Continue to Site

    Chipotle Raises its Prices Nationwide

  • Industry News January 17, 2018

    Chipotle completed the final phase of its systemwide price hike, spokesman Chris Arnold confirmed to CNBC Wednesday. The fast casual chain increased prices 5–7 percent in select markets in April and November of 2017, and extended those upticks to the remaining 45 percent of stores this week.

    Before raising a few months ago, Chipotle had not changed its prices since mid-2014—before the company’s E. coli crisis. The changes come as Chipotle faces labor and food inflation across the country, especially in regards to avocados.

    According to CNBC, Baird analyst David Tarantino told investors in a note Wednesday that "The move to implement pricing in the balance of the base was not entirely unexpected, as management previously had signaled willingness to complete the final wave of pricing actions in early Q1, after evaluating the customer reaction to the mid-November hikes."

    In the third quarter, food costs were 35 percent of revenue, which was actually a decrease of 10 basis points compared to the prior-year period. Increasing menu prices helped ease some of the burden, Chipotle said.

    Read More: Soaring avocado prices deal another blow to Chipotle

    “The benefit of the menu price increases taken in select restaurants during the second quarter of 2017 and decreased paper cost and usage were offset by higher avocado and beef prices, as well as steak making up a higher portion of our product mix compared to the third quarter of 2016,” the company noted at the time.

    For the nine months trailing September 30, food costs were 34.4 percent of revenue, a decrease of 50 basis points, year-over-year.

    “Cost savings from bringing the preparation of lettuce and bell peppers back into our restaurants after using pre-cut produce during portions of 2016, reduced testing and waste costs, and the benefit of the menu price increase that went into effect in select restaurants during the second quarter of 2017 were partially offset by higher avocado prices,” Chipotle said.

    This is a transitional period for Chipotle, and it will be worth tracking how customers react to the price hikes. Comparable same-store sales were up just 1 percent in the third quarter.

    Chipotle recently revamped its queso recipe in an effort to turn consumer sentiment. Additionally, the company continues to search for a new CEO following the news founder Steve Ells would be shifting to a chairman position.