Chipotle shares surged nearly 9% Thursday after the burrito-and-bowl chain reported improving sales and revealed roughly 3% menu price hikes in the fourth quarter amid rising beef, freight and labor costs.
The fast-casual giant has been gradually raising prices market by market since late last year, seeking to offset inflation without driving away customers.
“On pricing, the impact in Q3 was around 2.7%. We anticipate it will increase to about 3% in Q4,” Chief Financial Officer Adam Rymer told Wall Street analysts during an earnings call Wednesday.
The 3% projection reflects the cumulative effect of price increases introduced in different markets, not a newly announced hike affecting every Chipotle restaurant.
The impact of Chipotle’s price increases has grown throughout 2026, climbing from 0.9% in the first quarter to 1.6% in the second and 2.7% in the third.
Chipotle initially expected menu pricing to rise 1% to 2% for the full year, even as its operating costs were projected to climb between 3% and 4%.
The company now expects pricing to contribute roughly 2% for the full year, with menu price increases catching up to inflation in the fourth quarter.
Higher beef and freight costs have squeezed the chain, which is also grappling with rising wages and additional expenses tied to restaurant staffing.
Food, beverage and packaging costs fell to 29.5% of revenue in the third quarter from 30% a year earlier, helped by menu price increases that partly offset higher beef and freight expenses.
Labor costs, meanwhile, rose to 25.7% of revenue from 25.2% a year earlier, driven by higher wages, performance bonuses, additional restaurant staffing and insurance expenses.
The pricing strategy comes as Chipotle works to win back customers following a stretch of sluggish demand.
Third-quarter revenue climbed 9.6% to $3.29 billion, while comparable restaurant sales rose 2.1%, helped by a 0.8% increase in customer transactions.
Investors appeared to focus on improving sales and customer traffic despite adjusted earnings of 27 cents per share falling short of Wall Street expectations of roughly 29 cents.
Chipotle has also stepped up advertising and promotions, including campaigns built around limited-time menu offerings, to boost customer traffic.
Marketing expenses accounted for a percentage of sales in the mid-3% range during the third quarter and are expected to climb into the high-3% range in the fourth as Chipotle promotes its smoked brisket offering.
Chipotle CEO Scott Boatwright said in April that the chain’s entrée prices were roughly 20% to 30% lower than those of competing fast-casual restaurants.
Still, higher menu prices haven’t spared Chipotle from continued pressure on its profit margins.
Chipotle expects fourth-quarter restaurant-level operating margins to fall to just under 22% from 23.4% a year earlier, as higher marketing expenses and weaker sales leverage squeeze profitability.
Several Wall Street firms cut their price targets, citing concerns about a slower recovery in profit margins despite signs of improving customer traffic.
Bernstein lowered its price target from $50 to $43, RBC from $45 to $40, and BMO from $52 to $50.
Chipotle expects comparable restaurant sales to rise approximately 2% in the fourth quarter as it continues testing price increases in individual markets to gauge customer resistance.