Some Iowa restaurant owners said they are raising their menu prices as the cost of supplies like meat and to-go containers rise due to supply chain strains during the COVID-19 pandemic.
Owners shared their concerns during a Zoom roundtable with U.S. Rep. Cindy Axne, D-Iowa, Thursday morning, as the industry faces compounding financial challenges that aren’t expected to dissipate anytime soon.
Bubba, a Southern-style downtown Des Moines restaurant has operated on take-out orders since March and opened its dining room on Saturday for 50% occupancy, said Chris Diebel, co-owner of Bubba.
However, 85% of orders remain carryout and delivery, Diebel said.
In the last five days, the restaurant lost up to 40% of its typical revenues. Fees from third-party delivery services like DoorDash and GrubHub can take up to 20% of profits from an order. Add on unexpected costs from take-out containers, where companies are also raising their prices, and it adds another burden for restaurants.
To try to make up for losses, Diebel said menu prices have increased between 25 cents to $1, while customers who order through DoorDash or GrubHub will incur an additional 10% fee.
“We’ve got some challenges there,” Diebel said.
The issue isn’t unique to Des Moines. In rural Iowa, at Classic Cafe in Malvern, owner Alicia Hagen raised her burger prices by $1 as she struggles to find supplies ranging from salmon to beef.
None of these issues are going away. Restaurant delivery sales are up 70% from last year according to Barron’s, a finance magazine. While consumers were already gradually increasing their take-out consumption before the pandemic, COVID-19 has drastically accelerated that trend as people choose to stay at home.
Al Laudencia, owner of Big Al’s BBQ in Des Moines and Adel, relies on a stable meat supply to produce his smoked meats and hamburgers. But for the southern-style barbecue restaurant, finding the meat and then paying for it at a premium is troublesome.
In the last three weeks, his meat supply prices have doubled and even tripled in some cases.
Most restaurant owners who are in contracts with food suppliers are also finding themselves at the whims of “acts of God” clauses, that frees suppliers from delivering expected products and allows them to raise prices.
Deciding between eating the costs or passing it on to the customer is a dilemma, Laudencia said. “How are they going to respond to that?” he said.
Widespread meat shortages are expected to continue hurting restaurants and grocery stores, despite President Donald Trump ordering meatpacking plants to continue operations. Trump and Gov. Kim Reynolds predicted May 6 that meatpacking operations would be “fully back up” within 10 days.
While plants, like those in Perry and Waterloo are operating, production is still slow as the industry tries to get back on its feet. At the Tyson plant in Perry, 730 workers tested positive for COVID-19. In Waterloo, 1,030 Tyson workers had the virus.
Iowa is also one of the states requesting a federal investigation into meat price manipulation. Attorney General Tom Miller is asking the U.S. Department of Justice to investigate alleged price gouging by meatpackers. Despite low cattle prices, beef prices are higher than normal at the store.
Axne said the next round of the Paycheck Protection Program will focus on assisting restaurants. Restaurants in the past have critiqued the program, saying they struggled to receive funding. Others have said the loan forgiveness is too restrictive by requiring 75% of funds to go toward payroll.
Axne said she wants Trump to invoke the Defense Production Act to require personal protective equipment for meatpacking workers to mitigate the virus and keep the supply chain flowing
“We’ve got to get this meat out to folks,” Axne said.
She acknowledged the problems for restaurants are complex and will require assistance at several levels. Problems include transporting fresh food quickly enough and supply companies raising their prices for small businesses.
“We have to be able to figure something out because at the very end is all of you small business owners we have to continue to support,” Axne said.