Rising gas prices put pressure on Philadelphia restaurant costs
Gas prices remain elevated across the region, putting pressure on restaurants that rely on deliveries of food and other supplies. At one restaurant in Center City Philadelphia, higher transportation costs are adding to the price of ingredients.
At McGillin's Olde Ale House, most of the restaurant's beef comes from Colorado and Nebraska. Co-owner Chris Mullins, Sr. said the distance food travels adds to his costs.
"Top round is roast beef that we use for our sandwiches. A year ago, [it] was maybe $3.50, maybe $3.25," Mullins said. "This year, it's up to over $4.50 a pound."
According to AAA Mid-Atlantic, Pennsylvania's gas average was $4.57 on Monday, which is up 8 cents in the last week.
Mullins said produce is also becoming more expensive.
"A case of lettuce is going to be impacted greatly because that comes from Southern California and it's thousands of dollars for the diesel fuel increase since a year ago," Mullins said.
Buying local produce is one way Mullins is trying to keep costs down. He said he pays $16 for a 25-pound case of New Jersey tomatoes compared to $35 for a case from Canada. But with the Jersey growing season ending, he'll soon have to source tomatoes from Florida.
"I'm happy to have the tomatoes because they're available, but they're very expensive and the quality's not that good in Florida," Mullins said.
Mullins expects food costs to climb even more this winter.
Supply chain expert Kathleen Iacocca, an associate professor of management and operations at Villanova University, said restaurants often feel the impact of higher gas prices before grocery stores.
"Restaurants are in a really different situation in that they have less purchasing power and negotiation than grocery stores," Iacocca said. "They're holding less inventory, and they usually get their product much quicker because they want the food fresher. And so they almost have no choice but to pay these higher prices."
Iacocca said businesses can try to protect themselves by planning ahead and negotiating contracts with suppliers to lock in prices as fuel costs continue to rise. She said a jump in fuel costs does not translate equally across the food industry.
"If gas prices go up 35%, grocery store prices might go up 2% to 3%," Iacocca said. "Restaurants, though, sit in that middle area where they have more perishable items. So we're typically seeing that restaurants are absorbing a cost closer to 10 to 20% of that fuel increase."
Mullins is trying to hold off on raising menu prices as the restaurant continues to see a smaller lunch crowd than before the pandemic. He hopes keeping prices steady will bring more customers through the door.