Running a business in California is more difficult than in others due to the high cost of living, labor relations, and stricter regulations, according to Chipotle CEO Brian Niccol.
“Unfortunately, it’s getting harder versus being easier,” he told Bloomberg on May 4. “We have tremendous business in California. I wish it wasn’t as hard as it is to continue to operate, as well as open new restaurants, because I think we could grow our business even more.”
California is home to 456 Chiptole locations, by far the most of any state, but local expansion has slowed compared to new developments across the country. The company currently operates 3,137 restaurants in the U.S., with a stated goal of ultimately 7,000 sites.
Chipotle moved its headquarters from Denver—where it opened its first location in 1994—to Newport Beach in 2018.
“The consolidation of offices and the move to California will help us drive sustainable growth while continuing to position us well in the competition for top talent,” Niccol said in a press release at the time.
Since then, his outlook on the Golden State’s business climate has soured considerably.
“We need the environment to swing back to being easier, and there’s a lot of other places where it’s easier, and as a result, we’re able to open new restaurants and provide more job opportunities,” he said in the Bloomberg interview.
New locations have opened and are planned in states across the country including Florida, Virginia, and Texas this year, according to building permits in those cities.
In its 2022 full-year report released in February, Chipotle announced revenue growth of 11.2 percent and the intention of opening between 255 and 285 restaurants in 2023.
Executives are looking at towns with smaller populations and cheaper overhead costs, as past performance from stores in similar locations has proven successful, Niccol told Bloomberg.
A federal minimum wage of $7.25 compared to California’s $15.50 combined with significantly higher lease costs are just a few of the factors being considered when choosing new locations, he said.
“I don’t think the California legislature sees the business leader as someone who’s important to the puzzle,” Hank Adler, professor of accounting at Chapman University, said in the film.
Former California resident and business owner Candice Bright agreed.
“Being a business owner in the state of California is not employer-friendly, and my entire family is leaving,” she said in the documentary.
Cost of living is also a concern, as higher home prices eat into consumers’ discretionary income, reducing their ability to spend at local businesses, according to the film.
The median home price in California is approximately $743,000, while the national average is slightly more than half that amount at $401,000, according to Redfin—an online real estate broker.
Another burden placed on the industry, according to the California Restaurant Association, was Assembly Bill 257—known as the FAST Recovery Act—signed into law in 2022.
Critics of the legislation say that it increases labor costs and administrative burdens on businesses and suggest that the costs will be borne by consumers already operating on a limited budget.
Industry leaders say there is potential for California to change its ways and welcome employers back into the economy.
The state would benefit from “more business opportunities, seeing as how growth is a vehicle to really improve people’s opportunities as opposed to trying to manage down businesses,” Niccol told Bloomberg.
