If your local Chipotle (CMG 3.78%) seems slightly less crowded recently, you're not imagining things. The restaurant chain saw transactions slump 3.2% in the fourth quarter, with comparable sales dipping 2.5%. For all of 2025, comparable sales were down 1.7%. Once a fast-casual wunderkind, Chipotle is now struggling to get customers in the door.
This year, Chipotle expects its comparable sales to be roughly flat. That would be an improvement, but it would also only be the first step in the company's plan to rekindle growth. A big part of that plan in 2026 is to shield its customers from inflation, absorbing higher costs to keep prices low. Chipotle is betting on value, and sacrificing some profits, to win back customers.
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Chipotle wants to keep customers happy
Chipotle is experiencing rising beef and chicken costs, as well as a negative impact from tariffs. The tariff situation is expected to improve this year, but the company anticipates cost inflation of 3% to 4% in 2026. Wage inflation will also be in the low single-digit range.
The company is making a strategic decision to raise prices at a rate below inflation. Chipotle expects pricing to rise by 1% to 2% this year, leaving a gap of up to 3 percentage points with inflation. The National Restaurant Association reported that menu prices grew by 4.1% year-over-year in December, so Chipotle will likely be raising prices at a much slower rate than the rest of the industry.
Chipotle's profit margins are going to take a hit. "So margins in 2026 will be under pressure, and it's mostly due to our investment of taking less price compared to the inflation that we're experiencing," said Chipotle CFO Adam Rymer during the fourth-quarter earnings call. Rymer emphasized that the impact would be temporary, with the biggest hit in the first quarter of the year.
CEO Scott Boatwright views the slower price increases as an investment in Chipotle's value proposition. With plenty of competition in the fast-casual restaurant industry and consumers feeling pressure on affordability, keeping prices low could certainly help stop the comparable sales decline.
Efficiency may be the key to boosting margins in the long run
While Chipotle's margins will suffer this year, the company has a plan to improve profitability in 2027 and beyond. Chipotle is investing in high-efficiency equipment packages to improve speed and consistency. So far, the company has installed these packages at 350 restaurants, and the results have been impressive.
Chipotle noted that the new equipment reduces overall prep time by 2 to 3 hours, while also eliminating prep time during peak hours. The company is seeing higher customer satisfaction scores at restaurants with the new equipment, indicating that speed and consistency are translating into an improved customer experience.
The plan is to install the high-efficiency equipment in around 2,000 restaurants by the end of 2026, with the rollout wrapping up in 2027. As this year goes on, Chipotle should benefit from improved efficiency at a growing number of restaurants, which will offset some of the pricing pressure on its margins.
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A multi-year comeback for long-term investors
There's no easy or quick fix for Chipotle's problems. The consumer spending backdrop is tough, and competition is more intense than it's ever been in the fast-casual industry. The company is betting that keeping customers happy with a strong value proposition and quicker service is the key to winning in the long run. It's likely the right call.
In the near term, though, Chipotle's financial results won't be anything to write home about. The stock is down around 40% from its all-time high, although it has rebounded somewhat over the past few months. To regain that lost ground, a sustainable return to comparable sales growth is almost certainly a requirement. That's going to take time.
For long-term investors with some patience, Chipotle stock could be an attractive turnaround play. Given the level of economic uncertainty, though, how the stock performs this year is anyone's guess.
