If you’re out on the left coast and heading out for some tasty Chipotle goodness tonight, be prepared to dig a little deeper when you pay the check. Prices are going up and it’s not just because of the cost of beef. (From the Chicago Tribune)
In its weekly survey of 10 Chipotle markets, Chicago-based William Blair found that Chipotle raised prices in half of the markets that the investment firm surveyed — San Francisco, Chicago, Denver, Minneapolis and Orlando. In most markets, the price increases occurred due to the rising cost of beef.
The city by the bay, however, saw across-the-board price increases averaging 10.5 percent, and William Blair theorizes “the outsized San Francisco price hike was likely because of the increased minimum wages.”
In contrast, prices in Chicago, Denver, Minneapolis and Orlando each rose about half a percentage point, nearly entirely due to higher beef prices.
San Francisco’s minimum wage was $10.74 an hour in 2014, rose to $11.05 at the start of the year, and increased again to $12.25 in May.
Like any other business, Chipotle has to compete with everyone else in their market space. They have a minimum profit threshold to meet, but if they try to pad the bill too much while seeking better profits their competitors will eat them alive. So all of the eateries in the race for the consumer dollar are charging pretty much the least they can while still remaining profitable. What did you think was going to happen when you suddenly jacked up their labor costs? They don’t have a magical money tree out behind the corporate office where they can just go pluck a few extra billion dollars. Their revenue comes from selling food, so when their costs go up, the prices go up. This should not be daunting math for anyone to comprehend.
But so what if everything is going to cost more? According to Alison Griswold at Slate, if you’re fat and sassy enough to be dining out at a fancy joint like Chipotle, you can afford to spread around a little more cash in the name of social progress.
Don’t sound the burrito-flation alarm too quickly, because this might all be a decent thing. Yes, your burrito options in the Bay Area just got 7 to 14 percent more expensive. But on top of the aforementioned rising beef costs, wages in San Francisco and Oakland went up by 14 to 36 percent. The news for your wallet seems especially untroubling when you think about just how price-insensitive Chipotle burritos are. In the past, Chipotle has been able to raise prices between 4 and 8 percent without customers flinching. The thinking is that people who eat at Chipotle tend to have a bit more disposable income, so they find price increases less off-putting and are also generally willing to pay more for what the fast-casual dining experience offers.
Odds are Chipotle knows that, and could have gotten away with hiking its menu costs even more in the San Francisco area. But it didn’t. So for you, the price of workers getting paid more will be roughly a dollar. That seems like a pretty good deal.
See? It’s all good. Only rich people eat at Chipotle anyway, right?
That’s precisely the short sighted sort of social engineering mindset you find in progressive think tanks around the nation. Fear not, comrades, for the plight of the little guy shall be improved and we’ll just drain a bit more cash out of the fat cats to cover the tab. Except lunch at Chipotle isn’t really on part with shopping for a new Boeing BBJ7, now is it? Some of the people eating at Chipotle are families or young people with student loans to pay off. (You remember them, right? Wasn’t that a thing during the last election?) And jacking up the prices by 14% might not seem like much to you, but for some of them it’s going to translate into going to McDonald’s instead. Or maybe just staying home because the folks at the Golden Arches are going to have to raise their prices also.
So you push through a huge, sudden spike in the minimum wage and consumer prices rise to match. Who on Earth could have seen that one coming?