Chipotle is Focusing on Labor Costs

Oct 20, 2022 | Corporate Insights, No Bull Economics

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Chipotle has been having union trouble, starting with a store in Augusta Maine that was being organized before being closed because of corporate’s inability to “adequately staff” that location. More recently, a store in Lansing Michigan passed a vote to unionize under the International Brotherhood of Teamsters. According to the union, the workers “are forming a union to improve their work schedules, increase wages, and gain the respect from management that they’ve rightfully earned.” In its defense, Chipotle corporate responded that the company “is proud to offer employees industry-leading benefits such as competitive wages, debt-free degrees, tuition reimbursement up to $5,250 per year, health benefits and quarterly bonuses for all employees.” 

In any case, Chipotle’s labor margin has been steadily improving since covid which is quite a feat given the significant labor inflation that has developed subsequently. This doesn’t necessarily mean that Chipotle has been exploiting its restaurant crews – that would be difficult to get away with in such a tight labor market in which employees have so many choices of where to work. More likely this is a function of Chipotle finding ways to improve its labor efficiency (doing more with the same labor costs). In fact, Chipotle’s investment in Hyphen (a food robotics company that sells automated makelines that produce 350+ meals an hour while eliminating order defects) is a further move in this direction.

But that’s good, right? We want employers to find ways to stay in business during tough economic times like these by improving their efficiencies. Profitable employers can provide more jobs by staying open – it’s that simple. The problem with unions is that while they may be necessary to protect against abusive employers, they don’t offer any solutions for how to improve efficiencies. In other words, they are not adding value by helping to solve problems (like how to deal with crippling inflation). Everyone must pitch in to survive in this economy & that includes employees and even the unions! 

Chipotle Labor Margin Graph
Chipotle Labor Margin Graph

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