Restaurateurs Latest To Urge RFS Repeal

National Council of Chain Restaurants-PwC study claims RFS costs restaurants $3.2 billion annually

Published on: Nov 29, 2012

The National Council of Chain Restaurants on Wednesday released a new report regarding the impact of the Renewable Fuels Standard on the chain restaurant industry, estimating that the mandate could cost chain restaurants up to $3.2 billion annually.

To study the impact of federal ethanol policies on the chain restaurant industry, NCCR commissioned PwC US to estimate the potential cost and economic impact of the federal RFS mandate. PwC reviewed 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.

PwC estimated the impact under several scenarios and concluded that the RFS could cost quick-service restaurants about $2.5 billion, and full-service restaurants seeing increases upward of $691 million.

National Council of Chain Restaurants-PwC study claims RFS costs restaurants $3.2 billion annually
National Council of Chain Restaurants-PwC study claims RFS costs restaurants $3.2 billion annually

NCCR Executive Director Rob Green said the RFS has distorted the market and increased costs throughout the food supply chain, and has an adverse effect on the chain restaurant industry, which Green said has witnessed marked increases in commodity prices and associated costs.

"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," 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."

Ed Anderson, owner of a four-unit Wendy's franchise in Virginia and Chairman of Wendy's Quality Supply Chain Cooperative, stressed that chain restaurants aren't all mega-corporations, noting that many are family businesses.

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

Not Everyone Agrees

In response to the new study, several ethanol groups pointed out EPA's own analysis, and the cost of eating out.

"Many others are already pointing out the numerous, debilitating flaws in the NCCR's so-called study. But the fact remains, if NCCR were truly concerned about the cost of food in America, they would have simple advice: eat at home," Iowa Renewable Fuels Association's Executive Director, Monte Shaw, said.

Growth Energy CEO Tom Buis agreed. "The processing, packaging, wrapping, storage, refrigeration and transportation costs are the true drivers in price increases. They are all energy intensive – it takes a lot to bring food from the farm to the table. And that does not include the countless dollars used to market a product," Buis said.

With food production in mind, American Coalition for Ethanol Executive Vice President Brian Jennings said it's not just cost, ethanol provides a benefit, too.

"We refuse to take criticism from an industry that charges consumers four times what fast-food companies pay for food," Jennings said.  "Our industry manufactures more than 33 million metric tons of distillers grain every year, which is enough cattle feed to provide every person in the U.S. with 4 quarter-pound hamburgers every week for a year."

ACE pointed out that the EPA reviewed 500 different market scenarios prior to issuing its decision to deny waiver requests.

"In consultation with the USDA, EPA also estimated how these projected changes in corn prices would influence U.S. food prices. They found that a $0.07/bushel decrease in corn prices would result in a 0.04% decrease in the food consumer price index," ACE noted in a statement Wednesday.

Jennings offered a strong response to the study: "Take this fast-food study with as much salt as you'd find in one of their meals."