Chipotle Mexican Grill Increases Prices

Chipotle Mexican Grill has increased its prices at 440 locations as it attempts to shore its profit up, a move marking the first price increase since it faced food safety issues that flattened its sales during the latter part of 2015.

The 440 locations, which amount to 20% of the total chain of Chipotle locations, boosted prices 5% on the average since April 11, said a spokesperson for the chain. No plans are in place to increase prices at each one of the 2,200 Chipotle restaurants.

The Chipotle spokesperson said it was the first price increase for the chain in approximately three years and was put in place to offset food and labor inflation.

Even with higher prices, the pricing remains highly competitive, in particular when factoring in the ingredient quality, said the spokesperson.

Nevertheless, the hike in prices might bring another hurdle to overcome in Chipotle’s efforts to entice customers to return.

Following the outbreaks of food-borne illness, the company has been offering free food, added new ad campaigns and pushed toward ingredients of higher quality.

Through this push, sales of same stores across the chain have continued to decline. The most recent drop was its last reporting quarter that saw same store sales decline by 4.8%.

However, of recent, investors have shown more optimism that the burrito chain might have bottomed out and reached a new point upward in its comeback.

Shares have increased by 25% in 2017 including a 1.7% increase on Monday to close at $471.51.

The broader restaurant industry in the U.S. is trying to come to grips with higher costs for employees and a labor market that is tightening. Unemployment was down in March to 4.5%, which is its lowest in nearly one decade.

Chipotle was targeted as well by Bill Ackman an activist investor who disclosed a 10% stake in last year in the burrito maker.

Ackman pushed for a board shake-up at the company, which has its headquarters in Denver, Colorado. The board has been criticized for being insular. Chipotle in December named four new members to its board and four of its current members will stepdown.

As Chipotle works to reestablish its reputation, it is moving into the world of burgers in a separate foray. The company has launched a new restaurant Tasty Made that opened in 2016 with the first restaurant in Ohio. Like the burrito maker, the new restaurant offers a limited menu, as it offers just burgers, fries and shakes.

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