Drought, Refinery Fire Affecting Local Restaurants

Beef Prices, Higher Gas Prices Among Factors Hitting Restaurants' Bottom Line

Restaurants across the country, including in San Diego, are feeling the effects of the drought in the Midwest and the Bay Area refinery fire.

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Late in the morning on Tuesday, the kitchen is hopping as the Brigantine in Del Mar prepares for the lunchtime rush.

Mike Morton, president and CEO of the Brigantine Family of Restaurants, said while the Del Mar racing season brings a lot of customers these days, it's the near future that worries him.

"We're dealing with fuel surcharges; they're paying more for gas out there and that really inhibits their ability to go out and enjoy meals out," said Morton.

The cost of deliveries goes up along with gas prices, which are up about 40 cents a gallon for regular in California since July. Much of that being blamed on the Chevron refinery fire in Richmond.

On top of that, the Midwest drought has scorched cattle feed. Experts forecast up to a five percent increase in beef prices next year.

So why not pass higher operation costs on to the customer? Because the restaurant business is competitive and owners know they're not the only game in town. In fact, there are about 7,900 restaurants in San Diego County, according to the California Restaurant Association.

"If you've got to compete in this environment, you can't just pass price increases all the time because people have choices and they'll go elsewhere," explained Morton.

Morton also said employee health care mandates from President Obama's plan that are scheduled to begin in 2014 mean about 900 employees will have to contribute more out-of-pocket, as will the restaurant.

"We're approximating anywhere from $4,000 to $5,000 per employee on an annual basis," Morton told 10News.

The Brigantine is a 13-restaurant group with more buying power than smaller restaurants that are facing the bigger cost crunch.

Morton said the last thing he wants is for smaller, "mom-and-pop" restaurants to go under.

"They help everybody because typically when you have more restaurants in an area, it just draws crowds, and crowds breed crowds and everybody's going to flourish," said Morton.

In the short term, beef prices are actually expected to drop as suppliers dump cattle on the market to avoid the cost of feeding them.

Prices are expected to spike in the next cycle.

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