 2018.
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without added colors, flavors or
