Food Retail

Chipotle Raises Prices, America Orders More Burritos


Chipotle (CMG) has been dishing up millions of burritos, with same-store sales soaring 17.3 percent in the second quarter. Such results are an impressive feat in the restaurant business, and the chain says only a small share—2.5 percentage points—came from the much-loathed price hike that started rolling out in late April. (Menu prices went up by 6.5 percent, on average.)

The remaining 14.8 percentage points? Chipotle executives say the spread of pure burrito love increased the chain’s number of transactions.

Chipotle restaurants posted an increase of eight transactions during peak lunch hours and eight additional transactions during peak dinner hours compared to last year. Co-Chief Executive Officer Monty Moran credited improved speed, saying during Monday’s earnings call: “These are customers that might easily walk away from our long lines to dine elsewhere, except that they know that our excellent teams are geared up and ready to serve them a delicious meal quickly.”

The average check was up only 5 percent, according to Chief Financial Officer Jack Hartung, and even this wasn’t due totally to the price hike. About half resulted from an increase in group size per transaction, more side orders such as chips or guacamole, and Chipotle’s budding catering business. Catering accounted for about 1.6 percent of revenue last quarter, compared to 0.3 percent a year ago, thanks to a seasonal lift from graduation parties.

While some might fear that the price of a burrito is spiraling out of control, Chipotle is finding that there is a ceiling on how much people will pay, even if their gourmet burrito is responsibly raised and semi-locally sourced. Some customers traded down from steak to chicken, pushed to a different protein by a 9 percent jump in beef prices vs. a less-shocking 5 percent bump for chicken. “It is early, and we’ll continue to watch for resistance in terms of fewer customer visits, as well as customers trading down,” Hartung said.

Management expects that for the full year, comparable restaurant sales will increase in the mid-teens. Chipotle is also still expecting to add 180 to 195 new restaurants in 2014, of which 70 percent will be in markets where the chain is already succeeding, 15 percent in developing markets, and 15 percent in such new areas as Duluth, Minn., Texarkana, Tex., Mobile, Ala., and Charleston, W.Va.

Venessa-wong-190x190
Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • CMG
    (Chipotle Mexican Grill Inc)
    • $672.79 USD
    • 3.58
    • 0.53%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus