Chipotle, which recently announced the price hike, said it is likely to charge more at California restaurants, blaming a new law that raised the minimum wage for fast food ( and fast casual) state workers.
“We haven’t decided on exactly what pricing level we’re going to take,” said John Hartung, Chipotle’s chief financial officer, on an analyst call discussing the company’s third-quarter results. on Thursday, and added that “we are. studying” the situation.
“But to take care of the dollar cost of that and/or the margin part of that … it’s going to be a mid to high single-digit price increase,” he said. “We’ll pass it on.”
A company spokesperson later told CNN that Chipotle has not yet decided whether it will raise prices in California.
California Governor Gavin Newsom in September signed legislation raising the minimum wage to $20 an hour for fast food workers, and creating a council that can approve additional increases in the future. The state’s current minimum wage is $15.50 an hour and will increase to $16 an hour on Jan. 1. Chipotle said on the call that it currently pays employees $17 an hour in California, where it has about 15% of roughly 3,300 of its restaurants.
The new hourly wages for fast food workers will begin on April 1 next year. Employees who work in fast food restaurants with at least 60 locations nationwide is eligible.
Although some consumers have held back on spending, Chipotle has been able to raise its prices without much consequence.
Chipotle’s total revenue grew 11.3% to $2.5 billion in the quarter ended Sept. 30, the company said Thursday. During that period, sales at restaurants open for at least 13 months jumped 5%. And the company says the increase is driven by transactions, meaning the growth largely comes from people buying food more often, not just because they’re spending because of higher prices. Chipotle’s stock was up about 2% after the market closed.
So if the chain raises prices as a result of the new California law, it may not make much of a difference to customers who are already willing to pay Chipotle prices. If the company raises the price of a burrito by, say, 7% on a $9.95 burrito, the increase comes to less than a dollar.
But workers say a higher minimum wage would make a meaningful difference in their lives.
Anneisha Williams, who works for Jack in the Box in California and spoke publicly during the signing of the law, previously told CNN that the higher pay means more money for bills, feeding her children and dog, and hope to come out of poverty. At the time, Williams said he was making $17 an hour.
