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Trump trade war: IHOP, Applebee’s CEO on tariff benefit for restaurants

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Applebee's 2Hollis Johnson/Business
Insider

  • Dine Brands CEO Steve Joyce, whose company owns popular
    brands like IHOP and Applebee’s, laid out how President Donald
    Trump’s trade war is helping restaurants.
  • China, Canada, Mexico, and other countries have placed
    tariffs on US agricultural goods.
  • This means farmers have a tougher time selling to those
    countries and are left with more supply.
  • As supply builds, prices plunge for crops and livestock.
  • This makes certain ingredients cheaper, like those used at
    IHOP and Applebee’s.
  • We are a significant player in the food industry,”
    Joyce said. “What it looks like is, our overall product mix — the
    cost of it is gonna decline over the next year. That helps with
    margins.”

While President Donald Trump’s tariffs may be
bad news for retailers like Walmart and Costco,
the CEO of
IHOP and Applebee’s says those chains are set to profit. 

“Our product costs are probably going to come down,” Dine Brands
CEO Steve Joyce told Business Insider last week. “I don’t want to
be the economist on this, but other
people have said the tariffs are building up
inventories.
 Inventory build up means lower
prices.”

The good news for Dine Brands is coming at the expense of many US
farmers, who are seeing prices for their crops and livestock
tumble from the trade war.

That’s right: Trump’s decision to slap tariffs on steel,
aluminum, and $250 billion worth of Chinese goods has actually
been beneficial to the restaurants that rely on their crops and
livestock for ingredients.

In response to Trump’s tariffs, countries like China, Canada, and
Mexico responded with tariffs of their own on US agricultural
goods. These new duties on American goods, like pork and
soybeans, caused importers from those countries to look elsewhere
for their agricultural needs and left many US farmers unable to
sell products abroad.

The inability to sell these goods to key markets has caused a
backlog of supply for US farmers, forcing them to cut prices. The
cuts on the agricultural products means that ingredients
for the food used at IHOP and Applebee’s gets cheaper
.

Combined, IHOP and Applebee’s purchase billions of dollars of
food each year, Joyce said. 

We are a significant player in the food industry,” Joyce
said. “What it looks like is, our overall product mix — the cost
of it is going to decline over the next year. That helps with
margins.”

Read more:
The full interview with Joyce on IHOb madness, whether
millennials are really killing Applebee’s, and
more»

According to
data from Plate IQ
, a restaurant invoice management
company, the US restaurant industry could save as much as
$27 million on major non-seafood ingredients like corn, pork, and
cheese this year due to the trade war.

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