Chipotle 2012 Annual Report Download - page 56

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7. Leases
The Company generally operates its restaurants in leased premises. Lease terms for traditional shopping
center or building leases generally include combined initial and option terms of 20-25 years. Ground leases
generally include combined initial and option terms of 30-40 years. The option terms in each of these leases are
typically in five-year increments. Typically, the lease includes rent escalation terms every five years including
fixed rent escalations, escalations based on inflation indexes, and fair market value adjustments. Certain leases
contain contingent rental provisions based upon the sales of the underlying restaurants. The leases generally
provide for the payment of common area maintenance, property taxes, insurance and various other use and
occupancy costs by the Company. In addition, the Company is the lessee under non-cancelable leases covering
certain offices.
Future minimum lease payments required under existing operating leases as of December 31, 2012 are as
follows:
2013 ................................................................ $ 158,981
2014 ................................................................ 161,042
2015 ................................................................ 161,971
2016 ................................................................ 162,451
2017 ................................................................ 163,511
Thereafter ............................................................ 1,658,347
Total minimum lease payments ........................................... $ 2,466,303
Minimum lease payments have not been reduced by minimum sublease rentals of $6,099 due in the future
under non-cancelable subleases.
Rental expense consists of the following:
For the years ended December 31
2012 2011 2010
Minimum rentals ............................. $ 152,935 $ 130,827 $ 114,750
Contingent rentals ............................ $ 1,917 $ 1,754 $ 1,602
Sublease rental income ........................ $ (1,623) $ (1,390) $ (1,227)
The Company has six sales and leaseback transactions. These transactions do not qualify for sale leaseback
accounting because of the Company’s deemed continuing involvement with the buyer-lessor due to fixed price
renewal options, which results in the transaction being recorded under the financing method. Under the financing
method, the assets remain on the consolidated balance sheet and the proceeds from the transactions are recorded
as a financing liability. A portion of lease payments are applied as payments of deemed principal and imputed
interest. The deemed landlord financing liability was $3,529 as of December 31, 2012. The future minimum lease
payments for each of the next five years and thereafter for deemed landlord financing obligations are as follows:
2013 ................................................................... $ 394
2014 ................................................................... 394
2015 ................................................................... 401
2016 ................................................................... 421
2017 ................................................................... 423
Thereafter ............................................................... 3,472
Total minimum lease payments .............................................. 5,505
Less: Interest implicit in lease ............................................... (1,976)
Total deemed landlord financing ............................................. $ 3,529
54
Annual Report