The Reason Chipotle Just Got a Lot More Expensive
Have a hankering for a sofritas burrito or taco trio from Chipotle? If you head to one of the chain’s restaurants in the San Francisco Bay Area, those items are going to cost you about a dollar extra—and it turns out the price increase might not have much to do with the rising cost of beef.
Although Chipotle previously predicted a 4 to 6 percent price increase on steak and barbacoa-filled burritos and salads due to rising beef costs, 84 locations in San Francisco saw a much higher hike of 14 percent on the entire menu.
That number looked suspiciously familiar to Chicago-based wealth-management firm William Blair. Executives at the company noticed that it coincided with San Francisco’s recent minimum wage increase to $12.25 an hour in May—up 14 percent from $10.74 an hour, the Chicago Tribune reports.
Chipotle spokesman Chris Arnold confirmed to the Tribune that the price hike was “done in part to offset higher labor costs.”
So, Why Should You Care? One of the common arguments against raising the minimum wage is tied to price increases for consumers. If this cyclical effect were to take place in every industry, the result would be pure inflation. That has critics asking, what good is making a dollar more for minimum wage workers if every purchase also costs a dollar more?
When Los Angeles Mayor Eric Garcetti signed a law last month to raise the city’s minimum wage from $9 to $15 an hour by 2020, a report by the Los Angeles Economic Development Corporation claimed that the increase would do little to help those living in poverty, stating “many prices will increase” as a major pitfall.
Other reports conflicted with the LAEDC’s findings, with one study out of Berkeley noting that companies often absorbed the higher salary costs due to lower turnover and higher productivity.
Some burrito lovers might be happy to dish out an extra dollar or two knowing that it goes into the pocket of those who need it most. But for Chipotle, the fastest-growing fast-casual restaurant in the past decade—whose CEOs make more than $13,000 an hour—the decision to put the burden entirely on the consumer is a rather concerning precedent to set for other companies that may be less successful.
But before conservative economists use the beloved chain—which has ditched GMOs and is working toward preservative-free tortillas—as evidence for price increases tied to minimum wage increases, Arnold explained that San Francisco’s notoriously high rents are also part of the equation.
“In San Francisco, for example, our occupancy costs are about double the Chipotle average as a percentage of sales.” Arnold told the Tribune. “Increases to wages can have a greater impact [in San Francisco] than they might elsewhere.”
In the meantime, Northern California Chipotle fans looking to keep the price down on their next meal can try skipping the guacamole. Chipotle recently released its recipe for the avocado dip, which costs an extra $1.95 in the store.