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Chipotle, McDonald’s executives on how costs could hit consumers when California minimum wage increases


(NEW YORK) — The cost of doing business in California could soon be slightly more expensive with minimum wages set to increase in April. But what does that mean for menu prices at fast food restaurants that employ hourly workers?

A spokesperson for Chipotle confirmed to ABC News Thursday that as of now, the company has “not made a decision to raise prices in California to offset the anticipated labor increase in California next year.”

However, on the company’s most recent earnings call, CFO Jack Hartung addressed that labor cost changes will impact Chipotle’s margins.

“We’ve been studying that… it’s going to be a pretty significant increase to our labor,” he said.

“We haven’t made a decision on exactly what level of pricing we’re going to take, but to take care of the dollar cost of that and/or the margin part of that, we haven’t decided yet where we will land,” he continued. “It’s going to be a mid to high single digit price increase, but we are definitely going to pass this on. We just haven’t made a final decision as to what level yet.”

McDonald’s CEO Chris Kempczinski, meanwhile, addressed the same issue on his company’s Q3 earnings call Monday, saying it “is an impact that’s going to hit all of our competitors” and that McDonald’s will explore other areas outside of raising prices to offset increased labor costs, which is ultimately at the discretion of franchisees, and can vary by location.

“There is going to be a wage impact for our California franchisees. I don’t think, at this point, we can say exactly how much of that is going to work its way in through pricing,” Kempczinski said. “Certainly, there’s going to be some element of that, that does need to be worked through with higher pricing. There’s also going to be things that I know the franchisees and our teams there are going to be looking at around productivity.”

He added that in longer term discussions with franchisees, McDonald’s sees this as “an opportunity for us to gain share.”

“We believe we’re in a better position than our competitors to weather this. And so let’s use this as an opportunity to actually accelerate our growth in California,” Kempczinski said.

A spokesperson for McDonald’s told ABC News this week, “The assertion that raising prices is the only way the company is responding to wage increases is inaccurate.”

The wage legislation in question, AB 1228, was signed into law by California Gov. Gavin Newsom in late September, and “authorized the Fast Food Council to set fast-food restaurant standards for minimum wage, and develop proposals for other working conditions, including health and safety standards and training.”

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