Chipotle has quietly raised menu prices by an average of 9% for items that customers order fordelivery , according to a new Gordon Haskett report.- In New York City, for example, the same chicken burrito costs $8.95 for pick-up versus $10.10 for delivery, before the added costs of taxes and delivery or other fees.
- "Similar to other restaurants, we're experimenting with a modest price increase to help offset costs associated with delivery," Chipotle's Chief Corporate Affairs Officer Laurie Schalow told Business Insider.
- Chains are quietly raising prices on delivery menus — before adding delivery fees — to counterbalance third-party delivery services' commission fees.
If you're ordering Chipotle for delivery, the cost of a burrito might be slightly higher — even before paying delivery fees or tipping the driver.
The burrito chain is the latest restaurant to raise the price on its delivery menu, doing so by an average of 9% across 20 of its largest markets, according to a new Gordon Haskett research note.
Fifteen of the 20 markets have implemented a 7% delivery menu price increase. Cities including New York City and Philadelphia raised delivery menu prices even higher, charging 13% and 17% more, respectively.
For example, when Business Insider attempted to place a pick-up order at a New York City Chipotle location, a chicken burrito cost $8.95 before taxes or other fees. However, when we ordered delivery, the same burrito's price was listed as $10.10 before the cost of delivery, taxes, or other fees.
"Similar to other restaurants, we're experimenting with a modest price increase to help offset costs associated with delivery," Laurie Schalow, Chipotle's chief corporate affairs officer, told Business Insider.
Premium pricing on delivery menus is becoming a common practice, especially as more restaurants rely on delivery to boost sales during the coronavirus pandemic.
According to a Gordon Haskett analysis of 25 chains in July, Chick-fil-A has the highest delivery pricing premium, with menu prices that are 29.8% higher for delivery compared to pick-up. Starbucks' has a delivery pricing premium of 20.3%, and McDonald's has a pricing premium of 19.6%.
Restaurants raise prices on delivery menus because fees and commissions from third-party delivery services, such as Uber Eats or Grubhub, can make it difficult to turn a profit on delivery orders. Delivery commission fees can cut into as much as 30% of each sale, though chains often have better deals than independent restaurants.
Assuming Chipotle pays a 15% delivery fee commission, Gordon Haskett estimates the company generates a 5.5% restaurant level margin if delivery menu prices are the same as typical prices. For comparison, its profit margin is 20.5% on orders customers pick up at the restaurant. If delivery commission from third-party partners was 20%, then restaurants would barely break even on each order if Chipotle did not raise prices for delivery.
Delivery is a growing part of Chipotle's business. According to Gordon Haskett, delivery made up roughly 25% of Chipotle's sales in July, evenly split between third-party delivery services and Chipotle's own delivery app.