Record-high food prices could be the tipping point this year for U.S. restaurants already struggling with high debt loads and tightfisted consumers.
The economic downturn and drop in consumer spending has sent a handful of restaurant chains – such as Uno Chicago Grill pizza, Fuddruckers and Charlie Brown’s Steakhouse – into bankruptcy court during the past year. And 2011 is not likely to be much better, experts say.
“There are many companies that can absorb an increase in food costs,” said Steven Simms, a senior managing director at FTI Consulting who has worked on restaurant restructurings. “For companies that are teetering on the edge though, it’s just one more pressure point that they are going to experience as it relates to profitability and their ability to service debt.”
Food prices have soared as consumers in emerging economies have grown richer and erratic climate conditions have hurt supplies. Wheat prices have surged 60 per cent this year, and restaurants have also been hit by increases in beef, cheese, cooking oil and produce costs.
