A new wave of inflation from skyrocketing oil prices could wreck havoc on the US restaurant industry.
“The cost of food is is going up for different situations. The cost of labor is going up for different situations. But restaurants already were a very fragile type of small business,” chef and restauranteur José Andrés told Yahoo Finance at the Semafor World Economy conference on Tuesday (video above).
“The vast majority of restaurants in America are owned by small chefs and restaurateurs. If you are working day and night and at the end of the year every year you have losses, why are you going to keep open?,” he added.
Andrés is a world-renowned Spanish-American chef and humanitarian whose career has redefined the role of a modern culinary professional.
After moving to the US in 1991, he popularized authentic Spanish tapas and eventually built the José Andrés Group, which operates over 40 restaurants.
He’s also the founder of World Central Kitchen, a non-profit that serves as a first responder for food during humanitarian and climate crises.
Andrés and his teams have served over 313 million meals in Gaza since 2023 and continues massive relief efforts in Ukraine and Lebanon.
“I have a feeling restaurants right now, they are in one of the most difficult situations. And we went through Covid! But right now it’s a situation that for the restaurant industry, I have a feeling if we’re not careful, restaurants are going to go down and we’re going to see a bigger percentage of closures than we imagine,” Andrés said.
Restaurants are battling headwinds from all angles.
The Labor Department on Friday said that its Consumer Price Index (CPI) was 3.3% higher in March than a year ago.
Gasoline prices rose 21.2% due to higher oil prices stemming from the Iran war. It’s the largest monthly increase since record collection began in 1967. Year over year, gas prices are up 18.9%.
The fruits and vegetables index increased 4.0% over the last twelve months, and the nonalcoholic beverages index rose 4.7%.
It’s proving hard to deliver a menu to diners right now in a cost effective way. The industry is also having difficulties filling lower paying jobs such as dishwashers. Immigration crackdowns by the Trump administration hasn’t helped, either.
Restaurant staffing levels remain below pre-pandemic readings in 18 states and the District of Columbia, according to the National Restaurant Association.
Andrés adds that declining tourism has also hurt the industry.
“We are still $50 billion short of what was the peak of tourism in America. This also has put a very big strain in restaurants all across America,” he said.