Chipotle raises menu prices to offset employee wages

[mahatmakanejeeves]

Source: CNN Business via the Roanoke Times

Chipotle raises menu prices to offset employee wages

By Danielle Wiener-Bronner, CNN Business 2 hrs ago

Chipotle raised its menu prices by about 3.5% to 4% to cover the cost of higher wages for employees, company Chief Financial Officer John Hartung said Tuesday.

"You take about a 4% price increase to cover the dollar cost of the extra labor," he told an analyst during a conference.

Chipotle announced in May that it would increase restaurant worker pay to an average of $15 per hour. The company said at the time that it was looking to hire 20,000 new employees ahead of the summer.

As restaurants prepare for a bustling summer, many are finding it difficult to staff up. And Chipotle's not the only chain trying to attract labor with higher wages. McDonald's said last month that it would hike pay for workers at its company-owned stores.

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Read more: https://roanoke.com/lifestyles/food-and-cooking/chipotle-raises-menu-prices-to-offset-employee-wages/article_0326de72-1699-5fde-82b1-7ec3c0aa2d23.html

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Warning: loud autoplay video

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Restaurant chain Chipotle raised its menu prices by about 3.5% to 4% to cover the cost of higher wages for employees, the company has announced.

Link to tweet

[SheltieLover]

1. How about take less profit?

[FBaggins]

5. After a year+ of COVID?

You think they have any profits left?

Truthfully… this could be good. The claim is that wages can’t rise because people won’t pay more for a burger (burrito… whatever). If they raise wages and then raise prices to support those wages… and their sales don’t suffer?

[sheshe2]

13. After a year+ of COVID?

Do they think many Americans can even afford to eat out?

[brooklynite]

32. Come to New York; all the restaurants are full.

And, no, I’m not talking about fancy restaurants for the 1%ers.

[sheshe2]

40. You have stated you are rich.

Something about a 300 per course 'tasting' meal.

Bon Appétit!

I doubt it is the struggling class that are filling said restaurants.

An aside. I will not be going to any full capacity restaurant anytime soon. COVID is not done with us.

[brooklynite]

43. Yes, I am rich...and I rarely go to expensive restaurants.

I do walk around my (and other) neighborhoods. The Yemeni place is always busy. So is the Indian place. So is the pizza place.

89% of NYC's employed labor force are working. They're also tired of being stuck at home and are happy to eat out. If you're suggesting that they're all 1%ers, then NYC must be doing very well.

[sheshe2]

51. Where in my post did I suggest they are 1% 'ers?

Please read it again.

[brooklynite]

52. In that case, you think there are less wealthy people filling up the NYC restaurants.

[sheshe2]

66. Would you just stop.

[brooklynite]

68. If people don't assert unsupported statements, I'll have nothing to say...

I doubt it is the struggling class that are filling said restaurants.

[sheshe2]

72. Keep digging. nt

[LanternWaste]

89. Like the unsupported assertion Trump would never be impeached twice?

"If people don't assert unsupported statements, I'll have nothing to say..."

Like the unsupported assertion Trump would never be impeached twice?

Or do we rationalize a distinction lacking a relevant difference to better validate holding others to a higher standard as we ourselves prophesize the absurd?

I'm guessing the latter... as I also guess a rationalization will be made soon.

[pnwmom]

69. Restaurants have had a tough time. If people don't want to pay an additional 4%,

they can go less often or skip dessert.

[rdking647]

20. chipoltle 2020 earning report

revenue up 7%
net earnings of 352m

[Lancero]

42. Don't forget their stock prices, currently $1330.

[NickB79]

26. Chipotle had lines around the block during COVID

With sit-down restaurants closed.

[SheltieLover]

28. They should take less profit

Working families already shoulder the expense for every CEO's ridiculous salary & every corpprate upgrade.

[brooklynite]

36. What expense are working class families shouldering in this case?

Nobody is forced to eat at a restaurant.

[pnwmom]

70. No working family is forced to go to any restaurant that raises its prices so its workers

can be paid more.

[paleotn]

39. Chipotle excels at takeout. Takeout soared in 2020.

They did just fine.

[ForgoTheConsequence]

86. Lol they're doing great despite covid.

A quick google search would have shown you that.

