The media doesn’t have to tell me that cost of food is increasing at a record rate. I go to the grocery store several times a week and cringe every time the cashier gives me the total.
I know how food costs are affecting my family, but how are food costs affecting an important segment of our local economy, the segment that is near and dear to all of our hearts – the restaurant community.
I had an opportunity to speak at length last week with John Eichelberger, vice president of contract sales for the Atlanta division of Sysco (NYSE: SYY), North America’s largest food distributor. Eichelberger said this is the highest food cost inflation he has seen since the inflationary years of the Carter presidency.
“The cost of diesel fuel is unbelievably high which means it costs so much more to receive and deliver product,” Eichelberger said. “California is our largest grower of produce, and the freight charges are just unbelievable. We have to pass those increased costs onto our clients, and many of them are restaurants. There is a strangle hold on the United States right now, and it has taken the profitability out of restaurants.”
A couple of local restaurant owners that I spoke with confirmed Eichelberger’s claims.
“I have been in this business for 27 years, and I haven’t seen anything like we are seeing now,” said Randy Nessmith, owner of R. J.’s Seafood and Steaks on South Main Street. “Not only have food costs shot through the roof, but also the cost of paper goods, cleaning supplies, and utilities. It has all gone up.”
Nessmith said he increased his prices by three to five percent at the beginning of this year, but knows those increases will not cover his higher costs.
“I know that it is not going to be enough,” he said. “But right now, everyone is being squeezed. I have to be careful to keep our prices so that people can continue to afford to eat here. I have been affected more by this recession than I have ever been in the past.”
Randy Linton, owner of Daylight Donut on South Main Street, said he knew he had to raise his prices, but it was one of the hardest things that he has ever done.
“The cost of flour, cooking oil, everything has skyrocketed, more than doubled and in some cases tripled since last year,” Linton said. “I knew I had to do something, and I about worried myself sick over it for three months, but I really didn’t have a choice. So a few weeks ago, we raised our prices per donut and per a dozen of donuts. It wasn’t that much, but it was an increase. Our customers are still coming, and I am very grateful for that.”
Both Linton and Nessmith stressed how important it is to run their restaurants in the most efficient manner without cutting quality.
“We are going to continue to produce our quality product,” Nessmith said. “But, my management team and I have become very aware of every cost, even down to making sure every light is off when it doesn’t need to be on. You just cannot afford to waste anything at this time.”
Is either worried about the future? Not really.
“I use to worry about things, about the economy and the crazy cost of stuff, but I don’t anymore, because I just can’t do anything about it,” Linton said. “We are going to work hard and produce a great product every day. That is all we can do.”
Nessmith said essentially the same thing. “I have always believed that if you put out a great product, people will come to your restaurant,” he said. “Times are difficult now, but we will get through it.”