Fast-casual bellwether Chipotle Mexican Grill ($CMG) seems to always be in a transitional period, and this fall has been no different. Now under the leadership of ex-Taco Bell CEO Brian Niccol, the restaurant has been in a period of expansion and experimentation that has resulted not just in physical growth, but also in soaring stock prices that have increased 106% in the last three years.
Part of that success has a lot to do with profits — along with the stock rise has been a 64% EPS growth — and that has everything to do with revenue. Growing revenue has everything to do with increasing prices.
So that's what Niccol and Co have done: In the past two months, the average menu price of an item at Chipotle jumped from $4.50 to $4.80 as of this week.
The increase appears to have happened on or around two dates: September 17 and November 24, when prices moved from $4.50 to $4.69 and from $4.69 to $4.80, respectively.
But the price increases weren't equal across the various food categories sold at Chipotle.
While Burritos are, on average, the most expensive item sold at Chipotle, they didn't rise in price as much as the restaurant's "2 Tacos" combination.
In November, Taco prices rose 6.3% on average, outpacing all other menu items. Sides saw their prices jump 3.7%.
In the past two months, the average menu price of an item at Chipotle jumped from $4.50 to $4.80 as of this week.
Quesadillas, on the other hand, were spared by the price increase, for the most part, rising just 0.37% since November.
Restaurants adjust prices as a response to increasing overhead: ingredient costs, labor inflation, and real estate. Chipotle has all three with which it contends. Interestingly, however, the company cut its job openings in September just before the price hikes: openings tumbled from 4,820 to 3,720 in early October.
It seems Chipotle is hitting its profit goals by two fronts: decrease labor overhead and increase in-store revenue.
About the Data:
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Further Reading:
- Brian Niccol's Taco Bell-ization of Chipotle results in positive trends for the fast-casual joint
- Chipotle menu prices jump on heels of wage inflation
- New vs. Old, Chipotle vs. Taco Bell: How do they compare?