Chipotle will raise prices later this year to offset the high cost of its ingredients, which eat up about a third of its sales, reports WSJ. This is the first time the burrito chain has raised its prices in three years.
ABC News reports, “Menu boards with the new prices should start rolling out in coming weeks and be in place at all restaurants by this summer.”
Why would Chipotle do this to us? Cheaper competitors are encroaching on the 20-year-old burrito chain, and Chipotle is “struggling with the rising cost of fresh ingredients, which are a source of pride for the company,” according to WSJ.
The average meal at Chipotle is about $9, and Taco Bell (a major competitor) has moved in on Chipotle’s territory with a line of similar burritos and burrito bowls at a third of the price. According to ABC News, executives have said in the past that they were considering a hike of about 3 percent to 5 percent. That translates to an extra 24 cents to 50 cents for an $8 burrito bowl.
On Thursday, Chipotle CFO Jack Hartung told investors that the company “won’t rush” into passing along its cost increases to customers, but didn’t offer specifics. Although, earlier this week, the company said “faster-than-expected food inflation is likely to dent its profits in the fourth quarter,” according to WSJ. We’d be sweating if we were Chipotle.
ABC News reports that Steve Ells, Chipotle’s co-CEO, said that price is not the main reason customers visit its restaurants anyway.
“Most of the value comes from the experience,” he said. We sure hope (for Chipotle’s sake) that he’s right.
How do customers feel about the price hike? We’ve featured some early Twitter responses to the news below.
Chipotle announcing they’re going to raise prices. I imagine the feelings I have are similar to when the Stock Market crashed in 1929
— Arick Wade (@Arick_With_An_A) April 17, 2014
If you’re upset by the Chipotle price increase, just go to Taco Bell. Same thing.
— Steve Kovach (@stevekovach) April 17, 2014
#Chipotle to start raising prices later this quarter beginning with roll out of ChipotleCloud where users pay $50/month to rent a burrito.
— Pafford (@pafford) April 17, 2014