Restaurants say ethanol mandate has squeezed profits

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, November 5, 2013

Mark Behm, a Wendy’s franchise owner in Michigan, says the federal ethanol mandate has meant higher food costs, cutbacks on capital improvements to his restaurants and diminished employee benefits.

Behm’s story is not unique among chain restaurant owners and operators, according to a new video launched yesterday by the National Council of Chain Restaurants in a push to completely repeal the renewable fuel standard. By increasing the cost of corn, the RFS has raised the food costs for restaurants and squeezed already-tight profit margins, the group says.

“This is a penny-or-two business, and we’ve had to find other ways to take costs out of our business to be able to continue to operate,” Behm says in the online video, circulated yesterday as a part of the chain restaurant industry’s “Feed Food Fairness” campaign.

The National Council of Chain Restaurants launched the campaign in June and ramped up activities last month by running print and digital ads in Washington, D.C., and in a few targeted congressional districts, according to campaign spokeswoman Mallory Ward.

Biofuels producers have slammed the restaurant industry’s campaign as an attempt to revert to the days of cheap, heavily government-subsidized corn before the RFS helped boost the agriculture industry’s profits. The campaign comes amid increasing calls in Congress to repeal or drastically scale back the RFS, which calls for 13 billions of conventional ethanol to be used in petroleum-based motor fuel this year.

The video circulated yesterday features three fast food representatives. Along with Behm, Hardee’s franchisee Bryan Haas and White Castle President Lisa Ingram say the RFS has hampered their ability to provide cheap food to customers.

White Castle has seen its beef prices rise 47 percent since the renewable fuel standard was put into place, an impact that amounts to about $15,000 per restaurant, Ingram said.

“We work on very small margins. We’ve very fortunate to be able to bring a few pennies to the bottom line, so we have fluctuation in our food costs; that impacts our ability to be able to provide value to our customers,” Ingram said. “We’re not out there building new restaurants, we’re not out there creating new jobs because of RFS.”

The video promotes chain restaurants as small family businesses that are often built from the ground up and that employ millions of people around the country.

“The message I’d like to send to Congress is this: There’s only one solution. That’s to repeal the renewable fuel standard,” Behm said.

The chain restaurant council first entered the Washington, D.C., debate over ethanol about a year ago when it released a study that found that the renewable fuel standard, which calls for yearly increases in biofuel use, could increase corn prices by 4 to 27 percent by 2015. The increase, the group said, could cost the industry up to $3.2 billion per year by 2015, or as much as $17,000 for each full-service restaurant (Greenwire, Nov. 28, 2012).

According to the Agriculture Department, ethanol plays only a small role in retail food prices (E&E Daily, June 26). About 14 percent of the cost of food is attributable to commodity costs; the rest comes in the form of marketing and the energy it takes to produce and transport the food.

Chain restaurants are wrongly pointing the finger at ethanol for high food costs, ethanol trade group Growth Energy said when NCCR launched its Feed Food Fairness campaign this summer.

“If the NCCR is looking for the culprits behind increased food costs they should look no further than the mirror and at their supporters at Big Oil who have relentlessly pursued the efforts to repeal the renewable fuel standard,” Growth Energy CEO Tom Buis said at the time. “They are trying to blame the ethanol industry to justify their actions of constantly increasing food prices.”