How oil and gas prices affect your restaurant bill

We are all watching what is happening with gas prices every day.

The price of gas and oil can change almost hourly and, unfortunately, this affects more than just how much we pay at the pump. The ripple effect on almost every industry is becoming apparent, but how it affects restaurants is multifaceted.

I want to take the time to help you understand how oil and gas prices will increase the cost of food, utilities and eventually how much you will spend at restaurants and even how often you will go out.

Fuel makes food more expensive

Long before food gets to your restaurant table, gas and oil costs begin to drive up its price.

Manufacturing costs fluctuate with fuel, whether producers lease or purchase equipment. The cost of irrigation will go up as the overall price of utilities goes up. When it’s time to transport their products, distributors will be paying more for fuel, which will have a trickle-down effect from the farm to the restaurant to your plate. Produce, dairy and meat are immediately impacted by the rise in fuel costs due to transportation costs.

Other items that we don’t usually consider in fuel pricing are bacon, which is smoked and takes energy to produce, and even coffee because the beans must be roasted.

Changes in farm-to-table

A hundred and fifty years ago, a farmer transported food five to perhaps 50 miles to customers by horse-drawn wagon over poor roads. There was no modern refrigeration, so fresh food spoiled quickly. Even trains weren’t fast enough to avoid spoilage. Food was fresh, smoked, canned or pickled, and people ate what was available to them within a few days.

Today, farm-to-table can be anywhere within 250 miles, which means it has to be transported in refrigerated vehicles (none of which are horse-drawn). Most of the food on your restaurant plate travels anywhere from 1,000 to 1,500 miles by truck, train or plane, all of which require oil and gas. The person bringing you the food today is not a farmer but a unionized truck driver or pilot.

Fuel and the cost of labor

It seems crazy that what is happening half a world away can immediately affect the cost of labor and employee turnover.

When you are an employee relying on a paycheck that needs to stretch as far as possible, you are looking at the price of filling your tank a lot more closely. Once the price hits a certain level, many employees look for work closer to home, causing employee turnover.

The other way that fuel prices drive labor costs is that employees ask for raises to cover the higher cost of living and transportation. Once turnover begins and raises are implemented, the costs will soon be reflected in menu prices.

Gas prices change our behavior

With gas prices heading above $4 a gallon in Chicago, consumers will be spending more on gas and have less money in their pockets for discretionary expenses — like going out to eat. Ordering from Uber Eats, Grub Hub and the like will begin to decrease as their fuel and labor costs increase, which means the price of the food from these delivery companies will rise even faster.

Like you, restaurants are watching the price of fuel very closely and they are doing their best to not raise prices even though they are being affected at this time. However, if the current situation lasts another month, expect to see restaurant prices go up.

• Izzy Kharasch is the founder of Hospitality Works, a consulting firm that has worked with 700+ restaurants and small businesses nationwide. He is offering Daily Herald restaurant owners a free consultation by contacting him at Izzy@HospitalityWorks.com.