One of the reasons Chipotle (CMG) -) is so beloved in the U.S. is because it's reliable and quick with a consistently fresh menu and a laid back atmosphere.
And it punches well above its belt. With approximately 3,000 locations, Chipotle ranks as the 10th most popular restaurant in the U.S. by sales ($8.6 billion in 2022).
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That puts it in some pretty rarified air, just behind international chains like Domino's, Subway, Burger King, and Dunkin' Donuts.
Chipotle retains its desirability among such fierce competition by sticking to what it knows. It plays the hits and the hits only. It rarely gets fancy with ingredients customers have never heard about. It never strays from the roughly Mexican fusion fare that propelled it to success in the first place. And it gives customers the illusion of choice and customization without having to stock dozens of disparate and fussy ingredients that spoil quickly and cost a fortune.
Instead of menus, Chipotle focuses on lofty expansion plans and revenue increases. That makes it something of an investor darling; Chipotle's stock is up some 30% since the beginning of 2023.
Still, despite its financial success over the past 10 months, Chipotle isn't immune to market fluctuations and customer pullback. The September Consumer Price Index (CPI), which was released on Thursday, indicated that the cost of food is up 3.7% compared to a year ago. Food away from home, such as takeout from Chipotle, is up a whopping 6% compared to the period from a year ago.
Such fluctuations have a way of keeping some customers at home – and dig into Chipotle's bottom line. So, occasionally, the restaurant has to pivot.
Chipotle makes a hard financial decision
For the first time in approximately 13 months, Chipotle has indicated that it will tweak its prices in an effort to stave the bleeding.
“For the first time in over a year, we will be taking a modest price increase to offset inflation,” Chipotle Chief Corporate Affairs Officer Laurie Schalow said on Wednesday.
The chain offered no insight into how much prices would increase, or which items would be affected.
Currently, a standard steak burrito costs $10.40 before tax at a Chipotle in coastal Florida. Guacamole, which has always cost extra, stands at an additional $2.65. A side of chips and queso is $4.50. Add a 22 ounce fountain drink for $2.90 and – if you're ordering pickup on the app – a $2 tip, and your total comes to $23.88. That's a pretty expensive lunch, particularly if you're doing it multiple times a week.
Chipotle is no stranger to price hikes. Here's a brief history of a few that have happened over the past several years:
- 2021: 4% increase to help cover employee wages
- Early 2022: 4% increase to fight inflation
- July 2022: ""in the mid to high single digits," which amounted to between $0.50-$1.10 per meal, depending on your market.
If another 4% price hike is around the corner, a burrito could go for somewhere in the $10.80 neighborhood, before tax.
Still, many customers remain devoted, with some inventing crafty ways to stretch one order across several meals. Chipotle, which reported earnings in June, saw a 13.62% revenue lift year-over-year.
