Rising prices, delayed hires: How Tennessee small businesses are responding to inflation


When Max and Kayla Palmer started their Nashville bagel business in 2020, they were subject to the whims of pandemic pricing. Max Palmer remembers paying $16 for 50 pounds of flour and going “black market yeast hunting” to find neighbors who would sell them enough of the baking essential for the next day’s batch. 

Now, the yeast shortage has resolved, the price of a 50-pound bag of flour has nearly doubled to about $30 and the Palmers have grown from delivering bagels to restaurants and farmers markets to having their own Bagelshop storefront in Donelson.

“Here we are four years later. Things are a lot different, and prices have risen a lot since then,” Palmer said. “It’s pretty crazy.”

Pandemic-era supply shortages have eased but sustained high inflation is taking a heavy toll on business owners across Tennessee and beyond. Small businesses like Bagelshop contend with inflation impacts on a daily basis, from climbing operations costs to difficulties recruiting and retaining employees.

For the past 28 months, the National Federation of Independent Business’s Small Business Optimism Index has fallen below the 50-year average of 98 and, in April, the index dropped to 89.7. 

The main cause of stress? Inflation, according to NFIB’s April 2024 report.

“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Overall, small business owners remain historically very pessimistic as they continue to navigate these challenges. Owners are dealing with a rising level of uncertainty.”

A recent report from the U.S. Department of Labor showed wholesale goods prices rising consistently through April.

On the whole, Tennessee has the second-highest inflation rate in the U.S. at 3.8%, according to an analysis of index data by Moody’s Analytics. The only state with a higher 12-month rate is Florida at 3.9%.

Meanwhile, seasonally adjusted average hourly earnings in Tennessee increased 2.4% in the last year, according to an economy tracker from Middle Tennessee State University and the Tennessee Advisory Commission on Intergovernmental Relations. 

“I am ordering groceries for our shop every single day,” Palmer said. “The prices I see today are probably different than they were the day before, and there’s nothing I can do about it.”

Palmer said he and his wife have done their best to avoid passing off the rising cost of goods onto their customers, though they have had to bump up a few prices. Bagels went from $3 a piece to $4, and select coffee items have gone up by about 25 cents. 

He said salmon, cream cheese and butter are some of the items with the steepest changes.

“I look at my menu from 2021 when I opened my first restaurant to now, and the price of the sandwich has only changed like 50 cents. But the price of the fish has changed like $4 to $5,” Palmer said. “Nobody would buy a sandwich that’s $5 more four years later. It’s just not going to sell. The pressure is obviously I’m going to have to adjust things in other places of my menu to kind of recoup those costs.”

In an NFIB survey, 26% of business owners said they planned price hikes in April — down from 33% of owners in April 2023. 

Dean Wegner, owner of Nashville-based custom apparel manufacturer Authentically American, said he’s responded to inflation by emphasizing the quality of his product to customers and streamlining his company’s efficiency. Authentically American has reduced the total amount of inventory it carries and is looking at delaying several hires.

“Inflation means your prices are going up. But if you deliver higher value, then people are less likely to feel that,” he said. “That is really our biggest play being American-made and an amazing product. We want to lean into the quality of that product experience.”

Authentically American doesn’t have any brick-and-mortar stores and is not sold through third parties like Amazon, which Wegner said is one reason the company is able to maintain competitive pricing with brands like Nike. 

Wegner said he doesn’t know exactly how much the prices of his products have gone up since opening in 2017, but said they certainly have increased. 

Rising wages buoy consumer purchasing power

Overall, nationwide consumer purchasing power, which accounts for inflation-adjusted earnings, has also risen since 2019. The U.S. Department of Treasury said that, as of the end of 2023, the median American worker could afford the same goods and services as they did in 2019 while having an additional $1,400 annually for spending or saving.

Nashville Chamber of Commerce Vice President of Research Bishoy Mikhail said the rise in Nashville has nearly doubled that of the nation.

“Where purchasing power has increased maybe 10% over the last several years, Nashville’s has been at almost a 20% rate,” he said.  

While the Nashville market is not entirely isolated from national and statewide economic trends, Mikhail said the city’s fast-paced growth is helping to offset the impact of inflation.

“When you zoom in and look at Nashville specifically, I think we’re doing very well to make sure that our purchasing power, our income levels, are rising,” Mikhail said. “Obviously, we’re not immune to these challenges, but I think we’re doing a pretty good job at ensuring that we have some measure of insulation to help us at least meet these challenges that the whole nation is facing.”

Hadley Hitson covers trending business, dining and health care for The Tennessean. She can be reached at hhitson@gannett.com.

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