Franchise News

Chipotle is Raising the Prices of Food with Beef, Caused by Rising Beef Prices in the Market

Aug 17, 2015 01:55 PM EDT | By Jean-Claude Arnobit

Chipotle Mexican Grill, Inc. is raising the prices of items in its menu that uses beef, by 4 to 6 percent nationally, due to the continued rise in beef prices, according to a report from Eater.

The restaurant chain is charging more for its steak, barbacoa burrito, bowls, tacos, and salads.

Fortune added that the rise in beef prices is caused by the drought in 2014, in which supply of cattle herds fell to 30 or 40-year lows. Beef prices rose as much as 12% to record highs in that year.

Beef prices still haven't recovered from the 2014 hike, despite the better supply conditions of beef this year.

Fortune adds that forecasters expect beef prices to rise to 6 percent year-over-year by the end of 2015, double the rate of other foods.

Eater adds that Chipotle Communications Director Chris Arnold confirmed the price increase in an email conversation.

He stressed to Eater though that the price increase is strictly related to the increase of prices in the beef market and not labor related.

In a separate report, Eater said that Chipotle recently increased its prices across the board in its locations in San Francisco.

The increase was due to the hike of the minimum wage in the area.

Arnold said to Eater that an increase in minimum wage doesn't necessarily mean an increase in menu prices.

"I might note on the [San Francisco] increase that, had our overall cost structure been different there, that is to say that if our occupancy costs weren't double our national average and/or our prices not about our average, we may not have had to raise prices," he said. "The pricing model takes into consideration all of our costs,  occupancy/building costs, food, labor, and the like."

Fortune adds that Chipotle increased its prices across the board in 2014, but it had market reason to do that.

Arnold told Eater that last year was the first time in three years that they increased their prices.

"That's in spite of persistent food inflation in the preceding years," he said.

Fortune adds that Chipotle's same-store surged by 17 percent in the second quarter of 2014, a sign that customers don't seem to mind the price increase.

Analysts expect customers to react the same way in this year's price increase, according to Fortune.

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