- Chipotle just announced high restaurant operating margins from the second quarter of 2021.
- Margins were up despite the chain raising wages this summer.
- Chipotle says raising menu prices led to the increased profitability.
- See more stories on Insider’s business page.
Chipotle just had a hugely successful quarter, with its most profitable period for its stores since 2015 after raising wages for workers.
The chain posted that restaurant-level operating margins, which is the amount of revenue stores took in after factoring in costs for ingredients, labor, and other expenses, was 24.5% for the second quarter of 2021. The higher the margin, the more profitable the period was for the restaurant. This was a huge improvement over 12.2% margins in the same period in 2020, and the highest the chain has seen since the third quarter of 2015.
“We believe our key growth strategies will allow us to have 6,000 restaurants in North America with AUVs over $US3 ($AU4) million, and as our unit volumes and sales rise, margins and returns will do the same,” CFO Jack Hartung told Insider.
Chipotle says store margins were so high in part because of higher prices. In June, the fast-casual chain raised prices by about 4%, increasing the price of the average Chipotle meal by about 30 to 40 cents ($0.54). It says lower beef prices also contributed to higher margins.
Chipotle also raised wages this quarter, boosting the average hourly pay to $US15 ($AU20), an increase of $US2 ($AU3) over the previous average of $US13 ($AU18). When it raised prices, Chipotle said it was prompted by rising labor costs. The chain had previously warned that labor costs would be passed onto customers.
In the most recent earnings note, Chipotle mentions “wage inflation” as one factor that partially offset gains in profit. Labor is not the only cost going up for Chipotle. The note also mentions the price of avocados increasing, which alongside corn and other staples could impact Chipotle’s bottom line as tortillas and guacamole become more expensive. Chipotle says it has no further plans to raise prices.
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