Even the price of burritos has to keep up with the needs of the times, it seems. This is the reality as this week draws to a close, and the news of ChipotlePrice hikes have started to do the trick.
“We would really prefer not to [raise prices]”, CEO of Chipotle Brian Niccol told the Baird Global Consumer, Technology and Services on Tuesday Conference. “But it made sense in this scenario to invest in our people and staff these restaurants and make sure we have the pipeline of people to support our growth.”
Chipotle is in the midst of a hiring press – looking to recruit 20,000 more employees in a tight job market in general and the restaurant industry in particular. Unemployment in the restaurant segment remains at 9 percent, well above the US average of 5.8 percent. Chipotle moved to increase his salaries at a range of $ 11 to $ 18 an hour, as it appears to be avoiding the industry’s hiring crisis. And Chipotle, in particular, isn’t alone in raising employee wages in the quick-service restaurant (QSR) space. In May, McDonald’s announced that it was increasing the hourly wages of its current employees by 10% and that entry wages ranged from $ 11 to $ 17 depending on the location of the restaurant.
And while Chipotle is open to price increases – around 4% – executives were quick to downplay its effect, noting that the cost of their chicken burrito remains below $ 8 in almost all markets and the increases that most of consumers will face will amount to quarters and pennies.
Will the wage woes equalize so that the price increases will stop?
Well, the good news for restaurateurs is that the incredible work pressures they are under may be showing signs of slowing down. The US Department of Labor’s Bureau of Labor Statistics (BLS) reported last week that a third of all job growth reported in May (559,000) was from food services and drinking places – aka restaurants and bars – accounting for some 186,000 new jobs. The 10.8 million jobs in the category at the end of May marked an increase of 2 percent month-over-month and 38 percent from a year ago. Workers are coming back to restaurant business, not as fast as restaurant owners might like, but they are coming back.
This isn’t a complete reversal – the segment’s 1.5 million jobs are still 12% below pre-pandemic figures. But the problem is stabilizing, especially for QSRs. The crux of the problem lies in the full-service segment of the industry: sit-down dining establishments are down 14% and buffets down 52%, compared to QSRs and cafes which are also down. , but less than 5% respectively.
“The pandemic has changed us”, David Litchman, founder of the contactless ordering platform BellyMelly, told PYMNTS in a recent interview. âWe are all careful with what we touch, what we breathe and what we do. So anything that promotes a contactless environment will be a successful strategy for most businesses. “
Depending on how you define success. The new consumer affection for contactless environments has resulted in an explosion of delivery aggregators. Aggregators are a bit of a double-edged sword for restaurateurs – they definitely attract consumers who use them as discovery platforms. However, new customers come at a high cost of a 30 percent reduction. Delivery platforms like Uber Eats and DoorDash take over on every order, reducing profitability in a business where profit margins have historically been low.
This means that while the slowdown in hiring is likely to end in the next few months, as workers are increasingly comfortable and under financial pressure to return to the workplace, prices are unlikely to drop. . In fact, we’re betting more price hikes are on the way, although not as readily accepted as Chipotle admitted this week.