Chipotle customers in California should prepare for “significant” price increases after the state recently approved a minimum wage increase for fast food workers, one of the company’s executives told shareholders this week.
Chipotle Chief Financial and Administrative Officer Jack Hartung told investors on Tuesday’s earnings call that price increases are necessary to keep up with rising labor costs.
“We know that when you’re talking about a 20% or so increase in wages, you have to accept something as a significant increase,” Hartung said.
California’s new minimum wage law, which pays fast food workers $20 an hour, is scheduled to go into effect in April.
The state’s estimated 500,000 fast food workers earned $16.21 an hour before Gov. Gavin Newsom (D) signed AB 1228. The law also authorizes the commission to increase the minimum wage by up to 3.5% annually. About inflation.
Hartung previously said Chipotle pays employees at its 475 locations in California an average hourly wage of $17.
Hartung did not specify the extent of the expected price increase. Steaks and burritos currently cost about $11 in the state.
“We have not yet made a final decision on pricing,” he said.
“We’ll wait and see how things go, what consumer sentiment is and what other companies are going to do.”
McDonald’s CEO Chris Kempczinski warned in October that the Big Mac maker would have to raise menu prices in California as well.
The chain has raised prices nationwide amid rampant inflation, including charging $18 for a Big Mac meal.
During an earnings call with Wall Street analysts on Monday, Kempczinski acknowledged that low-income customers, those 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 low-income consumers.”
Last year, Chipotle began testing automation technology that it hopes will ultimately lead to lower labor costs.
The company is testing a robot that cuts, cores and peels avocados used to make guacamole. A robot that can make burrito bowls is also in the works.
Last year, Chipotle spent $2.44 billion on labor costs. This is an 11% increase over the previous year.
In comparison, the chain spent $2.91 billion on food, beverage and packaging costs.
The Post has reached out to Chipotle and Newsom for comment.
