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.

Wendy’s, which this year became the second biggest burger chain behind McDonald’s, added only a net 18 units last year, yet it continues to look for new staff to fill the 20–30 slots at a typical restaurant. Units that serve breakfast employ more.

“We always want to get the most talented people,” says spokesman Denny Lynch.

The economic downturn had one small positive effect: It caused average restaurant turnover to fall precipitously. At one point several years ago, Wendy’s turnover occurred an average of about twice a year. Now it is about once a year.

“A higher unemployment rate definitely helps in job retention,” Lynch says. At the same time, Wendy’s is putting increased emphasis on hiring people with certain attributes, including having a friendly disposition and being able to focus on customers.

“What’s the deciding factor when someone goes to get a hamburger?” he asks. “When it comes to the tiebreaker, that can be customer service.”

Quick-service restaurants will always face some turnover because part-time, young employees, often students, tend to make up a fair-sized portion of their crew, augmenting the five to 10 people making up a restaurant’s core staff. But it’s a major investment to hire and train employees, especially as the industry has become more complex with technological advances and numerous new menu items.

Limited-service restaurants have been a foodservice leader in technology and improved productivity, and that shows up in job projections, says the Bureau of Labor Statistics’ Kasper. Even though 400,000 jobs should be added by 2020 in that segment, managerial jobs will dip 85,000.

Restaurants added more than 550,000 jobs during the past two years, and limited-service operations chipped in about a quarter million of them.

“It appears these restaurants are putting more responsibility in the hands of other workers, even counter workers,” he explains. “The number of fast food and counter workers is expected to grow 16 percent” by the end of the decade.

Jamba Juice chose to have its own National Hiring Day in March at about 80 locations across the country. Its goal was to recruit and hire young people for summer employment. The undertaking supported the chain’s pledge to create 2,500 jobs as part of the Obama administration’s Summer Jobs+ program. That would increase employment across the Jamba Juice system an average of three people per store, or about 20 percent.

The day was a “resounding success,” says Kathy Wright, the company’s vice president of human resources. “We’re thrilled with the quality of candidates.”

Jamba Juice, like many other counter-service restaurants, adds employees to meet increased summer traffic. “We begin to see increased business in April and it really ramps up in June,” Wright explains.

The company made the commitment to add the young workers to help them get experience in the workforce. “We have the need, and there are people out there who need jobs. It makes perfect sense,” Wright says.

Thousands of people showed up for initial interviews and many were scheduled for follow-up conversations with the Emeryville, California–based beverage and food chain, which has about 775 units in the U.S. and three other countries.

“We are looking for someone who is comfortable talking to people,” Wright says. “There is significant customer interaction and many different tasks, so we want young people who are enthusiastic and committed to a family friendly environment and active lifestyle.”

Hiring days are good for focusing attention on the hunt for great employees, but just one in a hiring toolbox that includes placing want ads and using online applicant tracking systems, as well as posting to websites and social media.

The best, some experts say, may be through the circle of friends who work at or are customers of the restaurant.

“Referrals tend to bring better quality candidates,” says Brandon O’Dell, an independent restaurant consultant in Kansas City. “Now we’re seeing some social media catching up, like LinkedIn, which has been mostly for professionals but is growing in popularity among hourly [workers], too.”

Some young employees may be drawn to companies that have strong social ethics, such as buying local and using organic ingredients, O’Dell says.

While hiring is important, so is retaining good workers. Companies have created all kind of incentives, such as awards, bonuses and benefits to keep its best employees. One idea that has caught hold in full-service restaurants is profit sharing, something that O’Dell expects will eventually move to quick serves.

“It started with management and it will work down to hourly,” he says. “It’s a great motivator when you’re rewarded for your role in the success of the business. It gives workers a sense that what they do every day has real meaning.”