The Chain Gang

Chipotle Hiked Its Prices to Help Pay for Minimum-Wage Increases

On the rise.
On the rise.

Why the cost of your burrito or morning coffee just jumped 50 cents is often more enigmatic than it needs to be (take Starbucks, for instance: Prices just went up even though beans are 42 percent cheaper). Which is probably why this news about Chipotle is making waves: The chain’s most recent hike, originally tied to “undershooting” the cost of beef, can be pinned on major cities’ recent minimum-wage raises in at least one pretty notable way.

Wealth-management firm William Blair noticed that in San Francisco, where the minimum wage just increased 14 percent (from $10.74 to $12.25 an hour), Chipotle’s steak burrito prices have gone up not by the 4 to 6 percent the company predicted, but by 14 percent as well. The average hike to menu items in other cities is much more modest by comparison (0.5 percent), leading analysts to conclude that “the outsized San Francisco price hike was likely because of the increased minimum wage.”

Chipotle spokesman Chris Arnold tells the Chicago Tribune that that’s correct: The hikes were “done in part to offset higher labor costs,” and also partly because the cost of operating in San Francisco is double the national average. It’s interesting in light of the industry’s recent hand-wringing over upping the minimum wage. And of course just because it’s good business, it doesn’t mean it sits well with customers to learn that the company — which prides itself on paying better than welfare-eligible wages and even offering full benefits to hourly workers — can’t absorb a dollar-ish wage increase at 84 Bay Area locations. Especially considering its CEOs are by far the highest paid in the industry.

[Investor’s Business Daily, Tribune]

Chipotle Hiked Its Prices to Help Pay for Minimum-Wage Increases