Chipotle Plans to Pass Increased California Minimum Wage Costs Onto Customers

Chipotle expects minimum wage hike in California, which will be effective in April 2024 and impact around 15% of the company's total stores, will increase the company's overall labor costs by 2.5% to 3%. The exact level of price increases for customers is yet to be finalized.

• California's minimum wage hike, effective April 2024, will increase fast food workers' wages to $20 per hour from the current $15.50. Chipotle currently pays its workers in the state $17 as a starting wage.
• As a consequence, approximately 15% of Chipotle's 3,300 stores located in California will face a 2.5% to 3% rise in overall labor costs. The company intends to pass these costs onto customers through menu price increases.
• Although the exact level of price increase is yet to be decided, Chipotle's CFO indicated that it might be a mid- to high-single-digit percentage increase. This plan is yet to be confirmed as per the official statement given by the company spokesperson.
• Chipotle has previously increased menu prices in response to rising labor and ingredient costs. The recent price hike of 3% earlier this month was due to inflation and rising costs of ingredients like beef, cheese, and avocado.
• Despite price increases, Chipotle has demonstrated strong performance with an 11% year-on-year increase in sales, attributing this to new restaurant openings and a boost in comparable sales, which includes higher transaction volumes and average check size.

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