Restaurants say inflation could force them out of business without federal help
By Chauncey Alcorn, CNN Business
Restaurant owners can add the rising cost of food to their growing list of challenges.
Inflation is on the rise throughout the country, and independent restaurant leaders say many of their businesses will soon be forced to permanently shut down unless they receive more federal aid from Congress.
“Every increase in food prices really throws them for a loop,” says Erika Polmar, executive director of the Independent Restaurant Coalition, a group of more than 100,000 local chefs and restaurant owners that formed last year to advocate for their industry’s pandemic-related needs in Washington.
Polmar says Covid lockdowns and an ongoing labor shortage already had local restaurant owners struggling to catch up. For some restaurants, soaring prices could be the final nail in the coffin.
The price of grains was up 93.8% in June when compared to the same period a year ago, according to the US Bureau of Labor Statistics’ latest Product Price Index report released Wednesday. Beef and veal prices have surged 41.4% year over year after shooting up 5.6% in May and 10.5% the month prior. Shortening and cooking oil prices were up 34.8% between June 2020 and June 2021.
Gas prices were also up 45.1% last month when compared to the same period a year ago, according to the latest consumer price index report. Polmar says rising fuel prices means it costs more for restaurants to transport food.
“Even things like fuel prices impact everything restaurants do,” Polmar said. “It makes reopening and recovering from the pandemic even more challenging.”
Eating costs
IRC advisory board member and restaurateur Tyler Akin, owner of “Stock“, a pair of southeast Asian restaurant locations in Philadelphia, says rising food prices recently forced him to increase his menu prices by nearly 10%. Akin is also the chef-partner of Le Cavalier, a French restaurant located inside the Hotel du Pont in Wilmington, Delaware.
“We’re eating some of the lost profit and trying to recover some of it by bumping prices up,” he told CNN Business. “There’s an element of respect for the guests and their longtime loyalty and trying to maintain some viability.”
Inflation is just the latest obstacle for Akin, who in November was forced to permanently close Res Ipsa Cafe, a popular local Italian eatery that Philly Mag said was one of the city’s best in 2017.
Akin said he was unable to adjust Res Ipsa’s relatively small 1,300 square foot space to comply with Covid-19 guidelines.
“Our model was just not adaptive to the pandemic environment,” he said. “We were just kind of up against the wall and cutting our losses. This has been a historically unprofitable year and a half for restaurants.”
Asking for help
Growing inflation is one of the reasons the Independent Restaurant Coalition is calling on federal lawmakers to restore the Restaurant Revitalization Fund, which shut down on Wednesday after running out of money.
The Biden administration launched the program in January to give a lifeline to restaurants across the country that were forced by the government to either shut down or limit their operations. The fund provided a total of $28.6 billion in aid to more than 100,000 US restaurants, according to the US Small Business Administration.
But Polmar says many restaurant owners who qualified for aid have been left out in the cold now that the program has depleted its funds.
“Over 283,000 businesses applied for relief,” she said. “By no fault of their own, they had to close for the last 15 months. They do not have the resources to survive this.”
US Rep. Earl Blumenauer, a Democrat who represents a district in Oregon, is one of 181 US House members who support the Restaurant Revitalization Fund Replenishment Act, a measure introduced in June that would allocate an additional $60 billion to the depleted program.
Senate and House Republicans have resisted calls for additional pandemic-related stimulus packages. However, Blumenauer said a bipartisan group of 13 US Senators already supports the Senate’s version of the bill and he’s confident it will eventually be signed into law.
“There is broad appreciation that the demand is great and this will make a huge difference,” Blumenauer told CNN Business. “It’s the case of just trying to get it across the finish line.”
Without more federal aid, Polmar says the country will face an additional wave of local restaurant closures.
“When restaurants close, you not only impact the people who are employed by them, you impact the farmers, wineries, distilleries, breweries,” she said. “The return on investment in supporting restaurants is rather immense.”
Correction: A previous version of this story misidentified Tyler Akin’s role at Le Cavalier. He is the restaurant’s chef-partner.
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