Fast-food companies say biofuels hurt their profits - MyFoxAustin.com | KTBC Fox 7 | News, Weather, Sports

Fast-food companies say biofuels hurt their profits

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From the grocery store to your favorite takeout joint to the drive-thru window, you're paying more for what you eat and leaders in the fast food industry say the reason for these increased costs is the federal government's continued support of corn-based ethanol.

The bushel price of corn has nearly tripled in the past decade. Forty percent of what's grown today goes into fuel tanks and that percentage could rise if the current federal mandate--known as the Renewable Fuel Standard--remains in place.

"It's harder every day to offer great value because our costs are skyrocketing," Lisa Ingram, president of White Castle, recently said in Washington. "In fact, since the RFS became law our cost for beef has increased by forty-seven percent."

The fast food industry contends that with more corn going to ethanol gas, there's less for traditional corn-based food products and feed for farm animals, thus driving up the costs for restaurant owners.

That includes Ron Ross, who owns four Wendy's restaurants in southern California.  He cites an industry study showing how increased costs -- allegedly tied to the RFS -- take $25,000 in revenues away from each store.

"We go out and set our budgets every year. And we say, 'man, food costs are going up.' The next year food costs are going up even higher. And then food costs going up even higher. And all of a sudden you go back and say, 'man, what happened to this?'"

Ross, originally from Indiana, has been with Wendy's since 1979, working his way up from a manager-trainee.  He says the biggest change he's seen over the years, other than increased costs, is new burdensome regulations from all levels of government.

He says he's had a successful career and is proud to call himself a "burger flipper" but expresses frustration at what he sees as an artificial and unnecessary hit to his bottom line. "The farmers are doing very well and God bless them -- they provide our food," Ross says. "But the difference is when the government decides who the winners, the losers are, that's when it is a problem."

The head of the ethanol industry's trade association says his members are being unfairly set up as the bogeyman.  Bob Dinneen of the Renewable Fuels Association says, "we absolutely believe that the chain restaurants are trying to pull a super-sized whopper here. Because there is just no way that ethanol is driving food prices."

Dinneen says the primary driver of increased food costs is oil and the expense of transportation throughout the supply change. To that end, he contends, food costs have been held under control by blending ethanol with imported oil. 

"It the RFS were to go away, look, gas prices would go up--on day one. Ethanol is driving down the price of gasoline today."  Dinneen says the current price at the pump would jump by $1.09 a gallon without the RFS.

As for Ross's increased costs, he says the customer eats part of that in addition to a burger with fries.

The cost of Wendy's values meals at his stores have gone up by 40 cents in recent years.  But competition keeps him from passing it all to his patrons. 

 He says his employees are seeing less generous bonuses and plans for adding an additional store have been delayed. "[T]here's more price increases for the consumer. Less profitable situation for me. So, again, it goes back to you can't build as much as you'd like to. You can't reinvest in your business as you'd like to. Because there's not as much profit as there was before."

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