Chipotle customers in California should prepare for “significant” price hikes after the state recently approved minimum wage increases for fast food workers, one of the company’s top executives told shareholders this week.
Jack Hartung, Chipotle’s chief financial and administrative officer, told investors on an earnings call on Tuesday that the price hikes are necessary to keep up with increasing labor costs.
“We know we have to take something as a significant increase when you talk about a 20%-ish increase in wages,” Hartung said.
California’s new minimum wage law, which pays fast food workers $20 an hour, is set to go into effect in April.
The state’s estimated half-a-million fast food employees had been earning $16.21 an hour before Gov. Gavin Newsom, a Democrat, signed into law AB 1228, which also authorizes a panel to raise the minimum wage by up to 3.5% a year depending on inflation.
Hartung has previously said that Chipotle paid workers at its 475 California locations an average wage of $17 an hour.
Hartung declined to specify the scope of the anticipated price hikes. Currently, a steak a burrito in the state costs about $11.
“We haven’t made a final decision, in terms of pricing,” he said.
“We’ll wait and see just what the landscape looks like, what the consumer sentiment is, what other companies are going to do.”
McDonald’s CEO Chris Kempczinski warned in October that the Big Mac maker would also need to hike the price of its menu items in California.
The chain has increased prices nationwide amid rampant inflation, including charging $18 for a Big Mac meal.
Kempczinski admitted on an earnings call with Wall Street analysts on Monday that low-income customers making less than $45,000 a year have largely stopped ordering from McDonald’s.
“Eating at home has become more affordable,” Kempczinski said. “The battleground is certainly with that low-income consumer.”
Last year, Chipotle started testing automation-driven technology that it hopes would eventually cut down on labor costs.
The company is testing robots that cut, core and peel avocadoes used to make guacamole. It is also developing a robot that can make burrito bowls.
Last year, Chipotle spent $2.44 billion on labor — an 11% increase from the year before.
In contrast, the chain spent $2.91 billion on food, beverage and packaging costs.
The Post has sought comment from Chipotle and Newsom.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
