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Chipotle eyes price hike after strong quarter

Published on NewsOK Modified: January 30, 2014 at 5:13 pm •  Published: January 30, 2014

NEW YORK (AP) — Chipotle's popularity isn't showing any signs of fading, and the Mexican food chain is eyeing whether it can raise prices later this year without scaring off customers.

The Denver-based company said Thursday that sales rose 9.3 percent at established locations in the final three months of the year. By contrast, McDonald's reported a decline of 1.4 percent for the period. Even Starbucks, which has enjoyed healthy growth, saw the figure rise by a more modest 5 percent.

The figure is a key metric because it strips out the volatility of newly opened and closed locations.

During a call with analysts, Chipotle executives were noncommittal when asked about earlier discussions of a price hike of 3 percent to 5 percent in the second half of the year. Although the company is dealing with higher costs for avocados and other ingredients, its operating margin has improved as a result of lower costs in other areas, such as marketing.

When asked why Chipotle would risk hurting its brand by raising prices when it doesn't need to, an executive replied that was among the considerations in deciding whether to proceed with the hike.

Chipotle Mexican Grill Inc. has surged in popularity because people see it as being a step up from traditional fast-food chains such as Burger King and Wendy's. The chain's "Food with Integrity" slogan is intended to underscore the higher quality of its ingredients. In coming weeks, Chipotle is even introducing a series called "Farmed and Dangerous" on Hulu that satirizes the industrial farming system.

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