You don't need to follow the news to know that food is getting significantly more expensive — the 7.4% annual hike in grocery prices is being felt every time you reach for your favorites at the supermarket.
While fast food has long been a filling option for people on a budget, that doesn't mean it has been able to escape inflation. On the contrary, the average fast-food menu item rose by 8% between December 2020 and 2021 as chains compensate for the rising cost of meat in particular.
One chain that has not shied away from saying that it's raising prices is Chipotle (CMG). In its most recent earnings call, Chief Financial Officer John R. Hartung said that "inflation on beef and freight and, to a lesser extent, avocado costs more than offset the leverage from our menu price increases."
It's Not Just You: Chipotle Is Getting More Expensive
Analysts at KeyBanc estimate that Chipotle has so far significantly raised its prices at around 760 of its 2,997 stores primarily in the Southeast, Southwest and the New York City metropolitan area.
"Based on our proprietary scrape of Chipotle's digital menu, we believe the company is in the process of rolling out a price increase across its system," analysts Eric Gonzalez and Benjamin Blake.
Adding that "the magnitude of this increase varies by protein and location," Gonzalez and Blake found that the price of the Steak and Barbacoa entree in those 760 locations went up by 6.2% from November 2020. That number was at 5.6% for Steak and Carnitas and 6.2% for the Chicken and Veggie entrees.
Nationwide, that number is only a respective 1.7%, 1.6%, and 1.2% but, as Gonzalez and Blake indicate, that is likely to change soon.
Will People Really Stop Eating There, Though?
While high food prices can burn a hole in many a pocket, they are unlikely to affect sales as a more expensive fast food item is still, comparatively speaking, cheaper than a sit-down meal. If anything, many may be turning to fast food as the least expensive option.
Customers generally also perceive Chipotle as being a better value than many traditional fast-food chains. They have been will
In the same earnings call, Chipotle reported that its total revenue rose by 26.1% compared to 2020. McDonald's (MCD), Wendy's (WEN) and Restaurant Brands International (QSR)'s Burger King have also recently reported earnings that topped analyst expectations.
"This has been the toughest I've seen in terms of predicting the future about availability and about pricing early in my whole career," Hartung told investors in February.