[mitch96]

44. Yup, god forbid if they don't make their profit quota for the investors... Oh the shame!!😂

It's all about the profits and not the people..uff
m

[everyonematters]

64. They will probably make a little less profit.

As prices go up, demand goes down. They make a little less profit; the employees make a little more. There is a price at which you maximize your profits, if you raise it any more, you just make less profit.

[Sapient Donkey]

77. How much of a raise is it? I'm guessing $5 - $6?

It looks like they have 60k+ employees in total. How many of those are the workers who would be affected by that? At least half, right? Probably more, but let's say 30k. Let's give a $5 increase (from $10 to $15), for someone working 35 hours a week that is about $7,300/yr increase per employee with a 52 week year. 7300 * 30000 is $220,500,000 increase in wage costs. I'm mostly pulling these numbers out of my ass, but I think it does give an idea of how much the wage increase will cost when dealing with it on that scale. We're not talking a couple million bucks, but more like $200 million to 300 million, I think.

They might be raising costs higher than they need to, but I don't have a problem in principle with some slight price increases to ensure some people get a fairer wage. If I have to pay $12.50 (4% of $12 is $0.48) instead of $12 for my taco bowel so that someone can get a wage that makes their life easier, then I'm not to worried about that. Even if I'm a huge Chipotle fan who spends $1k/yr there, that's a $40/yr increase for me so that some person who is probably struggling gets an extra $7-9k/yr

At least that is my view of this right now. I'm open to hear other thoughts.

[everyonematters]

81. Agree.

[olegramps]

82. I think most people would be willing to pay a little more to benefit those serving them.

How can you enjoy eating when the person waiting on you is being paid starvation wages? Just skip one visit to the resturants and you will cover the increased cost by 96% of the time you can enjoy having people serve cook and serve you.

[ruet]

2. I Think It's Gotton to the Point Where I'm Asking This Question Every Day.

Who do consumers get to pass their costs down to?

Capitalism is a dead end.

[brooklynite]

33. Consumers have the choice of not spending money at a restaurant.

Name an economic system that’s better.

[Tiger8]

84. Capitalism + Democracy is the best so far

Any problems of Capitalism are solved at the ballot box.

If I invent something that I sell a billion at $10 profit per unit, it's because people see a value in it. I'm happy to pay taxes on my $10 billion. But if my tax rate is so high that I don't produce the item, then everybody loses.

[GulfCoast66]

65. I'll agree capitalism is a dead end when I see a better alternative.

All of Western Europe is capitalist. South Korea, Japan, Australia, New Zealand are capitalist.

Needless to say Canada.

But many practice social democracy where everyone gets the benefits of capitalism, not just those with capital. We don’t.

[pbmus]

79. In other words,

Capitalism is good for owners of capital, workers who work for capitalists not so good…

And it’s only gotten worse over the last 40 years….because every politician from raygun to the Big Con has propped up big money….

We wonder why 74 million voted for a Con, and several hundred stormed our capital…

The major reason fascism takes hold is because of an unfair economic system….

[GulfCoast66]

83. I know the downside of capitalism, as well as the upside

Still waiting to hear a better alternative.

[enki23]

3. So... a 25 to 50% increase in employee wages equates to a 4% increase in menu price?

Sounds like we need "labor shortages" more often. Maybe artificial ones, as needed.

(go figure)

[Bucky]

15. As an economics teacher, it bothers me that this comes as news to people

It's a basic thing I cover in all my classes. Recoveries are by nature inflationary. But the cost increases aren't all on labor. Capital costs (equipment, transportation, facilities, and servicing bank loans for expanding operations) and the cost of rising food prices are also calculated into that 4% price hike.

For the last 5 to 6 years, retail employers have been feeling like they're fat cats by offering eight or nine dollars an hour for line workers. But the cost of living has gone up a lot more than 16% median wage increase since the last hike in minimum wage.

You have to legislatively boost that minimum wage over the next 6 years. Housing costs alone are killing the working class

[h2ebits]

50. Good information--thank you!

Keep sharing the economics information so that more and more people can learn. Armchair experts abound and need accurate data.

