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. Thats one of Chipotle CFO Jack Hartungs biggest concerns.
The labor market has been a challenge, as we all know, theres historically low unemployment, Hartung told me. Youve got this thing called quiet quitting. Its 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, its tempting for employees to think about taking other jobs since theres a plethora of them out there, Hartung says. So, a positive onboarding experience is crucial, he says.
If youre a new crew person, and the line is out the door, and you feel like youre not really equipped to keep pace with the rest of the folks on that line, thats a tough experience, Hartung says. A lot of what Im 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, theyre 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.
Theres no revenue that happens in our offices, he says. All the action happens in our restaurants.
Were 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, thats 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, youll 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, youre going to see more like a 13% increase, Hartung says. And the rest of the increase is in our delivery channel.
Were 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, were 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 thats less than some competitors that offer similar dishes.
But if youre 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 its 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 weve raised prices to try to keep up with inflation, Hartung says. No matter where a lower-income consumer goes, theyre going to see higher prices. Theres no question that theyre 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 dont want to cut back on our food. Weve 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
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Big deal
Intercompany accounting (ICA) is set to get more support from organizations in the year ahead, according to a Deloitte poll released this morning. About 63.7% of finance and accounting professionals said their organization has an ICA program to manage transactions that occur within their business units, geographies, and legal entities. And 40.6% said their organizations will increase the time and effort put into ICA management. However, there are some barriers. Nearly a quarter of respondents said the greatest challenge to ICA in the next 12 months is technology, including disparate systems and decentralized operations, Deloitte found. Decentralized, incomplete, or unstructured accounting data followed closely as the second leading challenge (22.5%), followed by post-merger M&A integration activity (10.8%), and regulatory compliance (10.1%). The findings are based on a poll of more than 3,900 accounting and financial professionals.
Going deeper
"4 Types of Innovators Every Organization Needs," a report in Harvard Business Review, highlights four innovation stylesgenerators, conceptualizers, optimizers, and implementorsand explains how common they are across sectors. The research data is based on a survey of over 100,000 people from 84 countries that work in a variety of companies and industries, such as Microsoft, the Boston Symphony Orchestra, and NASA.
Leaderboard
Jeff Stafeil was named EVP and CFO at Tenneco Inc. (NYSE: TEN). Stafeil will replace Matti Masanovich, upon Tenneco's acquisition by Apollo Funds. Stafeil will join Tenneco from Adient PLC, where he served as EVP and CFO since 2016. Before that, he worked at global automotive electronics supplier Visteon, where he was EVP and CFO. Stafeil has served in a series of domestic and international executive finance roles within the automotive sector. He also held management positions at Booz Allen Hamilton, Peterson Consulting, and Ernst & Young.
Jaylene Kunze was named CFO at Urbint, an A.I. platform for predicting and preventing threats to infrastructure and workers. Kunze will lead the scaling of Urbint's finance and operations systems. She was previously CFO at Uplight, a software company. Kunze led Tendril's growth as CFO for three years and spearheaded its merger with Simple Energy to form Uplight. Before that, Kunze held financial leadership roles at the engineering firm MWH Global and other companies.
Overheard
Weve now reached a point where both bond and stock markets may be pricing in too much hawkishnessThis could provide some relief to stocks in the short term.
Morgan Stanley chief investment officer Mike Wilson said in a Monday Thoughts on the Market podcast, Fortune reported.
