Tariffs have yet to have much of an impact on the prices consumers and restaurants are paying for food or goods like electronics. But just about everybody believes they will at some point.
The Consumer Price Index rose 2.4% year over year in May, according to federal data. That wasn’t much of a change from April. Consumer food costs were up 2.9%, including 3.8% at restaurants, but that is more moderate than it has been in recent years.
The U.S. Federal Reserve this week left interest rates unchanged, but it, too, is bracing for higher costs to impact the consumer, and thus the broader economy. Fed Chair Jerome Powell said this week that he expects tariffs to result in higher prices this summer.
Consumers apparently agree with him. According to the survey firm Numerator, nearly 90% of consumers are concerned about the impact of tariffs, in line with earlier survey results. And 81% expect to adjust their finances or shopping habits in response.
One piece of good news: Consumers are less worried about the impact tariffs could have on the overall economy, with 33% worried about their impact, down from 41% in late April. Consumer fear over tariffs and the economy likely played a significant role in weak sales earlier this year.
Restaurant companies likewise appear less concerned of their impact. “The tariffs have had very minimal impact on us,” Yum Brands CEO David Gibbs said last month at the company’s annual meeting, according to a transcript on the financial services site AlphaSense.
For the most part, U.S. restaurant chains source their food supplies domestically, which blunts the impact of the taxes on their cost structure. Restaurant Brands International expects tariffs to have a 100-basis-point impact or less on its costs in the U.S., noting that “the vast majority” of its goods are localized.
Most of the products Noodles & Co. uses come from within the U.S. And more than half of that chain’s food purchases for the remainder of the year are under fixed-rate price agreements, the company told analysts last month. At most, the company said, tariffs could lower profit margins by 50 basis points.
Coffee is one product expected to be impacted. Dutch Bros expects 110 basis points of margin pressure because of higher coffee costs, impacted in part by tariffs—though most countries from which the U.S. imports its coffee are under a lower, 10% tariff rate.
Many restaurant companies learned how to effectively deal with supply chain headaches coming out of the pandemic, which has helped prepare them for the disruptions from the import tax policy.
Ultimately, it’s in imported goods from countries like China, subject to a 50% tariff rate on many items, that will see the highest cost increase.
Several restaurant companies have added language on tariffs in the risks sections of their annual reports this spring, according to a search on AlphaSense, including Noodles, Wendy’s, Dutch Bros, Yum Brands, Cheesecake Factory and others.
“A significant percentage of our inventory is directly or indirectly sourced outside the United States, and volatility in trade policy and tariffs could significantly increase our costs,” the food-and-games chain Dave & Buster’s said in its report.
Maybe the biggest impact in the restaurant industry is being felt at Cracker Barrel, perhaps for obvious reasons: It has a retail area where it sells a lot of goods made outside the U.S. That will impact its EBITDA, or earnings before interest, taxes, depreciation and amortization, by $5 million. And yet it wasn’t enough to keep the family-dining chain from increasing its outlook for full-year EBITDA.
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