WASHINGTON, Nov. 28, 2012- The National Council of Chain Restaurants (NCCR) today released a report on the impact of the Environmental Protection Agency’s Renewable Fuel Standard (RFS) on the chain restaurant industry, which indicated the mandate increases costs throughout the food supply chain.
NCCR commissioned PricewaterhouseCoopers (PwC) to complete the 32-page report, released during a Capitol Hill press conference today and available here.
John Stell, an author of the study and director at PwC, said the RFS costs a typical restaurant from $2,800 to $18,000 per year, according to low- and high-end ranges he used for the study.
“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,” said NCCR Executive Director Rob Green, who further maintained that the RFS forces business owners to spend more on commodities, “which ultimately drives up prices on the end-user, the consumer.”
PwC concluded that the RFS 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“The federal RFS mandate is essentially an ethanol tax on consumers and should be repealed,” Green said.
Following the release of the PwC report, Growth Energy CEO Tom Buis released a statement calling the study flawed and claimed “the true culprit behind rising food prices is the cost of energy, and in particular oil.”
Energy groups assert that more than 80 cents of every dollar spent on food comes from transportation, packaging, and advertising, which are driven by oil prices.
“Numerous independent studies and a recent EPA analysis have affirmed that ethanol production has little to no impact on corn prices, and therefore little to no impact on food and feed prices,” noted the Fuels America coalition today. The energy groups added the RFS also reduces the amount of fuel we need to import, saving Americans $50 billion on imported fuel costs last year.
“Only 14 percent of the price of food is attributable to the cost of the commodity, while the rest can be attributed to energy costs and marketing,” Growth Energy’s Buis said, adding that the restaurant groups are attempting to “distort the facts in order to justify higher profits.”
“Follow the money – the less these big corporations have to pay their hard working farmers and ranchers to produce the food, the bigger dividends for their shareholders,” he said.
However, Ed Anderson, owner of a four unit Wendy’s franchise in Virginia and Chairman of Wendy’s Quality Supply Chain Cooperative, said “chain restaurants aren’t all mega-corporations. Many are systems of small business franchises like the one my family owns.”
Anderson, who said the mandate is costing him $20,000 to $30,000 per restaurant, noted during today’s press conference that 80 percent of the Wendy’s system is owned by franchisees, “but Congress passed the ethanol mandate and restaurants are being hit at a time when our economy can’t afford it.”
Rep. Bob Goodlatte, R-Va., sponsor of legislation to repeal the RFS, said today the NCCR study “further underscores why this is bad policy and why Congress must act to fix this broken policy.”
Goodlatte highlighted the study finding that shows the RFS mandate to cost individual chain restaurants up to $18,000 per year.
“This $18,000 tax is caused by the federal government picking winners and losers,” he said. “Promotion of the RFS means this $18,000 cannot be used by restaurants to hire new employees or invest in upgrades to their facilities.”
Using Anderson as an example, Goodlatte said “these franchisees are small businesses and these added costs are not easily absorbable.”
Goodlatte, named as the chairman of the Judiciary Committee for the 113th Congress and a member of the Agriculture Committee, said he plans to hold more hearings on the RFS. He added that the 156 House members who signed a letter asking EPA Administrator Lisa Jackson to waive the mandate are likely supporters for his legislation. The Congressman called Jackson’s decision to turn down the appeal for a waiver of the mandate a “political decision.”
However, Goodlatte said “if turns out that reforming the law is more feasible to solving the issue then we’ll push for that” instead of a full repeal.
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