Chipotle 2013 Annual Report Download - page 25

For policies under which we are responsible for losses, we record a liability that represents our estimated
cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is
based on a number of assumptions and factors, including historical trends, actuarial assumptions and economic
conditions, and is closely monitored and adjusted when warranted by changing circumstances. Our history of
claims experience is short and our significant growth rate could affect the accuracy of estimates based on
historical experience. If a greater amount of claims occurs compared to what we estimated, or if medical costs
increase beyond what we expected, our accrued liabilities might not be sufficient and we may be required to
record additional expense. Unanticipated changes may also produce materially different amounts of expense than
reported under these programs, which could adversely impact our results of operations.
Negative publicity relating to our restaurants or our company could adversely impact our reputation,
which may significantly harm us.
We depend in part on customers’ perception of and connection to our brand. We may experience negative
publicity from time to time relating to food quality, customer complaints, restaurant facilities, advertising and
other business practices, litigation alleging illness or injury, regulatory issues, our suppliers’ potential failure to
adhere to elements of our Food With Integrity protocols, other issues regarding the integrity of our suppliers’
food processing, employee relationships, or other matters, regardless of whether the allegations are valid or
whether we are held to be responsible. The negative impact of adverse publicity relating to one or more
restaurants or any of the foregoing topics may extend far beyond the restaurant(s) involved and affect many
more, or even all, of our restaurants. The considerable expansion in the use of social media over recent years can
further amplify any negative publicity that may be generated. A similar risk exists with respect to unrelated food
service businesses, if consumers associate those businesses with our own operations.
Negative publicity may adversely impact customers’ perception of us, which could adversely impact our
sales. If the impact of any such negative publicity is particularly long-lasting, the value of our brand may suffer
and our ability to grow could be diminished. Additionally, negative publicity about our employment practices
may affect our reputation among employees and potential employees, which could make it more difficult for us
to attract and retain top-performing employees. That could adversely impact the quality of the customer
experience we can offer and our operations generally, and may increase our labor costs as well.
We may not be able to adequately protect our intellectual property, which could harm the value of our
brands and adversely affect our business.
Our ability to successfully implement our business plan depends in part on our ability to further build brand
recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including
our name and logos, our Food With Integrity strategy and the unique ambience of our restaurants. If our efforts to
protect our intellectual property are inadequate, or if any third party misappropriates or infringes on our
intellectual property, either in print or on the internet, the value of our brands may be harmed, which could have
a material adverse effect on our business and might prevent our brands from achieving or maintaining market
acceptance. We are aware of restaurants in foreign jurisdictions using menu items, logos and other branding that
we believe are based on our intellectual property, and our ability to halt these restaurants from using these
elements may be limited in jurisdictions in which we are not operating. This could have an adverse impact on our
ability to successfully expand into other jurisdictions in the future. We may also encounter claims from prior
users of similar intellectual property in areas where we operate or intend to conduct operations. This could harm
our image, brand or competitive position and cause us to incur significant penalties and costs.
Our quarterly results may fluctuate significantly and could fall below the expectations of securities
analysts and investors due to various factors.
Our quarterly results may fluctuate significantly and could fail to meet the expectations of securities
analysts and investors because of various factors, including:
• changes in comparable restaurant sales and customer visits, including as a result of changes in
consumer confidence;
• our ability to raise menu prices without adversely impacting customer traffic;
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Annual Report