[Humanist_Activist]

63. One thing that killed me was starting wage at a job I had for 10 years, in 2009 was...

8 dollars an hour, when I finally left for a higher paying job in 2019, their starting wage was....8 dollars an hour. That's fucking insane, and it wasn't a livable wage, not even close, in 2009. Hell, they were pushing me out by 2019, because my raises made me cost more to them than my newer coworkers, by that time, I was one of about 3 people left who weren't salaried supervisors from around that same time period.

[Sapient Donkey]

87. I see the exact same thing in IT field

How exactly does a very similar job I did back in 2010 pay roughly the same now in 2021? Even worse, often times requiring even more in their laundry list of skills. There might be a dollar or so increase, but not nearly enough to keep up with the rising housing and other living costs. I often times become annoyed enough that I will respond to job postings in which I detail why they are assholes. To get through their automated filters, I will add keywords that perfectly match what they want. I've only had two responses. One was from a guy who said he's just a small businesses who barely makes it. I didn't really buy what he was trying to sale. The other thanked me for my input and they actually raised the salary on the posting. Not sure if I actually made them make actual changes, or if they were just correcting an error in their posting. I'm sure for the most they just ignore my rants, but it sure makes me feel better when I do it.

[MichMan]

16. The quote says it was an additional dollar increase

[enki23]

27. Er.... no it doesn't. "Dollar cost" doesn't mean "the cost of one more dollar."

I just looked up some values. Nationally, the average wage at Chipotle is (according to payscale.com) $11.82 per hour. That would make this approximately a 25% wage increase overall. Hopefully not acquired by biasing it toward managers obviously. But most of them aren't exactly rolling in money either.

[dixiechiken1]

4. So he's blaming the employees for the increase in menu prices...

But the increased costs of meat, fuel, produce, etc. have nothing to do with it?

I call BULLSHIT.

[leftieNanner]

17. He took home $38 million in 2020

So yeah. Let's blame the employees.

[oldsoftie]

60. His salary would pay each employee about $400

Big salaries dont equate to much for 10s of thousands of people.
He's not blaming the employees, he's blaming costs. Thats business.

[Sapient Donkey]

88. I was trying to figure that out.

I saw he has a base salary of like $1.2 million, and the rest were stock awards. How does that work in practice? Does that mean he received 30 millions dollars worth of stock for the year, or that his stocks in the company are now valued at that? Could he get another 30 million in stocks next year, making it 60 million over the past two years, or is it that that 30 million he has might gain another 20 million in value making it 50 million? Maybe someone here can clear that up, because I was talking to someone about this last night and neither of us had much of a clue.

https://www.marketwatch.com/story/chipotle-ceos-2020-pay-more-than-doubles-as-covid-related-psu-modifications-provided-a-23-million-boost-2021-04-05

Chipotle Mexican Grill Inc. CMG, +1.50% disclosed in its proxy statement filed Monday that Chief Executive Brian Niccol's 2020 compensation more than doubled from the year before, as stock awards jumped fivefold amid COVID-related modifications. Niccol's total compensation was $38.04 million in 2020, up from $16.07 million in 2019. That included an increase in base salary to $1.24 million from $1.20 million, a jump in the value of stock awards to $29.22 million from $5.70 million and a rise in the value of option awards to $4.00 million from $2.73 million. Elsewhere, non-equity incentive plan compensation fell to $3.15 million from $3.87 million while "all other compensation" declined to $420,529 from $2.57 million. For Niccol, all other compensation included 195,977 in company compensation to retirement plans, $129,072 for personal aircraft use and $50,031 for temporary security detail. Meanwhile, total 2020 compensation excluding COVID-related modifications to performance share units (PSUs) was $14.81 million.

[durablend]

6. But I thought...

$15/hour pay meant teh Big Macs go from $5 to $20.

THEY LIED?!?!?

[paleotn]

46. Surely not!!

CEO's don't lie....do they?

[louis-t]

7. Supply and demand. The 'free market', assholes.

Shouldn't have any problem getting employees now.

[JI7]

8. The fact is price of these foods was going up even before any increase in employee wages

Fast food and casual food places often can come out to 10 to 15 dollars just getting one meal with a drink .

[JohnnyRingo]

9. Off the top of my head... that should a about 30 or 35 cents

...to a $7.00 burrito.
Sounds fair to me. They've had larger increases to give the CEO a Christmas bonus.

