Chipotle’s CFO reveals that quiet quitting is the biggest economic issue keeping him up at night

The number of job openings in September increased to 10.7 million, up from 10.3 million in August, even as the Fed is taking action to cool inflation. Some employees may still be eyeing the door for other opportunities or even quiet quitting. That’s one of Chipotle CFO Jack Hartung’s biggest concerns. 

“The labor market has been a challenge, as we all know, there’s historically low unemployment,” Hartung told me. “You’ve got this thing called quiet quitting. It’s harder to keep young folks in a restaurant engaged in the current business.” 

The quiet-quitting phenomenon where employees simply perform their duties without going the extra mile to forgo hustle culture has been rippling through the workplace. Some may be trying to prevent burnout, while others may feel disengaged from the company. 

Even though Chipotle has increased wages and offers enhanced benefits, it’s tempting for employees to think about taking other jobs since there’s a plethora of them out there, Hartung says. So, a positive onboarding experience is crucial, he says. 

“If you’re a new crew person, and the line is out the door, and you feel like you’re not really equipped to keep pace with the rest of the folks on that line, that’s a tough experience,” Hartung says. “A lot of what I’m doing lately is figuring out is, how do we make sure that the labor assigned to the restaurant is deployed in the right position throughout the day between the frontline and our digital make line? Our digital make line is almost 40% of our business.”

If crew members have an overall good experience, starting with onboarding, they’re more likely to want to have a career at the company, Hartung says. When he goes to Chipotle restaurants, as a regular customer or visiting with colleagues, he finds out from the crew and managers what the pain points are and how Chipotle can support them, he says.

“There’s no revenue that happens in our offices,” he says. “All the action happens in our restaurants.” 

‘We’re seeing inflation in every one of our ingredients’

Chipotle released its third quarter 2022 earnings last week. Total revenue increased 13.7% to $2.2 billion. In-restaurant sales rose 22.1% year-over-year. However, that’s less than the second quarter, when in-restaurant sales increased 35.9% compared to the year prior. Prices in the third quarter were up 13% from the same time last year. 

“If you go to a restaurant, you’ll see prices that are up about 11 and a half percent.” Hartung explains. “The remainder that gets you to 13% is delivery related pricing. It costs us more to have our food delivered, so we charge a premium.” In Q4, prices may increase 15% year over year until it drops down to 11% in the first quarter of next year. “Eighty percent of our customers that come into a restaurant, or order ahead and pick it up, you’re going to see more like a 13% increase,” Hartung says. “And the rest of the increase is in our delivery channel.”

“We’re seeing inflation in every one of our ingredients, and wage inflation,” he says. In addition, energy prices are higher, Hartung explains. “So, what we tried to do was just keep up with inflation,” he says. “But when we look at our menu prices compared to competitors, we’re still a terrific value. More than half of our customers get a chicken burrito or chicken bowl, and that still costs less than $9, on average.” Hartung says that’s less than some competitors that offer similar dishes. 

But if you’re someone who likes guacamole, or double meat, that bumps up the average price. The chicken burrito bowl with guacamole I purchased in-store at a Chipotle restaurant on Sunday came to just over $13, including tax. 

“We are seeing that low income customers are visiting less often,” Hartung says. But it’s because everything is costing them more, like energy, grocery stores, and other restaurants, he says. “We think this is more of an economic macro impact than the fact that we’ve raised prices to try to keep up with inflation,” Hartung says. “No matter where a lower-income consumer goes, they’re going to see higher prices. There’s no question that they’re the ones that are feeling the current economic inflation the most.” 

He continued, “Our food cost and our people cost are by far the largest items on the P&L. We don’t want to cut back on our food. We’ve never tried to reduce the quality of our fresh ingredients. We want to invest more in food and our people.”

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

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