Why Chipotle Doesn't Need A Dollar Menu, According To Its CFO
Guacamole will continue to cost extra, and your basic burrito will too, according to Chipotle's (CMG) CFO.
The Mexican cuisine inspired fast food company believes its customer base is not motivated by dollar menu options and wants customization, Chipotle CFO Jack Hartung said on Yahoo! Finance Live on Thursday.
"We don't think Chipotle is the brand where somebody is looking for a dollar menu or bundle meal," Hartung said. "They [customers] look for customization. Most customers get the same exact entree every single time, and that's what they crave."
Chipotle has implemented a series of price hikes due to inflation and rising costs over the last year. After raising prices in the first quarter by 4%, Chipotle raised its prices by a mid-to-high single-digit percentage in most American markets in August.
The company said in August that customers did not appear to mind the price hike.
On Tuesday, Chipotle's CEO Brian Niccol said lower-income customers were visiting the restaurant's over 3,000 U.S. locations less during an earnings call. "We continue to see a widening of trends by income level with the lower-income consumer further reducing frequency," Niccol said.
For October, Niccol said sales are trending upward, even with fewer sales from low-income customers.
Speaking on Yahoo! Finance Live, Hartung said similar discussions about value meals happened during the 2007-09 recession, and the company ultimately decided not to change its menu. Discounted bundle meals were tested in some Chipotle locations but were unsuccessful.
"Our customers said great idea, go ahead and do it. When we tested it in restaurants, nobody bought it," Hartung said.
Hartung said the company saw a dip in sales during the recession, but not as much as other fast-casual restaurants.
Chipotle's third-quarter earnings beat market expectations. Total revenue for the company clocked in at $2.2 billion, almost 14% higher than during the same quarter in 2021.
Outside of charging higher prices, the company also recently came under criticism for adjusting its rewards program due to rising inflation and food costs, Business Insider reports.
A free entree reward was once redeemable with 1,400 points on the Chipotle app, but the number of points needed increased to 1,625 points in early October. Customers gain 10 points for every dollar spent with the app, making the new amount needed to spend to be eligible for a free entree $162.50.
As of 11:29 am ET on Friday, Chipotle stock was trending upward at 0.16%.
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