New Study: Renewable Fuel Standard Could Cost Chain Restaurants Billions Annually

Thursday, November 29, 2012

(American Meat Institute)

The Renewable Fuel Standard (RFS) is driving up food prices for consumers and could cost chain restaurants billions annually, according to a new study by Price Waterhouse Coopers (PwC) for the National Council of Chain Restaurants.

In analyzing the impact  of federal ethanol policies on the chain restaurant industry, PwC reviewed numerous public and private reports and combined these findings with chain restaurant survey data to calculate the overall cost of the RFS mandate to chain restaurants.

“Policies encouraging the use of ethanol not only impact the corn market, but have unintended consequences for other parts of the economy,” the PwC report said. “Corn is an input into the production of a wide variety of food products, from baked goods to meat production.”

According to PwC,  the mandate could cost chain restaurants up to $3.2 billion annually, with quick-service restaurants witnessing cost increases upward of $2.5 billion, and full-service restaurants seeing increases upward of $691 million.

“The RFS mandate artificially inflates the price of corn, which increases costs throughout the system, from cattlemen and poultry and pork producers to dairy farmers and restaurant operators,” NCCR Executive Director Rob Green said. “The RFS mandate forces small business owners, franchisees and their suppliers to spend higher and higher sums on commodities, which ultimately drives up prices on the end-user, the consumer.”

The production of ethanol and its byproducts represent the largest use of U.S. corn production with roughly 45 percent of all U.S. corn dedicated solely to ethanol production, NCCR noted, adding that the price of corn has nearly quadrupled since the RFS mandate was established in 2005.

“Chain restaurants aren’t all mega-corporations,” said Ed Anderson, owner of a four unit Wendy’s franchise in Virginia and Chairman of Wendy’s Quality Supply Chain Cooperative, in NCCR’s news release. “Many are systems of small business franchises like the one my family owns.”

“The government picked winners and losers when they passed the RFS mandate,” Anderson said. “This mandate is costing me $20,000 to $30,000 per restaurant. It is blatantly unfair and we urge Congress to repeal it.”

To read the complete report, go to http://www.nccr.net/

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