Chipotle raises prices to cover the cost of rising wages
An employee sprinkles cheese on a burrito at a Chipotle Mexican Grill restaurant in Hollywood, California.
Patrick T. Fallon | Bloomberg | Getty Images
Mexican Grill Chipotle increased menu prices by around 4% to cover the cost of increasing salaries for its employees.
In the restaurant industry, chains such as Chipotle, Starbucks and Mcdonalds increased hourly wages for employees of company-owned sites with the aim of attracting new workers and keep their current ones. Consumer demand for restaurant meals came back strong, but the workforce was slower to come back, pushing restaurants to soften the deal. In May, the leisure and hotel industries created 292,000 jobs, but employment in these areas is still down 2.5 million from pre-pandemic levels, according to the labor ministry.
In May, Chipotle said he increase the hourly wages of its restaurant workers to average $ 15 an hour by the end of June. Company executives told the Baird Global Consumer, Technology & Services conference that they would pass the price of the wage increase on to consumers.
“It seems like the right thing, at the right time, and it looks like the industry is now going to have to do something similar or catch up,” CFO Jack Hartung said at the virtual conference. “Otherwise, you will just lose the staff gain. “
CEO Brian Niccol said the company preferred not to raise prices but the move made sense in this scenario.
The timing of the price hikes coincides with rising ingredient costs in the restaurant industry as suppliers grapple with returning demand. At this time, Chipotle does not plan for further price increases.
“Ingredient costs, we’re talking about that. We’ll see where that leads,” Hartung said.
Chipotle shares were trading up 1.3% on Tuesday. The stock has fallen more than 3% this year, giving it a market value of $ 37.72 billion.