(Reuters) – Chipotle Mexican Grill said on Wednesday it raised menu prices by about 2% as the burrito chain struggles with higher production costs amid choppy demand for restaurants in the United States.

Key ingredients like dairy, beef and avocado have been more expensive this year, weighing on restaurant operators’ margins in an environment where consumers are already eating out less and turning to cheaper meals at home.

Input cost inflation helped U.S. restaurants and fast-food chains raise menu prices in 2023, dampening consumer demand.

While Chipotle couldn’t tolerate those price increases, executives said on a post-earnings conference call in October that inflation in both cost of sales and labor costs was still in the low single digits.

However, given some softening in demand trends – Chipotle missed market expectations for quarterly same-store sales – the company had indicated that a price increase might not come until early 2025.

“For the first time in over a year, we have implemented a modest price increase of approximately 2% nationwide to offset inflation,” Chipotle head of corporate affairs Laurie Schalow said in a statement on Wednesday.

“The timing of the increase is also a positive signal given current demand trends,” Raymond James analyst Brian Vaccaro said in a note.

The company raised prices in California in April when the FAST Act went into effect, increasing wages for workers at fast-food chains.

(Reporting by Juveria Tabassum; Editing by Alan Barona)