Chipotle Will Be More Expensive in California Next Year as Minimum Wage Hike Takes Effect, CFO Says
Chipotle will be more expensive in California next year as the state's minimum wage law takes effect, according to an executive of the chain.
"It's going to be a mid to high single-digit price increase, but we are definitely going to pass this on," Chipotle CFO Jack Hartung said of the wage increase mandate during the company's third-quarter earnings call. "We just haven't made a final decision as to what level yet."
Their price hike plans come just one month after California Gov. Gavin Newsom (D.) signed a $20 minimum wage law for fast-food workers that will take effect in April. Currently fast-food franchises follow the state minimum wage of $15.50 per hour.
The legislation, backed by the powerful Service Employees International Union (SEIU), is meant to help low-wage Californians as the cost of living spikes across the state. Along with the new hourly pay mandate, the law establishes a state-appointed council to set workplace regulations.
Other fast food restaurants, such as McDonald's and Denny's, announced price hikes as well. They also said they'll be looking at replacing their workers with machines.
"You would look for us to do what any good brand would be doing, we're looking into automation … to ensure that the labor that we deploy in California is the most efficient," Denny's CFO Robert Verostek told investors on Monday.
Critics of the minimum wage hikes have warned of its unintended consequences, from higher prices to industry consolidation, more automation, and a spillover effect on small family-owned restaurants that want to compete for workers.
"This is absolutely class war carried out by California's unions," Will Swaim, the president of the conservative California Policy Center, said of the law.
SEIU, the union behind the measure, did not respond to a request for comment.
A spokesman for Newsom downplayed the link between the minimum wage mandate and the promised price increases, noting that fast food already went up 13 percent last year and that the law hasn't yet taken effect.
"Fast-food workers have been fighting for decades for the fairer wages, and safer and healthier working conditions that they deserve," the spokesman said in a statement.
"It's clear that higher wages benefit both workers and employers—McDonald's said they will use it as an opportunity to 'accelerate our growth in California,'" he added, referencing the McDonald's CEO's optimism about beating competitors.
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