Restaurant Depot's sale to Sysco could hike food prices, some customers worry

The four Lubrano brothers who own Piccola Bussola Ristorante in Huntington and La Bussola in Glen Cove make multiple trips weekly to Restaurant Depot in Farmingdale to buy a host of goods, such as takeout containers, milk, cheese, flour, sugar and frying oil, for their two eateries.

News this week that the nation’s largest food distributor, Sysco, plans to buy Jetro Restaurant Depot, the biggest cash-and-carry food supplier serving mostly mom-and-pop businesses, concerned John Lubrano, who said he worries the deal will lead to higher food prices and less convenience for his family's business.

With Restaurant Depot, "we see what we’re buying and we know what we’re getting. With dealing with a large distributor, you place orders and they suspend orders. And then they might be out of stock. You don’t know," he said.

Long Island restaurant owners are split on what the sale of Restaurant Depot, which has four warehouse stores on Long Island, could mean for their businesses, with some saying the deal could improve efficiency and convenience, while others worry about a decline in services and uptick in prices.

Filling the gaps

The Olympic Diner in Deer Park buys most of its food from Sysco, but the eatery fills in the inventory gaps between the biweekly deliveries by shopping at Restaurant Depot in Farmingdale, said Dawn Piscitelli, co-owner of the diner.

Piscitelli said she was pleased with Sysco’s product offerings and service, and anticipated the company’s acquisition of Restaurant Depot would benefit customers.

"I expect a good quality because I’ve experienced it from both ends, from Restaurant Depot and Sysco, and their products are great," she said. "I don’t see any downfall at all."

Some members of the Long Island Hospitality Association, which includes managers of food and beverage operations at hotels, restaurants and catering venues that are Restaurant Depot customers, are concerned about the company's sale, so they are seeking alternative regional distributor options, Dorothy Roberts, president of the group, said in an email Wednesday.

Others are waiting until the deal is finalized to assess the effect on their operations, she said.

Calls to block sale

Meanwhile, the Independent Restaurant Coalition, headquartered in Oregon, has called on the Federal Trade Commission to block Sysco’s purchase, saying in a statement Tuesday the deal would mean "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."

Houston-based Sysco Corp., however, maintains that Restaurant Depot would operate as a separate entity within Sysco, and that the companies serve different demographics.

"Both the Federal Trade Commission and federal court found in 2015 that broadline and cash & carry operate in different markets, serving different customer bases," a Sysco representative said in an email Wednesday. "They are widely recognized in the industry to be distinct modes of distribution, and we know that together they are better able to offer even more affordability and broadest assortment to all those customer types."

Restaurant Depot will continue to offer quality products at affordable prices after its sale is complete, the representative said.

Sysco, a publicly traded food distributor that serves business customers via delivery, announced Monday that it planned to buy Whitestone, Queens-based Jetro Restaurant Depot in a deal valued at $29.1 billion.

Jetro Restaurant Depot shareholders would receive $21.6 billion in cash proceeds and 91.5 million Sysco shares, Sysco said.

The sale is expected to close by the third quarter of Sysco’s fiscal 2027 year, subject to regulatory approval.

Founded in 1976, Jetro Restaurant Depot has 167 membership-based, wholesale warehouses in 35 states that operate as Jetro Cash & Carry or Restaurant Depot.

The company employs about 10,000 workers in the United States, including approximately 300 at its Long Island sites — in Bohemia, Farmingdale, Riverhead and Uniondale. The company has about 725,000 local customers across the country, 57% of which are restaurateurs and caterers and 10% of which are grocers.

Cost savings, more warehouses

Not only is Restaurant Depot’s customer base complementary to Sysco’s higher-volume customers, but the acquisition also would save about $250 million in annualized net costs in the first three years due to reductions in the expenses for acquiring products and inbound supply chain optimization, Sysco said in a statement Monday.

Sysco does not plan to close any Restaurant Depot locations, but it does expect to open more than 125 additional warehouse stores over the next two decades, with five to six opening per year, the company said.

No employee layoffs are planned at either company, Sysco said.

Sysco, which has 730,000 customer locations, employs about 75,000 people and has 339 distribution facilities in 10 countries, including the United Kingdom, France and Canada. The company’s 207 facilities in the United States include one on Long Island — in Central Islip.

Sysco stands to gain from its purchase of Restaurant Depot because the acquisition would increase its presence with independent restaurant operators, said David Henkes, senior principal at Technomic, a Chicago-based restaurant industry research firm.

"And every distributor in the world is trying to figure out how to do more with the street operator because they are a more-profitable customer to a distributor, right? I mean, large chains tend to negotiate contracts and tend to have cost-plus arrangements with ... distributors, so the margin is capped," Henkes said.

No end to competition

Even if the Sysco deal is finalized, a competitive market will remain because Restaurant Depot is not the only cash-and-carry game in town for small restaurants, since warehouse clubs, such as Costco and Sam’s Club, are among its biggest competitors, he said.

Also, the nation’s third- and fourth-largest delivery-oriented food distributors, respectively, US Foods and Gordon Food Service, have cash-and-carry operations, "so it’s not like ... Sysco is suddenly blazing new ground here," Henkes said.

Restaurant Depot customers are more value-focused than Sysco customers, who are willing to pay more for "white-glove service," which includes ordering products from sales representatives and having access to more goods, said Kristoffer Inton, senior analyst for the consumer sector at Morningstar Equity Research, a financial services firm in Chicago.

Sysco raising Restaurant Depot’s prices would be illogical given the cash-and-carry business’ target demographic, Inton said.

"Basically, I think a lot of the [company] changes would be behind the scenes in terms of the supply chain and trying to cut costs there," he said.

Restaurant Depot had $16 billion in revenue last year, while Sysco had $81 billion in sales in its 2025 fiscal year that ended last June.

Following Monday morning’s announcement of the planned acquisition of Restaurant Depot, Sysco’s stock price closed at $69.30 that afternoon, down 15% from Friday’s close of $81.80.

The stock closed at $72.17 on Wednesday.

Sysco has been reporting solid earnings for the past year, and the stock drop Monday was likely due to investors' concerns about the price the company plans to pay for Restaurant Depot and the large increase in debt to pay the cash portion of the deal, Inton said.

But the price seems fair for several reasons, he added, including the quality of Restaurant Depot’s business and potential cost savings, he said.

By Tory N. Parrish

tory.parrish@newsday.comToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.