Chipotle Mexican Grill has raised its menu prices by about 4%, the chain’s CEO revealed at an investor event this week.
CEO Brian Niccol blamed the increase on higher labor costs in a tight hiring market.
“We really prefer not to take pricing,” Niccol said at the Baird 2021 Global Consumer, Technology & Services Conference. “But it made sense in this scenario to invest in our employees and get these restaurants staffed, and make sure that we had the pipeline of people to support our growth. And then with that, we’ve taken some pricing to cover some of that investment.”
Earlier this year, Chipotle noted it had raised its menu prices on delivery orders an average of 13% to make up for the hit its margins had taken because of the success of the off-premise channel.
At that time, Niccol said the chain was “testing a lot of different pricing levers.”
Chipotle is certainly not alone in its price increases.
Prices at limited-service restaurants jumped 6.2% during the pandemic, while full-service operations only took a 2.9% price hike, according to federal data.
Chipotle CFO Jack Hartung said he expects to see even more chains raising their prices to deal with higher wages.
“It feels like the industry is going to have to react,” Hartung said at the event. “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.”
Last month, Chipotle announced it would raise its average hourly pay to $15 by the end of June, up $2 an hour from the current rate. The move comes as the chain is looking to hire 20,000 new employees this year.
Chipotle also launched a $200 employee referral bonus for hourly workers and a $750 referral bonus for apprentices and general managers.
With the pay increase, Chipotle’s starting hourly wages will range from $11 to $18 an hour, the chain said.
The menu price increase was engineered to fully cover that wage boost, Hartung said.
“The intent there was to basically cover the dollar cost of the increase in wages,” he said. “Not to protect margin, but to cover the dollar cost. We’ll see how the rest of the year unfolds … see what our margins do.”