Chipotle chief financial officer Jack Hartung admitted last week they would be forced to raise menu prices if the government mandates a $15 per hour minimum wage.
In fact, Hartung said most restaurants would not absorb the costs of forced increases wages, but pass them onto customers.
What are the details?
While speaking on a quarterly earnings call last Wednesday, Hartung said Chipotle executives would raise menu price to “offset” the costs the restaurant would incur if the federal government forced them to pay each of their nearly 90,000 employees at least $15 per hour.
“We’re not that far off of like for example, a $15 number. But let’s say, for example, that there’s going to be an across-the-board 10% increase in our wages,” Hartung said, Business Insider reported. “And that would, to offset that with menu pricing, that would take us 2% to 3% price increase.”
Hartung said forced wage increases — amounting to an average of 15% overall — and increased menu prices would be “very manageable.”
Business Insider reported, “For customers, this could mean about a 20¢ to 35¢ additional charge per meal, as the average person spends about $11 for a burrito or other meal at Chipotle.”
What about other businesses?
Hartung predicted that Chipotle would not be the only restaurant to raise menu prices if the government forces an increased minimum wage.
“We think everybody in the restaurant industry is going to have to pass those costs along to the customer,” he said. “We think we’re in a much, much better position to do that, than other companies out there.”
As Insider reported, Texas Roadhouse and the Cheesecake Factory are examples of two such restaurants that raised menu prices after being impacted by forced wage increases.
Raising menu prices is, at this point, a tried-and-true response to minimum wage regulation for many restaurant chains. Executives at Kura Sushi, The Cheesecake Factory, and Texas Roadhouse all said in recent calls with investors that, when states and cities raised minimum wage, the chains responded by raising menu prices.
“I would say there is a short-term shock,” Texas Roadhouse CEO Wayne Taylor told investors in late October. “And then long term, there’s an adjustment, both on our side and the guest side.”
Democrats promised they would raise the minimum wage once they gained power of the White House and Congress.
They attempted to pass a federal minimum wage hike in President Joe Biden’s COVID economic relief bill, but the effort ultimately failed.