Executives from Chipotle have indicated that the company will "definitely" adjust its menu prices in response to California's upcoming fast-food minimum wage hike, despite posting strong third-quarter figures.
The new legislation, signed into effect by Governor Gavin Newsom, will see the hourly wages for fast-food employees in California rise to $20 by April 2024. The state's minimum wage currently stands at $15.50, with an expected increase to $16 come January. This is significantly higher than the national minimum wage, which is $7.25.
On Chipotle's recent earnings call, officials shared that they had already implemented a 3% increase in their menu prices. Jack Hartung, the company's Chief Financial and Administrative Officer, clarified to stakeholders that this recent adjustment "does not consider any part of the California wages that'll happen next year."
BUSINESS INSIDER: Chipotle says it's 'definitely' going to pass on the costs of California's new $20 fast-food minimum wage by hiking menu prices pic.twitter.com/lj5JH1DASf
— News and Market (@newsandmarket) October 27, 2023
Hartung emphasized the substantial impact this will have on their labor expenses, pointing out that the average wage rate for the company in California is around $17.
He continued, "We haven't made a decision on exactly what level of pricing we're going to take. It's going to be a mid to high single digit price increase, but we are definitely going to pass this on. We just haven't made a final decision as to what level yet."
However, following the call, a representative from Chipotle informed CNN that the company was still uncertain about implementing price hikes in California.
With 457 establishments in California, Hartung mentioned that this represents approximately 15% of Chipotle's overall number of stores. Nevertheless, based on the company's disclosure of over 3,300 locations globally, this percentage appears to be slightly lower.
The company disclosed commendable financial performance on Thursday, noting an 11.3% surge in total revenue for the quarter ending September 30, reaching $2.5 billion. This growth was attributed to the opening of new outlets and a 5% rise in comparable sales. The company emphasized that the latter was due to an increase in both the number of transactions and the average transaction value. Additionally, there was a significant 21.8% increase in net income.
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