- Hollis Johnson
- Chipotle is considering raising prices as minimum wages increase and the labor market tightens.
- “We have a model that we can invest in our labor,” CEO Brian Niccol told Business Insider. “And, we will use sales growth coupled with some pricing to handle it.”
- Niccol said that Chipotle wants to remain accessible, and that the chain will be careful to avoid raising prices to a degree that could scare away customers.
ORLANDO, Florida – Your Chipotle burrito may get more expensive in 2019.
The fast-casual chain hired an outside consultant to analyze the menu’s pricing, item by item, executives said at the ICR Conference on Tuesday.
The analysis comes at a time when a number of chains are investigating ways to avoid having rising labor costs cut into profit margins.
“Every cost in the business is a challenge,” CEO Brian Niccol told Business Insider. “The good news is we have a model that we can invest in our labor. And, we will use sales growth coupled with some pricing to handle it.”
Chipotle executives have been hinting for months that changes in menu prices are in the works. The chain has held off on raising prices significantly in recent years. In January 2018, the chain finished implementing waves of price increases that began in April 2017.
Niccol and CFO Jack Hartung emphasized that Chipotle plans to keep prices well within customers’ price range.
“We’re behind on raising prices,” Hartung said. “I think we want to say we’re always behind. What that means is we’re making Chipotle accessible to everybody.”
“We chose a long time ago, and we’re still sticking with this, we don’t want to be like Whole Foods,” Hartung said. “Whole Foods does a great job, but they historically have charged very, very high prices.”
Chipotle says the analysis of the menu is not complete, so it is not yet clear how the new pricing strategy will play out. In addition to possibly tweaking menu prices, the company hopes to offset rising labor costs with new advertising, boosting digital sales, and opening new locations.
But, executives are confident that – if they are deemed necessary – Chipotle’s prices are competitive enough that an increase won’t scare away customers.
“We have more pricing power in the bank that, if we need to, we can pull it out and tap into it,” Hartung said.
However, at other, franchised companies, Hartung said, “if the labor inflation is high and they are already fully priced, they have a choice to make: Do they want to eat into their margins or do they want to increase prices and lose customers?”