Beloved Mexican restaurant Chipotle (CMG) has just confirmed making a change that consumers have historically despised.
After California’s new $20 per hour minimum wage for fast-food employees went into effect on April 1, many fast-food establishments in the state hiked up their prices to help offset the higher costs, sparking backlash from consumers.
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Burger King, for example, was spotted selling its Texas Double Whopper meal for $16.89 at a location in Los Angeles. Before the legislation went into effect, it was priced at $15.09. In-N-Out also increased its price for a cheeseburger from $3.95 to $4.10 in the state after the wage hike.
Chipotle, which has roughly 500 stores in California, has just revealed that it has joined its competitors in increasing menu prices following the minimum wage hike that was enforced earlier this month.
“In April, minimum wage in California for restaurant companies like ours increased to $20 an hour,” said Chipotle Chief Financial Officer Jack Hartung during a recent earnings call. “As a result, our wages in California went up by nearly 20%, and we subsequently took a 6% to 7% menu price increase in our California restaurants just to cover the cost in dollar terms.”
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After the menu price hike, Hartung also claimed during the call that Chipotle’s burritos will still be “reasonably priced,” highlighting that the restaurant’s chicken burrito will be priced at around $10.
He also said that the company is keeping a “close eye” on how its customers react to the price increases.
“We're not seeing any kind of change in consumer behavior yet, but it's only been a matter of a few weeks so far,” said Hartung during the call. “So we will keep a close eye on it.”
Chipotle's financial revenue has been up so far this year. In its first-quarter earnings report for 2024, it revealed that its revenue increased by 14% year-over-year. Its restaurant sales also increased by 7%.
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Fast-food price hikes are nothing new
Fast-food prices have been on the rise since long before the new minimum wage increase in California went into effect. Many users across social media have been spotting higher prices fast-food prices across the country, and some restaurants have been seeing consumers pull back on their spending at their establishments as a result.
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A recent report from the Roosevelt Institute revealed that fast food prices have increased by almost 47% over the past decade compared to 28.7% inflation overall during the same period.
The report also claims that the fast-food industry has more than enough money to afford the new $20 minimum wage, as it has been filling its pockets via similar price hikes for years.
“According to the data, there’s no reason why the new fast-food minimum wage of $20 per hour in California should mean layoffs or increased prices,” said Alí Bustamante, a co-author of the Roosevelt Institute’s report. “Profits in the fast-food industry are sufficiently high to absorb the greater operating costs and ensure industry workers are paid fairly.”
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