Chipotle To Raise Prices As Worker Pay Increases

This week, Chipotle Mexican Grill hiked menu prices by an average of 4-5% to cover the higher worker wages it implemented. It also wants to cover increases in food costs given the higher prices across the industry. 

RELATED: Restaurant Prices Rise Amid Inflation, Labor Shortage

Chipotle Will Increase Prices

The popular food chain said it will raise its prices by 5% in many markets around the country. Once implemented, it becomes Chipotle’s first price increase in three years.

On average, the increase will amount to between 25 -35 cents on a typical entree. The increase initially will happen in 440 out of it more than 2,000 stores nationwide. 

Spokesman Chris Arnold said that the rise in prices will cover increases in food and labor costs.  “Our pricing has always been done on a market-by-market basis, as the cost of doing business varies by market.

So we tend to evaluate pricing in that fashion,” he said. .”Even with the new prices, our pricing remains very competitive across the category, particularly if you factor in our ingredient quality,” Arnold added. 

Increased Hourly Pay For Workers

Across the restaurant industry, chains including Chipotle, Starbucks, and others offered increased hourly wages in order to attract workers.

In May, the leisure and hospitality industries added 292,000 jobs, but employment in those fields fell down by 2.5 million compared to pre-pandemic levels.

While consumer demand for outdoor dining exploded in light of easing pandemic restrictions, the lack of workers is hampering reopenings countrywide.

Restaurants such as Chipotle now have to offer a minimum of $15 per hour just to get workers to notice the openings. In order to afford the pay increases, Chipotle officials said they will pass the cost to consumers. 

‘Some Kind Of Catch-Up’

“It feels like the right thing, at the right time, and it feels like the industry is now going to have to either do something similar or play some kind of catch-up. Otherwise, you’ll just lose the staffing gain,” said CFO Jack Hartung at an industry virtual conference.

Chipotle CEO Brian Niccol said the company preferred to maintain prices. However, the decision to adjust prices made sense. “And then with that, we've taken some pricing to cover that,” he added.

The Mexican food chain plans to hire 20,000 more employees. The $15 minimum wage will become standard by the end of June. 

Rising Ingredient Costs As Well

“We really prefer not to take pricing. But it made sense in this scenario to invest in our employees and get these restaurants staffed and make sure that we have the pipeline of people to support our growth,” Niccol remarked during the Baird Global Consumer, Technology & Services Conference.

The timing of the price hikes coincides with rising ingredient costs across the restaurant industry. At present, many suppliers are dealing with the increased demand for returning menus.

While Chipotle did say that they are not planning on further price increases, material costs might factor in soon. “Ingredient costs, there’s talk about it. We’ll see where that leads,” Hartung said.

Watch Yahoo Finance! News video reporting that Chipotle's long lines are back, but CEO Brian Niccol says strong demand is causing hiring challenges:

 Loading ...

Are you already going out to eat at this point? Do you support the 5% price increases in restaurants such as Chipotle?

Tell us what you think about increased menu prices that go into higher labor and food costs. Share your thoughts below.