Shares of Chipotle Mexican Grill (NYSE: CMG) climbed by double digits Friday, a day after the fast-food chain reported that its third-quarter profit soared by 15% and its revenue surpassed Wall Street projections.

Chipotle had earnings of $83.4 million, or $2.66 a share, an increase over $72.3 million, or $2.27 a share in the previous year. It had revenue of $826.9 million, representing an increase of 18%. Wall Street analysts polled by Thomson Reuters had anticipated earnings of $2.78 a share and revenue of $820 million.

Looking ahead, the big twin questions for Chipotle are: Will the company have to raise its prices slightly next year to offset increases in ingredients and related expenses and,If so, how willingly will its customers accept the news?

Chipotle is also determined to stop using in its restaurants all produce that has genetically-modified organisms (GMO). "While the timing is difficult to predict as we still have work to do to remove GMOs from our ingredients, a price increase around midyear is a reasonable assumption," said Chief Financial Officer Jack Hartung during a conference call.

Chairman and Co-CEO Steve Ells said on the same conference call that a price hike could come in the mid-single digit range.

As families continue to search for reliable and affordable restaurants for dining, Chipotle has rivals on every corner in America, or so it seems. A price jump on the menu – and even a very moderate one – carries with it a potential risk of disappointing or alienating the market of cost-conscious diners.

Chipotle has been eager to establish an image that differentiates itself from traditional “fast-food” companies. In its view, Chipotle is in a higher class than the standard fare of hamburger chains (which, by the way, are also trying hard to leave the past behind by modernizing menus and featuring a greater variety of foods for both diet-conscious and discriminating consumers).

Ells said on the call that his company’s “focus is helping us realize our vision for changing the way people think about fast food.”

Chipotle, like its fast-food rivals, has to walk a tightrope. It wants to project an image of offering good food at reasonable, family-friendly prices. But it also wants its customers to feel that they’re getting a quality dining experience, just like they might have in a slightly fancier restaurant chain.

This corporate challenge underscores the changing economy restaurant situation in the U.S. With establishments expanding their traditional offerings, the industry is becoming ever more competitive for the middle-class consumer’s business.

Chipotle’s food, beverage and packaging expenses increased by 21% in the period, with food by itself costs representing 33.6% of the total revenue. Chipotle encountered expenses related to increases in ingredients owing to rising prices for tomatoes, corn and tomatillos in the company’s popular salsas, in addition to surges in dairy and chicken prices.

The Bottom Line

For now, Chipotle’s ace in the hole is its reputation for serving good food at affordable prices. But if a price rise shows up on its menu, it has to hope that its customers will decide to shrug off the higher prices and remain loyal.

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