What a Bagel, a Toronto-based bakery that primarily sells baked goods and also offers catering, has nine locations in the city. What a Bagel's Danny Farbman says his company, like other bakeries across Canada, has had to swallow the impact of rising fuel and food costs since the beginning of the year and is hesitant to pass on the additional costs to consumers.

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CBCnews.ca: What has been the biggest impact of higher fuel/ food prices on your business?

The costs of ingredients ranging from wheat to oil have soared this year, says What a Bagel's Danny Farbman. (Larry Crowe/AP)Danny Farbman: Our largest and fastest price increase has been the cost of a 40-kilogram bag of flour. We were paying around $20 for about eight to 10 years. In [recent] months it's gone up. Now it's at around $43 — that's a huge increase. It's more than doubled.

You can't pass those kinds of costs on to the customers — the customer couldn't handle the increase. You have to gradually do it. And you have to eat a lot of the costs at the beginning.

The cost of oil has gone up gradually — vegetable oil, olive oil — it's all gone up. It has increased about 25 per cent this year. So anything that uses oil — the cost of mayonnaise, the cost of deep frying French fries the cost of cream cheese — have gone up.

All the milk products have gone up as well this year. It's been a tough year. Every category of food in our business has gone up this year.

When did you first start noticing that was occurring?

It started last January. And flour went crazy around March and April — it just skyrocketed.

Did you raise prices?

We did [raise prices] slightly — but not enough to cover the increase.

'You can't pass those kinds of costs on to the customers.'—Danny Farbman

And then another thing that has gone up is the cost of fuel, and all of our supplies are shipped to us — so now [suppliers are] tacking on these ridiculous fuel fees, to cover the cost of delivery — which makes sense.

How much does that cut into your profits?

Ultimately, the bottom line gets affected. Ten to 20 per cent. But it has also caused us to be more creative — more creative with labour, more creative with systems.

When you say more creative, what sorts of things have you had to do?

Little things. For example, we coat our Challah breads with egg. So we invented this little device — instead of having someone standing there spraying the egg, it sprays automatically and cleans itself.

It's little things like that we've been forced to do to cover all our costs.

Have you had to lay off any staff?

Luckily, no, because business hasn't changed. We're still growing and business is good and we're still producing the same amount of product. But it's our costs to produce those products that are higher.

How is your catering business affected? Are fuel prices taking a chunk out of that line of business?

It's minimal. But Sysco Foods, where we get a lot of our supplies from — it's a huge part of their business. They have 24 trucks on the road all day driving around.

Going forward, what do you hope to do to offset some of these costs?

It's starting to level off now — flour has come down — it's back down to $40 now. Which is still double, but not triple ...

Everything has started to settle in, and this may be the new reality. But eventually the costs will have to be passed on to the consumer.

We're just waiting to see how things settle in. We'll see how the market adjusts itself, then we'll have to make changes.