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said Chief Financial Officer Jack Hartung. The higher wages are poised to hit as Chipotle's labor costs have risen considerably in the past few years, with the competitive market pushing watrers' nov un. The Newport Beach, Calif.-based company spent $616.3 million year period and a more than 50% increase from the same period in 2020 . The law in California, where roughly 15% of Chipotle's more than 3,300 restaurants are located, will increase overall labor costs by between 2.5% and 3% next year, according to Hartung. Jack Hartung, chief financial officer of Chipotle Mexican Gnil. PHOTO: LAURA In California, the CFO said, those costs will rise on average by 15% to 20%. "That's a huge hit," said Hartung, adding that labor is Chipotle's second-highest cost at the restaurant level, behind only food. "Any time you take the secondbiggest line item and then you MCDERMOTT/BLOOMBERG NEWS increase it by 20%, it definitely has an impact." Hartung added, "It's significant enough that it puts a dent in our economics." To offset the higher costs, Chipotle will raise menu prices in California. The company is still assessing the impact of the law, but Hartung said California menu prices will likely increase in the mid-to high-single-digit range. This would follow a 3% price increase last month, the company's first national price lift in over a year. The finance chief doesn't currently see a need to pull additional levers in response to the higher minimum wage, such as opening fewer-than-planned new sipso0 atses ariv 1 Us, to w atareld cos28 IHL WALL STREET JOURN World Business US Politics Economy Tech Finsoce Opinion Artsiculture Lifestyle RealEstate Per: GojoupNML. Chipotle's Labor Costs Are Rising. Customers Will See It in Pricing. The fast-food chain plans to offset higher labor costs in California with price increases Now L2023segomet c Share AA Resiae (3) tistan (2inn) Cutw Are bling. Custemers Whil See it in Prikibg would follow a 32 price increase last month, the company's first national price lift in overayenr. 3. Who Now is Stridenly The finance chicf doesn't currently see a need to pull additional levers in arad Time to viaif tas Verats response to the higher minimum wage, such as opening fewer-than-planned new restaurants in California, unless customers resist pricing actions, "But the reality is, every restaurant company in Califormia is probably going to have to take a simalar increase, so we will probably still keep our value gap," according to Hartung. Analystsare watching closely for signals that consumers are pulling back with inflation and interest rates up and pandemic-era suvings dwindling. Chipotle's customers so far continue fo spend, with the company's coanparable restaurant sales, which typically look at transactions in restaurants open for at least 13 full months, increasing by 5x for the quarter ended sept. 30 . Net income rose to $313.2 million in the three-month period, compared with $257.1 million a year earliex, and revenue increased 11.3% to $2.47 billion. WS. | CFO Journal OD sibner For companies with fast-food workers in Califormi, analysts are looking at how the whec change may hit financlals as restaurants including McDonalds and BJ's Restaurants weigh whether menu prices will increase because of the law. Companies that don't fall within the remit of the law may fisd it more difficult to bire if they can't meet the hourly $20 wage door, said Evercore ISt food and restiarant analyst David Palmes. Meamwille, he said, companiss directly affected by the change may fed pressure to lift pay elsewhere in their 4. Turning Eungtyofic: teto Apartineits is Gettine Lven Itartier 5. Itesus, vs, Chinisin an tharesteubly Dirided World Fconceay MOST POPULAR OPINION 1. Opinioni A Blve-Alarm BAdeat Re Election Firr 2. Opinion: Why Stanfordin teaden Telerativ AutiSemirtem 3. Optobica: Hoycouting the Jewo Reicher the Wost liank of the Deloware 4. Opinbore ina Murpliy Nirwietiog Winit Vlep 5. Oyisilon The Mhartor of a Oreat Elatiratar