If you’re a fan of Chipotle, you might want to brace yourself for a slight price hike. The popular fast-food chain has announced that it’s increasing its menu prices by 2%.
This rare admission comes as a response to the ongoing price increases in the economy that are affecting its finances.
A Modest Price Increase to Offset Inflation
According to Laurie Schalow, Chipotle’s chief corporate affairs officer, “For the first time in over a year, we have taken a modest price increase of approximately 2% nationally to offset inflation.” This move comes after an analyst report by Truist Securities financial group observed the 2% increase at 20% of Chipotle locations surveyed.
A Time of Transition for Chipotle
Chipotle is currently going through a period of transition after the exit of CEO Brian Niccol, who was poached by Starbucks in August. Despite the initial drop in shares, the company has seen a 23% increase, and is up about 42% year to date. However, it missed revenue forecasts in its most recent financial report, citing steady traffic but a slump in overall demand.
The Real Reason Behind the Price Hike
So, what’s driving the price increase? Chipotle acknowledges that it’s facing higher food costs, partly due to its response to viral online complaints about shrinking portion sizes. It’s not just Chipotle, though – dining out has become more expensive in recent years. According to the Bureau of Labor Statistics, the price of food away from home has soared more than 28% since the spring of 2020.
Restaurants Are Raising Prices, But Consumers Are Willing to Pay
Many restaurants have seen high turnover alongside increasing costs for ingredients, yet they’ve continued to enjoy strong earnings. Consumers seem willing to accept higher prices if they believe they’re getting good value. In Chipotle’s case, the company is raising prices “from a point of strength,” meaning traffic continues to be steady.
Food Prices: A Volatile Game
Food prices are notoriously volatile. According to the USDA, wholesale poultry prices were 4.5% lower in October 2024 than October 2023, and are predicted to decrease 0.6% on net this year. However, prices for beef and veal were 1.9% higher this past October than in October 2023, and are predicted to increase faster than most other meat categories in 2024.
What Does This Mean for the Future of Fast Food?
As the economy continues to shift, it’ll be interesting to see how restaurants adapt to changing prices and consumer behavior. For now, it seems that Chipotle is betting on its customers being willing to pay a little extra for their favorite burritos and bowls. Only time will tell if this gamble will pay off.
