Tariff Tensions Threaten U.S. Restaurants with Rising Costs and Supply Chain Disruptions

A recent QSR Magazine article explores the growing impact of shifting tariffs on the foodservice industry, particularly U.S. restaurants, which could face significant cost increases and supply chain disruptions. As trade disputes escalate, including U.S. tariffs on European alcohol and duties on imports from Canada, Mexico and China, the National Restaurant Association predicts that tariffs could cost U.S. restaurants $12.1 billion. 

A proposed 25% tariff on North American food and beverage imports is a key concern for the industry, as many ingredients — like fresh produce — are not easily sourced domestically. Restaurants, which already operate on thin margins, are caught between rising food costs and the challenge of passing those costs onto consumers without further losing customers.

“Restaurants aren’t like other small businesses,” Michelle Korsmo, president and CEO of the National Restaurant Association, said in a letter to Trump, where she asked him to exclude food and beverage products from the tariffs. “They run on tight pre-tax margins that average 3-5 percent,” she wrote, “and they have, on average, 16 days cash on hand.”

While the long-term impact of these tariffs remains uncertain, restaurant operators are advised to prepare for potential cost hikes and supply shortages. Some larger chains have improved supply chain strategies and relationships during the pandemic, but smaller chains face more vulnerability due to limited purchasing power and fewer supplier options. 

Despite the uncertainty caused by rapidly changing trade policies, restaurant operators are encouraged to focus on controlling the factors they can manage, like maintaining strong supplier relationships and adjusting menus if necessary. However, the broader economic uncertainty, including recession fears and consumer behavior shifts, adds another layer of complexity, with potential for industry attrition in the form of bankruptcies or closures.

Read the full article here.

Every great franchisee had help. Franchisees turn to Growth Club to leverage its 100+ years of franchise experience to help navigate the difficulty of finding the right franchise opportunity. Visit www.1851growthclub.com and see what we can do for you.