"Pain at the Pump"-Impact on Small Businesses
Wednesday, May 21, 2008SUSIE GHARIB: Airlines aren't the only business suffering from soaring energy costs. $4 a gallon gas is cutting into the bottom line at companies, big and small. While many larger firms like airlines can pass those costs onto consumers, small businesses are struggling to preserve profits. As we continue our series "Pain at the Pump," Erika Miller looks at the coping strategies of three different small businesses in New Jersey.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: When fuel prices started rising, Bernie Wilker got nervous about profits at his business, Alphagraphics of Paramus. The copy and printing franchise offers free pickup and delivery service for customers. Wilker knew that charging for those trips -- or raising prices on his services -- would not be a smart move.
BERNIE WILKER, OWNER, ALPHAGRAPHICS OF PARAMUS: I don't think our customers will stand for it. They might understand it, but they'll just go looking for someone who is more competitive, who will say to them, we're going to absorb the increase. So that's what we do. It's a cost of doing business.
MILLER: So he opted to cut costs by swapping the firm's SUV for a Prius hybrid vehicle. Remarkably, the Prius easily fits 15 crates of paper in the back. Recently, the company also started using the car to pick up supplies from vendors.
WILKER: Vendors are now putting surcharges on to their bills for delivery. There used to be none. About six months ago, they went to a I think $4 a delivery surcharge. Last month, they went to a $6 a delivery. Well, that's a 33 percent increase.
MILLER: Just down the road, Anthony Franco's pizza is also feeling the pinch from higher gasoline prices. The restaurant says it has seen significant increases in the cost of ingredients like cheese and green peppers, all pushed up by rising transportation costs. Co-owner Greg Fila reluctantly raised his prices two months ago, rather than compromise on quality or freshness.
GREG FILA, CO-OWNER, ANTHONY FRANCO'S PIZZA: You can't start cutting corners, you know? You got to operate your business like you always have. Now you start cutting corners. People will realize that and you start losing customers.
MILLER: There's another way higher fuel prices have hurt Anthony Franco's pizza. The restaurant says it is harder to find drivers to make deliveries because they don't get reimbursed for their gasoline.
FILA: About it a year ago, give or take, I used to be able to hire 10 drivers a day if I wanted to. Right now, it takes a little time. It takes a little time. You can't do it right away.
MILLER: Delford Flowers in River Edge is trying to keep profits from wilting due to high fuel prices. Owner Randi Duffie says her wholesale prices for flowers have risen sharply the past few months because most come from overseas.
RANDI DUFFIE, OWNER, DELFORD FLOWERS & GIFTS: A typical flower, per se, would get trucked from the farm to the airport, from the airport then to the United States, from that airport to my wholesaler to me. And so, you can see, that fuel has been involved in that transportation all the way down the line.
MILLER: She says roughly 80 percent of her business is deliveries. In addition to raising her delivery fees, she has tried to conserve fuel.
DUFFIE: It used to be a customer would call. We'd make that delivery no matter what time of day. However, now because of the fuel impact, we've had to say we can only go north in the morning or we can only go south in the afternoon.
MILLER: But as she and other small business owners know, you sometimes have to go the extra mile to keep business blooming. Erika Miller, NIGHTLY BUSINESS REPORT, Paramus, New Jersey.
GHARIB: Tomorrow, we wrap up our series "Pain at the Pump" with a look at how record high energy costs are affecting state and local governments.