[Jilly_in_VA]

10. I'm cool with that

I prefer Qdoba though. I ate at Chipotle the other day and it was darn near tasteless.

[aeromanKC]

11. Reminds me when Papa John's bitched about raising Pizza price $0.25 for ACA

I haven't ordered from Papa John's since. They would have remained on speed dial if they would have welcomed the $0.25 per Pizza increase in order to provide employees with Healthcare thanks to ACA.

[leftieNanner]

18. Papa John

has a 27 car garage and a 48,000 square foot "house".

I call BS.

I don't order their pizza either. Never have. Never will. We have too many good local joints!

[rpannier]

31. Don't forget the guy has a moat

[leftieNanner]

38. Should we send him

Some alligators?

[rpannier]

53. I thought about that

A siege tower and canon

[wryter2000]

19. Seriously

If you want to buy a bad pizza, are you going to change your mind because it costs an extra quarter?

[COL Mustard]

12. I Put My $$$ Where My Mouth Is

I ordered from them just today and it was quite tasty. I'm glad they're doing that.

[mucifer]

14. Makes me feel a little better about eating there if they pay that amount to their workers.

They have a good vegan options.

[leftieNanner]

21. Plus they were one of the first places to offer GF meat

Lots of Mexican restaurants use soy sauce in their marinades (seriously!) and when my daughters were diagnosed with celiac a number of years ago, it was one place they could eat that served decent fresh food.

[Bleacher Creature]

22. I'll gladly pay an additional 30-40 cents so that employees can make a livable wage.

That said, top executives and shareholders should also shoulder some of that burden.

[badhair77]

24. This sums it up.

[badhair77]

23. Ours has very limited hours on days when they're open, and the hours are irregular.

Everyone is hurting for help. Maybe the high school kids can fill in.

I haven’t been to Chipotle since an employee was rude to me. I walked next door to Panera and haven’t looked back.

[greenjar_01]

25. So?

THAT'S WHAT THE MOTHERFUCKING SERVICE COSTS.

I wonder whether the OP thinks it's a bad idea to raise wages, Mr. Jobs Numbers.

[NickB79]

29. If I ate at Chipotle twice a week

And got my usual, ($7.50 chicken burrito), I'd spend $780 a year.

A 4% rise in cost turns that into $811 a year.

A whopping $31 in an entire year. Oh the humanity!!!

[AZLD4Candidate]

30. Dear me. . .he can't get by if it's multi-multi million salary and bonuses are only multi-millions

There aren't enough onions in the world.

[WarGamer]

34. This is basic stuff.

Economics 101


Like it or not, the purpose of a (most) business is to make a profit.

If something reduces their bottom line (overhead, infrastructure, taxation, payroll) they will simply adjust something to end up with the same bottom line.

Many restaurants are now adding mandatory 3-5% surcharges to all bills to cover higher payroll.

The Consumer ALWAYS gets burnt.

[oldsoftie]

62. Your facts are no good here!!

[I of the Eye]

35. Zero-Sum Capitalism

They keep the sum, we get the other part.

[Autumn]

37. I've eaten there once, eight years ago. I thought it was over priced garbage and

never went back.

[Baked Potato]

41. Good! Nt

[MontanaMama]

45. My husband and I own two business.

We have never had to raise our prices to cover employee wage increases. Not once. We give a 5% increase to all employees annually in addition to other perks and benefits. Other than a slight uptick in federal payroll taxes, our bottom line isn’t affected in any noticeable way.

[paleotn]

48. And I bet you guys have very low headcount turnover.

Recruiting and training is expensive. Not to mention the knowledge that walks out the door when an employee leaves. Lots of business owners and corporate exec types don't understand that part of the equation and bitch and moan about the cost of their headcount turnover. Been there, seen it in corporate America. It's not a pretty picture. It pays in hugely to keep people well paid and well appreciated.

[MontanaMama]

78. You are 100% correct.

We have extremely low turnover. Hiring and training is so expensive. After we hire someone and they seem like a good fit, I sit down with them and we talk about compensation and what is ofvalue to them. Every one of our employees has a different compensation package based on their wants and needs. Some of our folks have kids, some of our folks are retired, some need insurance, some have their insurance covered by a spouse… Everyone’s lives are so different and, as an employer, recognizing that is the key to keeping people happy and feeling cared for.

