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Chipotle CFO Breaks Down How $15 Minimum Wage Will Impact Menu Prices

In a recent earnings call on the brand’s Q1 2021 results, John Hartung discussed the potential effects of an increased minimum wage.

By Sarah Brown1851 Franchise Copy Editor
Updated 3:15PM 04/22/21

Chipotle’s first-quarter earnings released on Wednesday, and along with reporting a 23.4% net sales increase compared to last year, the brand’s CFO, John Hartung, discussed what a $15 minimum wage increase would mean for the brand. Although Chipotle does not currently franchise, Hartung’s insights apply broadly to the QSR sector.

According to Hartung, raising the minimum wage would increase food prices, could cause inflation but also wouldn’t hit the sector too hard.

“Our minimum wage, or our average wage right now, is $12 for our crew, and it's $13 for all of our hourly employees. We're not that far off of a $15 number. But let's say, for example, that there's going to be an increase across the board, a 10% increase in our wages. That would have an impact on our margins; I will call it 150 to 200 basis points. And to offset that with menu pricing, that will take a 2% to 3% price increase,” said Hartung.

“All of that is very, very manageable. And we feel like if there is going to be significant increased inflation because of federal minimum wage, we think everybody in the restaurant industry is going to have to pass those costs along to the customer,” he continued.

Hartung’s analysis mirrors what Vox Co-founder and Author Matthew Yglesias told 1851 about a potential federal minimum wage increase

“Restaurant prices are sensitive to the cost of labor, particularly where real estate is cheap,” he said. “In lots of markets, and around where I live, rent is the dominant factor, and you may see the adjustments happen in that dimension. But where labor is a dominant cost, you’ll see lots of more expensive food.”