Chipotle Is Betting That You'll Gladly Pay More for Burritos
Chipotle announced today that it will hike up its prices for the first time in three years, thanks to rising food costs, and that the costlier items will join the menu this summer.
Chipotle announced today that it will hike up its prices for the first time in three years, thanks to rising food costs, and that the costlier items will join the menu this summer. Because Chipotle is basically betting that you will keep coming back for those sweet, tasty burritos, not matter what it costs you.
In the first fiscal quarter of 2014, the company said it saw a 13.4 percent increase in customers throughout all its stores. So Chipotle executives have good reason to assume that a relatively measly bump in prices — somewhere between three and five percent — won't affect sales all that much. Plus, according to Founder, Chairman and Co-Ceo Steve Ells, people keep going back to Chipotle because of its "food culture":
Our food culture has always been a defining characteristic of Chipotle and continues to set us apart from other restaurants. We are confident that our special food culture will continue to attract more customers to visit Chipotle as customers better understand and connect how natural and high quality ingredients that are freshly prepared result in better tasting food.
Chipotle's earning report fell short of expectations, and its stock took a hit, but the price hike is going forward as planned. Plus, Chipotle is convinced that we're all too into that food culture to even notice, per the Wall Street Journal's Marketwatch:
Customers who like Chipotle tacos and burritos have more disposable income and are more health-conscious than the average fast-food customer, says branding expert Rob Frankel. “It doesn’t have the same price-sensitive audience as McDonald’s and Burger King.” Rather, it has time-constrained office workers who want what they want now, even if they have to pay more to get it. “If lunch was $7 last week and $7.75 this week, many won’t even notice it. It’s imperceptible to them,” Frankel says.
With that in mind, the company has said it will open close to 200 new restaurants next year. Their future depends on how much you love guacamole. (Probably a lot.)