Chipotle revealed Tuesday that its raising menu prices 3.5 to 4 percent to cover the cost of raising wages for employees.
In early May, the fast-casual giant announced that it would boost its average wage to $15 per hour by the end of June to attract more workers amid an industrywide labor shortage. The upgraded pay scale will result in hourly employees earning starting wages ranging from $11 to $18. Chipotle said at the time that it was looking to hire 20,000 workers and that it was offering a $200 referral bonus for crew members and a $750 referral bonus for apprentices or general managers.
CFO Jack Hartung said the intent of the price increase is to cover the dollar cost of the increased wages as opposed to protecting margin.
“We'll see how the rest of the year unfolds and see what our margins do,” Hartung said at the Baird Global Consumer Technology & Services Conference. See what resistance, if any, we see and then see what happens to the labor markets. We like how things have played out so well so far, in terms of the response to the increase both from our existing people, as well as applicants. So that part of the move was the most important part, and we're pleased with how that's gone so far.”
CEO Brian Niccol said Chipotle prefers not to taking pricing, but he added that it made sense in this situation because the company is investing in employees, helping restaurants get staffed, and building a pipeline of people to support growth.
The Chipotle leader also emphasized that the brand has “a lot of pricing power,” meaning chicken burritos are still below $8, excluding New York and other higher-priced markets.
“We're usually talking about quarters and dimes that we're layering in,” Niccol explained. "And the feedback we've gotten is, we still have a really strong value proposition with more pricing power, if we had to pull that lever.”
Chipotle is one of many chains to bolster its wages and benefits package in recent months. McDonald’s said in May the average wage for hourly workers at corporate units would rise to $13 per hour and to $15 per hour by 2024. The company said entry-level workers will earn a minimum of $11 to $17 per hour and shift managers will make a minimum of $15 to $20 per hour. Previously, hourly employees earned an average of almost $12 per hour and shift managers earned an average of $16 to $18 per hour.
Whataburger, which gave staff more than $90 million in bonuses for work during COVID, promoted all of its general managers and pushed their salaries to six figures. Taco Bell revealed this spring that general managers at corporate stores would now receive up to four weeks of accrued vacation per year.
Hartung said Chipotle knew the industry would react in some way to the labor shortage. Chipotle’s approach was to get in front of it and lead.
“So, it feels like the right thing at the right time,” Hartung said. “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 game, and if you lose the staffing game in this business, it's not going to end well.”
The number of job openings across the U.S. reached a record-high 9.3 million on the final business day of April, according to the Bureau of Labor Statistics. The data is part of the agency’s monthly Job Openings and Labor Turnover Survey. April was the highest amount since the series began in December 2000. The previous high came in March when there was 8.1 million job openings.