Why Chipotle Wants to Give Its Workers More Than a McJob
Business + Economy

Why Chipotle Wants to Give Its Workers More Than a McJob

REUTERS/Lucy Nicholson

Chipotle workers are about to receive a major benefit boost. The fast casual chain said Thursday that it will expand benefits formerly reserved for salaried workers, including full tuition reimbursement, sick pay and paid vacations to all employees, starting July 1.

The details of the Chipotle reimbursement program have yet to be released, but its move is just the latest in a string of similar announcements from major food chains, suggesting that they now feel some pressure to improve their compensation practices in order to attract and retain workers, especially younger ones.

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Last summer Starbucks announced an online partnership with Arizona State University to give employees free tuition coverage for 49 online degree programs. In April, Starbucks announced it would expand the program from two years to four years for its more than 140,000 full- and part-time workers.

McDonalds said in April that it would expand a college tuition assistance program to workers at all of its 14,399 U.S. restaurants. The company also announced that workers at their 1,559 company-owned stores would receive a pay bump and be able to earn paid time off as well. Those specific benefits do not affect 12,840 franchise-owned stores.  

Both Starbucks and McDonalds only offer the benefits to employees who work at least 20 hours a week.

Chipotle already boasts about its low employee turnover rates, and it says that about 95 percent of the chain’s managers are were promoted from within. The company also reported that 10,000 employees at the restaurant level were promoted into management positions just last year.

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The company hopes that this announcement will further demonstrate its commitment to providing career paths for its workers. In addition, the benefits will help recruit high school and college students, which is Chipotle’s target demographic for entry-level employees.

“We have a lot of people who, if they realize they could make a career with Chipotle, would stick with us while they are in college and take advantage of our tuition-reimbursement program,” JD Cummings, recruitment strategy manager at Chipotle, said, according to Nation’s Restaurant News. “They could find the path to restaurateur is an amazing path that they might not have thought of.”

The announcement could also pay off for the chain in other ways. Although Chipotle has a phenomenal growth story, its incredible growth seems to be slowing. This year, the rate of new store expansion is estimated to be 11.2 percent, down from 14.9 percent in 2012. In addition, same store sales growth has fallen to 10.4 percent, about 10 percentage points down from the third quarter of 2014.

Perhaps the increased employee benefits will help Chipotle to draw in even more millennials, a demographic the company has been quite successful with, that even giants like McDonalds have struggled to attract. This younger generation has responded well to Chipotle’s other announcements, such as getting rid of GMOs. Nielsen data found that 29 percent of millennials are “very willing” to pay a premium for healthy foods, compared with 26 percent of Generation Xers and 23 percent of baby boomers.

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Or maybe Chipotle executives saw the Pew Research Center study that found millennials are much more amenable to labor unions than other generations. In the Pew poll, 55 percent of people between the ages of 18 and 29 view unions favorably, while 29 percent view them unfavorably. Among older generations, the favorability rating of unions is about the same as the unfavorability rating.

The research suggests that millennials want members of the working class get livable wages. Chipotle’s “feel good” company directive might help those who follow such things feel good about eating there instead of at a competitor.

Taking bets now for the next fast food restaurant to make the next announcement.  

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