I have one guy who wants his Costco membership paid, a stipend to pay for his health insurance on his wife’s policy and a line of credit at the hardware store...that’s what speaks to him. I have another employee that wants to come in work at 4:30am and leave by noon. I have another employee that is going to pharmacy school at the local university and needs very flexible hours. Another guy wants specific paid holidays, flex time and health insurance. All of it is possible and crucial to keeping us up and running. I care about the people who work for us and it is my job to give them what they need.

[pbmus]

80. You and your husband are magnificent gemstones 💎

In a garbage dump of greed..

[Cryptoad]

47. Lord Forbid,,,,,,,

they cut the upper management an executives salary and bonuses a wee bit ,,,,,

[PSPS]

49. Umm...

Link to tweet

[GB_RN]

58. Yeah, I Was About To Post This

Saw this info from Dan Price. CEO got a huge pay raise and he said that Chipotle is now getting ready to CUT their hourly worker pay back to $13 an hour, IIRC.

Screw Chipotle…not that I eat there, anyway.

[VarryOn]

54. Inflation is here...

I work in freight transportation. I've never seen rates rise this fast in 33 years. We wouldn't accept anywhere near 3-4% rate increases. Even the largest shippers are taking double digit increases.

The good thing is truck drivers are going to get nice increases because of it.

[Ferrets are Cool]

55. So? Something on the menu that costs $9.99 now costs $10.39

That's a VERY small price to pay for semi-living wages for the staff.

[relayerbob]

56. Chipotles

where you too can expeience prison quality food in the ambiance of a prison cafeteria.

[NurseJackie]

57. Okay.

Fine with me.

[Orrex]

59. A business that can't pay its living wage is a failed business. Full stop, no exceptions.

If the business couldn't pay its suppliers or its utility bills or its rent, no one would say "oh, that noble business should get to pay less than is due." But when we're talking about exploiting the workers, someone always steps up to cheer the business on.

At this point some clever soul usually asks me "Well Orrex, how much to you pay your employees?"

I don't have any employees, obviously, because I can't afford to pay them a living wage, and because I'm not a fucking asshole who thinks that I'm entitled to exploit people's financial hardship for my own gain.

Chipotle can go fuck itself.

[pnwmom]

71. But they can pay living wages. There is no rule that says a business

can never raise its prices. This is a good reason for doing so.

[Orrex]

74. I'd say that this is a good reason for slightly reducing the shareholder's profits

Once again, a multi-billion dollar company is shifting the cost of its failures away from those who are at fault, namely the corporate structure that decided starvation wages were great. This has the further intent of "proving" the false claim that raising wages necessarily results in higher prices. That's been the favorite rebuttal of corporations for a century or so, and they roll it out to whine about every single change that might benefit employees.

I'd be curious to see how much Chipotle paid in taxes during the last decade or so, and how much its CEO paid.

[Hiawatha Pete]

85. +1000! n/t

[Soxderrube]

61. No people in the know

Of wage packages? How much of the $11 + goes for insurance, sick pay, vacation, or pension? I was a union worker the last contract they negotiated it was published as $18 per hour after all the things I mentioned I ended up earning $12.25 per hour as take home and the unknowing thought I should not make that much.

[Warpy]

67. That would add a whopping 40 cents to a $10.00 burger

and I think the average diner will find that won't break the bank.

(Don't bag me about the price, it's a guess because I prefer my own cooking and eat at home)

[Grokenstein]

73. Remember Chipotle's oh-so-wholesome "Scarecrow" ad?

Seemed like a big load of horseshit at the time; seems even moreso now.

(Below is the "Honest" version from Funny or Die)

[Gore1FL]

75. OK, but most of their cost is materials. nt

[Hekate]

76. Good!

[marble falls]

90. I was always lucky - I knew what I was doing and I owned a good tux. The $2.13/hr I got ...

... meant nothing because at I made over $25/hr at least 90% of the time. And I know 80% of servers made the same $2.13 and hardly went over $10/hr. I absolutely have no problem with my brothers and sisters earning a living wage. Especially, I hear about so many employer scams to steal tips and compensate other employees with them.