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Chipotle ‘will probably have to raise prices’ because of California's fast food wage bill: CEO

Chipotle CEO Brian Niccol says California governor Gavin Newsom's proposed changes to the minimum wage could cause the restaurant chain to rethink its presence in the state.

"We pay well beyond $15 an hour in California. So there there is legislation that has the potential to take the hourly wage up to $21, $22 an hour that will put organizations in a place where prices probably have to rise. It's unfortunate because it also impacts the economic model, and that could impact how many restaurants we open in the future in a state like California which is a shame," Niccol said at the Yahoo Finance All Markets Summit on Monday.

People are served in a Chipotle outlet in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly
People are served in a Chipotle outlet in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly

About 15% of Chipotle's 3,000 plus locations in the U.S. are located in California.

In early September, Newsom signed into law a bill establishing a "Fast Food Council." The 10-member council will set standards for pay, hours and working conditions for fast-food workers in the Golden State. If the referendum receives roughly 623,000 signatures by the first week of December, the measure will appear on the November 2024 California ballot.

The legislation could pave the way for raising the minimum wage for fast food workers to $22 an hour for employers with more than 26 workers. Currently, the minimum wage stands at $15 in the state.

"Equitable? You signed a bill from the hills of Napa that singles out franchise owners with new rules and costs to appease your biggest campaign donors; will raise prices on lower income Californians and will accelerate business leaving the state," tweeted the CEO of the International Franchise Association Matt Haller to Newsom.

Niccol predicts any changes to the industry that come as a result of the Fast Food Council will ultimately backfire on Newsom.

"The brand is loved in California and the employees love working there, and the customers love getting our food. And hopefully that legislation doesn't get in the way of great economics that result in great opportunities for employees and customers. If it does, we will deal with it accordingly...it will be a shame," Niccol added.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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