Is inflation the chicken, the egg or the panini?
The $6.50 Cuban sandwich sold at the three Pressed sandwich shops in Boston will likely be going up in price about 32 cents before the end of the month.
After several years of keeping prices steady, owner Andrew Pierce says inflationary pressures are squeezing his profits like a hot panini press, and he’s got to raise prices or his business will end up oozing out like melted cheese in an overloaded sandwich.
OK, I got a little carried away with the metaphor.
But the bottom line is that small businesses are being hammered by inflation.
Do you hear that, federal policymakers?
Federal Reserve policymakers have been struggling over whether to take further action to boost economic growth or to begin raising rates to curb escalating inflation.
If you ask small business owners, they’ll probably tell you to focus on inflation because rapidly rising prices for a host of supplies are causing them to boost their own prices, and who do you think won’t like that? Customers.
No customers, no sales. No sales, no economic growth.
The day I interviewed Pierce, a story in the Wall Street Journal came out about how inflation is causing workers to brown-bag it and bypass eating out for lunch.
Pierce hadn’t read the story yet because he was so busy with work that day, so I had to break the bad news.
“Oh, man,” he said with a hint of agony in his voice. “Our biggest competitor is the lonely brown bag.”
He knows even a 5 percent hike in prices for his sandwiches will get a lot of customers saying, “Forget this. I’ll just bring lunch from home.” But he has little choice given that meat prices have skyrocketed 15 to 20 percent this year.
“Inflation has made it difficult for us to squeeze out any profit,” he says.
Indeed, a new study put out by the National Federation of Independent Business found that inflation is the No. 1 concern among their members.
“Since 1983, the average percent of owners citing inflation as a top problem has been 3 percent. In February 2008, 8 percent cited inflation as their top problem. By May, 17 percent said inflation was their top concern, and in June it rocketed to 20 percent.”
Inflation isn't the only culprit. The growing push for businesses to go green is also taking a bite out of the bottom line.
Pierce says customers want him to use environmentally friendly products and paper goods, but those cost more. “People are not willing to pay more for that,” he explains.
So, after looking within his operations, which also includes fourth restaurant called The Carving Station, and getting rid of excess fat where ever possible, he’s left with no choice but to raise prices on many of his products.
For what it’s worth, Pierce offered his advice to the Federal Reserve: Take some pressure off the inflation panini press.
