(The Center Square) – Businesses up and down Illinois have seen impacts stemming from high fuel prices in recent weeks due to refinery issues and foreign entanglements impacting international trade. One executive told The Center Square what fast food restaurateurs have been telling him about those impacts.
Trever Gallina, senior vice president at Matthews Real Estate, is primarily focused on properties for quick service restaurants such as fast-food franchises.
He said in the past few weeks, he’s heard from owners of establishments across the Midwest that have seen adverse impacts from the high costs within the fuel market on both sales and costs.
“First and foremost, it hits the consumer obviously, right? Like there’s sort of, you know, the higher the price of gas, the less people want to go out and buy food,” Gallina said. “The other way it impacts restaurants is diesel, right? The delivery goes up.”
He noted a statistic, originally from Revenue Management Solutions, a data collection and analysis group, that found when gas prices increase about 10% of normal, drive-thrus see a reduction in traffic of about 1% of customers per day.
“One source says that for every 10% increase in gas you lose 1% of your customer base and for every dollar the price of a gallon of gas goes up, you lose about six customers a day per restaurant,” Gallina said.
Gallina said that in discussion with one Midwestern Burger King franchisee, they said it feels like a lot more than 1% of revenue lost because of how many restaurants he owns across the region.
Gallina noted that while fuel prices aren’t driving restaurant owners and franchisees out of the industry, the thought of leaving the industry does occur to some owners.
“People who own these properties need to make sure that their tenants can pay rent and the tenants can’t pay rent [if] they don’t have customers,” Gallina said. “We have not seen a wholesale fire storm of, you know, ‘let’s get out of the restaurant business, gas is too high.’ No, that has not happened yet, but it comes up in the conversation all the time.”
He said that the cost of fuel and its impacts on the supply chain have also hit restaurants in the Midwest, and those costs are being passed on to consumers to varying degrees.
“Some brands do their best to keep prices low. Others got people – if it’s a franchisee with seven stores or two stores – will just try to get away with it and nothing’s really stopping them,” Gallina said.
He noted that in and around Chicago, fast-food chains might struggle more than compared to other metros in the Midwest due to the area’s notably high motor fuel taxes.
“What puts Chicago area restaurants at risk obviously is motor fuel taxes in addition to the already high price. You know Chicago’s got the highest price of gas basically in the Midwest. Which is obviously no surprise,” Gallina said. “It’s just the cost of doing business in the big cities, but it is pretty short it is pretty – it just makes it that much more riskier for concepts to come in.”
The data of fuel prices, as he pointed to, exemplifies the heightened costs, as the price for a regular gallon of gasoline Monday was $4.67 across Illinois, but $4.85 per gallon in Cook County, according to AAA gas price data.
