Independent restaurants worry about the fallout from a Sysco-Restaurant Depot deal. | Photo: Shutterstock.
The Independent Restaurant Coalition is calling on the U.S. Federal Trade Commission to block Sysco’s proposed acquisition of Restaurant Depot, saying that the deal would eliminate a crucial alternative used by many local operators.
In a statement on Monday, the coalition cited Sysco’s comments on the deal saying that it would create an “omnichannel partner for the entire foodservice industry.”
“The Independent Restaurant Coalition (IRC) believes the FTC must scrutinize that ambition for exactly what it is: the elimination of Restaurant Depot, the one meaningful wholesale alternative in many regions that independent restaurants have used for decades to avoid the minimum order requirements, delivery fees and pricing power of the nation’s largest food distributor, Sysco,” the group said in its statement.
The IRC was formed at the outset of the pandemic, in March of 2020, and represents thousands of local and independent restaurants.
Sysco surprised much of the restaurant world on Monday by announcing a planned acquisition of Jetro Restaurant Depot for $29.1 billion in cash and stock. The deal was largely panned on Wall Street amid fears that the distributor would amass too much debt in the acquisition.
But it also generated some fears among local restaurants worried about the impact on the prices and food quality they’ll get at Restaurant Depot. Sysco is the largest broadline distributor of food and other goods to foodservice companies around the country.
Restaurant Depot, meanwhile, is the largest provider of so-called cash-and-carry distribution in the foodservice sector. The company operates 166 warehouses in metro areas around the country, giving some 725,000 mostly small, local restaurant operators a source of food, paper and other goods at generally lower prices.
Sysco touted the deal as good for both companies, saying that its supply chain reach would enable Restaurant Depot to expand more rapidly. CEO Kevin Hourican noted that the cash-and-carry business is growing more rapidly than distribution and is a $60 billion to $70 billion market. “Cash and carry is a large and growing business, and it is not a business segment that Sysco meaningfully participates in today,” he told investors on Monday.
Erika Polmar, executive director with the IRC, said in a statement that the deal could leave smaller restaurants with fewer choices.
“For decades, Restaurant Depot has been the great equalizer for independent restaurants, the place where a small operator could walk in and get the same price as everyone else, no contract, no negotiation, no leverage required,” she said. “Sysco’s acquisition of Restaurant Depot doesn’t just limit competition, it changes the playing field entirely in Sysco’s favor, leaving independent restaurants with fewer real choices.”
She also cited ongoing struggles by independent restaurants coming out of the pandemic. Rising costs have eaten into profit margins, and the average operator makes thinner margins than they did before the pandemic, according to the National Restaurant Association. (That group has not taken a position on the Sysco-Restaurant Depot deal, according to a spokesperson.)
“Independent restaurants are already fighting every single day against rising costs and shrinking margins,” Polmar said. “Handing the nation’s largest food distributor a monopoly over the wholesale staples channel is a gut punch to every neighborhood restaurant in America, and the FTC has both the authority and the obligation to stop it.”
The IRC noted that Sysco plans $250 million in cost “synergies,” through combined procurement, “a figure that signals the merged company’s intent to leverage its dominant purchasing power to extract supplier prices that no remaining competitor can match.”
It also took issue with Sysco’s claim that the customer bases of the two companies do not match. Both companies serve independent operators, who will use both channels. They may get regular deliveries from Sysco and then supplement them with regular purchases from Restaurant Depot.
“That substitution behavior is the definition of a competitive market,” the IRC said. “Eliminating one side of it is the definition of anticompetitive consolidation.”
Sysco does have substantial competitors in the broadline market, notably US Foods and Performance Food Group, which recently abandoned talks that would have merged the two and created an even bigger distribution behemoth than Sysco.
US Foods does have its own cash-and-carry operation, called Chef’Store, which it acquired in 2020. But in 2024 the distributor announced plans to sell that operation, which now numbers about 100 locations, noting that benefits from such a combination have been “very limited.”
Still, IRC said that Sysco buying Restaurant Depot would eliminate competition. “Allowing Sysco to absorb the dominant wholesale cash-and-carry channel would eliminate a form of competition that no remaining distributor can replicate, compounding cost pressures that will be felt in every neighborhood in America,” the group said.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.
