McDonald's, Chipotle to raise prices in California as minimum wage increases for workers
McDonald's and Chipotle Mexican Grill executives said they will raise their menu prices next year in California to off-set the minimum wage increase for fast food workers. Under California's recently passed minimum wage bill, most of the state's 500,000 fast-food聽workers will be paid at least $20 per hour starting in 2024.
McDonald's has yet to decide how much their prices will increase, according to CEO Chris Kempczinski.
Meanwhile, Chipotle expects it will raise prices by a 鈥渕id-to-high single-digit鈥 percentage in California, according to Chief Financial Officer Jack Hartung who told analysts the company has not made a "final decision" during a
According to the , food prices away from home increased 6% in September compared to a year ago.
Fast food prices expected to increase
Chipotle has raised prices four times within the last two years, the most recent price increase of 3% took place in October. While inflation is聽聽in a better direction, consumer prices this聽month still rose overall by 3.7%聽from earlier聽years after hitting a 40-year high of 9.1% in June 2022.
McDonald's Chief Financial Officer Ian Borden said the company increased prices in the U.S. in the third quarter at a lower rate. McDonald鈥檚 expects its U.S. prices will increase just over 10% for the full year,
, Kempczinski said McDonald鈥檚 will likely look at ways to cut restaurant costs and improve productivity, along with increasing prices as a way to offset labor costs.
"there will certainly be a hit in the short-term to franchisee cash flow in California鈥 tough to know exactly what that hit will be because of some of the mitigation efforts. But there will be a hit."
Earnings rise for McDonald's and Chipotle
According to McDonald's most recent quarterly results, same-store sales increased 8.1% in the U.S. s.
Chipotle's聽net聽sales聽increased 11.3% in Quarter 3 to $2.47 billion, while rose 14% to聽$6.69 billion.
McDonald's reported a net income of $2.3 billion for the quarter, while Chipotle's was $313.2 million in the same period.
How many fast-food chains exist in California?
California is home to聽about 1,300聽McDonald's restaurants. More than 230 owner/operators and 70,000 restaurant crew and managers are in the Golden State.
About 15% of Chipotle's restaurants are in California.
Minimum wage spike in California for fast food workers
聽signed into law in September increases minimum wage to $20 per hour for workers at restaurants in the state that have at least 60 locations nationwide. The initial wage increase takes effect on April 1. The only exception applies to restaurants that make and sell their own bread, such as Panera Bread.
As part of the law, a nine-person council was established that has the authority to raise the hourly minimum wage annually for the fast-food industry, through 2029. The council will adjust wages by either 3.5% or the annual change in the consumer price index.
For Chipotle, the average wage in the state is currently $17 an hour.
Minimum wage by state:California fast food workers will earn at least $20 per hour.
Rising prices:Chipotle menu prices are going up again, marking the 4th increase in 2 years.