Special Report | May 2012 | By Barney Wolf

Where America Works

The vital role restaurants play in Obama’s plan to get America back to work and out of the recession.

A half-century ago, there seemed to be considerable truth in the phrase, “As General Motors goes, so does the nation.” That sentiment reflected the general idea that the auto industry, and the manufacturing related to it, was a key sign of America’s economic health.

These days, one of the strongest indicators of the nation’s employment and general economy is the restaurant industry. After struggling through the late-2000s recession, foodservice is now at the recovery’s leading edge. Restaurants added more than 550,000 jobs during the past two years, and limited-service operations, which make up about a third of the industry’s employment, chipped in about a quarter million of them.

“Various foodservice segments are outpacing national job growth rather robustly,” says restaurant analyst David Morris. “The categories that are closely tied to quick service, including limited service and non-alcoholic beverages, are doing the best.”

It’s easy to draw a parallel between the employment gains over the past year in the restaurant and auto industries, notes Morris, who prepared the 2012 Foodservice Landscape report for Packaged Facts, a food and beverage market research publisher.

“There’s a lot of pent-up demand,” he says. “People feel more confident now to buy something they want and need, either replacing their older cars or dining out.”

The nation’s economy, particularly jobs, is easily the biggest concern of President Barack Obama’s administration during this election year.

With the foodservice industry employing some 13 million people—the second biggest private-sector employer after construction—it’s no surprise that many observers are watching restaurants’ performance to gauge future job growth. An estimated 1.3 million more foodservice jobs should be created during this decade, according to projections by the U.S. Bureau of Labor Statistics.

“We see job growth at between 9 and 10 percent for this industry” from 2010 to 2020, says Henry Kasper, supervisory economist for the bureau. “We look at the long-term trends, but you are going to have months when there is faster growth or slower growth.”

A quick growth spurt is occurring now. The nation’s overall job total grew at a 1.5 percent year-over-year pace this spring, but the restaurant industry was growing at more than twice that rate. The limited-service segment is advancing nearly 4 percent and is a good indicator of the recovering economy.

“As the underlying economy continues to improve and consumer spending picks up, quick service and the beverage-and-snack segment mirror that,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association (NRA), based in Washington, D.C. “Their employment grows.”

The total private sector added 4 million jobs since the recovery began three years ago, creating demand for convenience from more workers grabbing a bite for lunch or having less time to prepare dinner in the evening.

“And convenience, very simply, is a driver for quick service,” Riehle says.

At this point, it appears foodservice employment will continue its strong growth in the upcoming months. The NRA’s Restaurant Performance Index, which evaluates the current and future health of the restaurant industry, has been positive since last fall.

The index’s labor-expectations component was recently at a five-year high.

An estimated 1.3 million more foodservice jobs should be created during this decade.

“Perhaps the most positive indicator is the optimistic outlook for staffing levels in the months ahead,” Riehle says. “Only 7 percent of restaurant operators expect to reduce staffing levels in the next six months, the lowest level in nearly eight years.”

Fast-casual restaurants were able to take advantage of the positive momentum the quickest, Morris says. “That is where consumers are starting to set their quality expectations,” he says.

Even though fast casuals are growing faster, percentage-wise, than regular quick serves, the traditional limited-service chains are still growing sales and adding employees.

Quick serves have continued their popular value menus while adding a variety of higher-priced items to appeal to quality-oriented consumers with more money to spend.

McDonald’s U.S. sales rose 4.8 percent in 2011 even though the company added only 71 net restaurants nationally. The chain has 14,100 units across the U.S. and employs about 720,000 people, with 40–50 workers at a typical McDonald’s.

In April 2011, the iconic company looked to meet its hiring needs by holding a national hiring day. It planned to hire 50,000 people, but ended up finding 62,000 new employees.

This year, the company decided against repeating that tactic, and instead is hiring on a more traditional basis. “It’s business as usual, and restaurants hire every day based on their needs,” says spokeswoman Ashlee Yingling.

On any given day, McDonald’s hires 1,500­–1,800 people, she says.

Starbucks has taken a less direct route to improve employment by teaming up with the Opportunity Finance Network for the Create Jobs for USA Fund. The Starbucks Foundation seeded the fund with a $5 million donation.