In light of California’s new $20 minimum wage bill for fast-food workers, which went into effect on April 1, restaurant chains and franchisees are already taking action, in some cases by raising prices by as much as 7-8% for select menu items in the state.
Analysts Eric Gonzalez of Keybanc and Mark Kalinowski scraped data and researched pricing trends over the past couple of months at major restaurant chains to determine how much menu prices have been impacted by surge in labor costs in the state. All eyes are on companies like Chipotle and Starbucks especially, as these brands do not franchise (which is historically an industry anomaly).
According to Kalinowski’s research (which sampled 25 Chipotle restaurants in California), the price of a Chipotle chicken burrito went up 8.3% from February to April, while the cost of a steak burrito increased by 7%. This research is in line with Gonzalez’s analysis, which suggests that pricing at most Chipotle’s 476 stores in California increased by 7-8%. Gonzalez said that Chipotle is actually an unusual case because the company has undervalued its menu prices in the state to compete with the proliferation of other burrito options in California.