RFS carries hefty price tag for chain restaurants — study

Source: Amanda Peterka, E&E reporter • Posted: Thursday, November 29, 2012

Chain restaurants jumped today into the fight against federal biofuel mandates.

The National Council of Chain Restaurants today released a study finding that the renewable fuel standard 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.

The council, which has so far avoided the spotlight in the debates on the RFS, said that the analysis has prompted it to launch an advocacy campaign to “educate” Congress on the impacts to retail restaurants with the goal being full repeal of the standard.

The council wants “to make sure Congress knows a well-intended idea turned out to be a very serious problem, and it’s getting worse,” Ed Anderson, a Wendy’s franchisee with four restaurants in Virginia, said at a Capitol Hill briefing.

The renewable fuel standard requires that refiners blend 15 billion gallons of traditional corn ethanol into the nation’s fuel supply by 2015, up from the 13.2 billion gallons required this year.

According to the study by PricewaterhouseCoopers, conducted for the chain restaurants group, the mandate is estimated to increase costs for the chain restaurant industry on average between $503 million and $3.2 billion a year.

The price increase would be greatest for quick service restaurants, which would see a $393 million to $2.5 billion increase, according to the 30-page study. For full-service restaurants, the prices would go up $110 million to $691 million.

PwC analysts reviewed prior studies on the impacts of the RFS on corn prices and produced a model to estimate the different impacts on a range of commodities. They based their estimates of price increases on 2011 figures of what restaurants spent on major food commodities.

The results, said National Council of Chain Restaurants Executive Director Rob Green, show the RFS having a “sustained and structural impact” on food prices that affects thousands of small-franchise owners around the country.

“This study is very important. It provides a foundation for a dialogue on Capitol Hill,” Green said. “We think we have a compelling case to be made.”

Biofuels industry groups, which plan to push back against all attempts to open the RFS next year, today accused the restaurant group of serving up a “bogus recipe” that ignores the increasing costs of fuel on food prices.

About 84 cents of every dollar of food goes toward transportation, packing and other oil-dependent inputs, said Fuels America, a coalition of biofuel, agricultural and national security organizations backing the RFS.

Michael Frohlich, a spokesman for ethanol trade group Growth Energy, said he found several inconsistencies and misconceptions within the report, including that the ethanol industry takes up 40 percent of the nation’s corn supply. The chain restaurant group, he said, was not taking into account byproducts of ethanol production that go back to the livestock industry as feed.

“As John Adams said, ‘Facts are stubborn things,’ and they don’t seem to have a consistent stream of facts here,” Frohlich said. “They are distorting these facts to try to make the argument to manufacture the outcome they want.”