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Chipotle's Price Hike: Will Customers Care?

Stocks in this article: CMGSONCSBUX

NEW YORK (TheStreet) - Chipotle (CMG) is raising prices, but is it a big deal for customers?

Suffering from higher food costs, especially in beef, cheese and avocados, the popular Denver-based chain noted on its first-quarter earnings call that menu prices would rise on average in the mid-single-digits. Management said it expected to start installing new menu boards with the upped pricing late in the second-quarter, and be fully rolled out by early in the third quarter. Chipotle noted that the last time it raised menu prices was nearly three years ago. TheStreet's Laurie Kulikowski has details on what to expect when Chipotle reports results:


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In an email to TheStreet, Chipotle spokesman Chris Arnold wrote that the company will provide an "update on the status the price increase" during its earnings call. According to a Wells Fargo Securities research note, approximately 60% of Chipotle's 1,637 stores have implemented the new pricing plan as of June 11.

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Chipotle, of course, isn't the only restaurant chain feeling the pinch of higher costs. Starbucks (SBUX) and Sonic (SONC) are two more examples of restaurants raising prices.

A recent survey by SpenDifference found that more than half of chains held steady on price increases during the first quarter, however, 93% of chains plan to raise prices during the second half of this year. "Recent events affecting commodities may provide operators the impetus to follow through on their planned increases," SpenDifference CEO Maryanne Rose said in a June release.

SpenDifference works with emerging to mid-sized restaurant companies to provide full-service supply chain support. The company currently works with approximately 20 national and regional chains that represent nearly $1 billion annually in purchasing.

Prices for beef and cheese are at an all-time high, SpenDifference noted. The Porcine Epidemic Diarrhea Virus that broke out in Iowa last year has spread to 23 states, severely impacted pork costs, according to SpenDifference.

"The price increases are happening everywhere -- even In-N-Out Burger," restaurant consultant Tom Kelley wrote in an email. "Now with new city and state minimum wage increases there's no end in sight."

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