In-N-Out Scores Top Marks in Fast Food’s ‘War for Talent’

In the summer of 2019, Chipotle’s chief restaurant officer, Scott Boatwright, referred to the labor landscape as a “talent crisis.” The pool had, for the first time in his career, or lifetime for that matter, surpassed a mark where there were more jobs than people to fill those roles. And so, while a celebratory milestone for some, it represented a changing reality for restaurants.

One key arena was the makeup itself. The labor force participation rate of teens had stagnated. A year earlier, the Bureau of Labor Statistics found 1.7 million teens worked in restaurants—the same number as 2007. Yet over that same span, the number of units jumped close to 16 percent.

The overall math was easy to crunch: In March 2019, the National Restaurant Association pegged the number of hospitality vacancies at a million. With the national unemployment rate sub-4 percent (it was 3.6 percent) that May, Boatwright’s point resonated.

So how has this resurfaced in the crosshairs of a pandemic rebound? Restaurants are staring down a field that added 74,100 jobs in July and now boasts 11.7 million people. While upward, it’s still more than 600,000 jobs short of February 2020. The unemployment rate, nationwide, was 3.5 percent. The BLS estimated hourly restaurant wages had climbed at a double-digit pace since April 2021 before retracting to 9 percent in June. Average hourly earnings actually fell in July for the first time since May 2020 (negative 0.16 percent). Still, they’re roughly 8 percent above year-over-year levels.

Enough time has passed where these data sets point to a lasting vision. In June 2022, there were 1.304 million job openings in the accomodation and food services field and 1.004 million hires. There were 918,000 separations.

When you couple wage bumps with commodity pressures, the result is a restaurant world where menu prices are increasing at the fastest clip since 1981. They surged 7.6 percent in July compared to the prior-year period, a slight deceleration from June’s 40-year high. Full-service meal prices climbed 8.9 percent and quick service 7.2 percent. Something that’s insulated restaurants is the food at home index soared 13.1 percent in the past 12 months, the largest yearly hike since the period ending March 1979.

All told, however, the pressing labor challenge returns to Boatwright’s 2019 descriptor. Has the “talent crisis” accentuated in light of recent workforce evolutions? The not-so-simple answer is yes. Restaurants have fewer workers to pick from and smaller staffs to operate with. They’re paying more to hire and more to retain, from bonus structures to enhanced benefits. So the ability to win the so-called “war for talent” is as much a differentiator today as it’s ever been, if not more so.

Sharon Zackfia, head of William Blair’s equity research consumer group, releases a yearly longitudinal analysis of restaurant employee satisfaction. This iteration, which dates back to 2015, pulled more than 350,000 Glassdoor reviews for more than 90 restaurant concepts to get a sense of which brands might be separating themselves.

To start with some high-level notes, average employee ratings declined from 2021, when workers seemed to be giving restaurants more credit than usual for their efforts to staff back in COVID’s initial wake. They remain, however, above 2019 levels (36 percent higher). Overall and subcategory ratings are nearly unilaterally better than pre-COVID marks, with 92 percent higher than 2019 numbers. Put differently, the restaurant industry is a better employer today than it was before the crisis. Or at least workers appear to think so.

Higher pay also did not necessarily key employee satisfaction, as charts throughout this study will show. Despite wages climbing quickly, as noted, the correlation between compensation/benefits and employees’ overall ratings of the restaurants they work for was the lowest of the six measured attributes (others include culture/values, career opportunities, work/life balance, senior management, and diversity/inclusion). Additionally, compensation/benefits represented the only attribute for which the link with employee satisfaction was markedly lower than pre-COVID, with a 70 percent correlation to overall employee satisfaction versus 74 percent in 2019 and 80 percent-plus in 2016/2017.

“Instead, our analysis continues to suggest that qualitative attributes such as culture/values, senior management, and diversity/inclusion are much more important determinants of employee satisfaction, with correlations of 91, 90, and 87 percent, respectively, and with all three trending upward over the past two years,” the company said. “As a result, we believe that restaurants need to reexamine ways to highlight or alter the less tangible parts of their businesses to better align with the softer [and stickier] attributes that lead to higher employee satisfaction.”

Before getting into the data, it is worth noting that Glassdoor does not authenticate reviews. And generally, voluntary reviews can skew extreme positive or negative thanks to selection bias. The number of reviews varies as well by brand and there isn’t a vetting process to figure whether an employee is telling the truth or not. Despite this, William Blair says, the stability of concept rankings over time and the stability of the relationships between subcores and restaurant subsectors creates an approach that provides meaningful insights into relative levels of employee satisfaction.

William Blair.

What jumps out about the above chart is the diversity and inclusion metric. In just a year, it’s lifted 26 percentage points, illustrating what a lot of brand initiatives today reflect—that corporate purpose is no longer a perk; it’s a core vital that employees take the temperature of before signing up.

But let’s get into pay.

Average wages by subsector (crew):

Quick service

2015: $8.46
2020: $9.09
2021: $9.94
2022: $11.50

Fast casual

2015: $9.01
2020: $10.27
2021: $10.75
2022: $12.25

Specialty

2015: $8.86
2020: $10.13
2021: $11.09
2022: $12.71

Casual dining

2015: $4.58
2020: $4.91
2021: $6.42
2022: $10.14

And for GMs on an annual basis

Quick service

2015: $47,200
2020: $48,000
2021: $48,000
2022: $51,500

Fast casual

2015: $49,200
2020: $59,500
2021: $59,700
2022: $63,760

Specialty

2015: $46,700
2020: $44,900
2021: $45,300
2022: $48,860

Casual dining

2015: $65,500
2020: $72,400
2021: $71,500
2022: $75,370

As William Blair explains, within each subsector, there was a notable difference in the magnitude of wage increases between companies that paid above-average versus below-average rates in 2021, with nearly across-the-board above-average wage jumps for hourly crew at concepts that ranked below average in pay last year.

In regard to GMs in quick service, salaries at below-average concepts rose more than twice as quickly as those with above-average managerial salaries. The gap industrywide is tightening.

Regional footprints play a role in the below breakdown, especially in the case of California-housed In-N-Out. Overall, relative wages for the category’s hourly employees rose 16 percent in 2022. Striking here is the lack of parity. You can only stand out so much on wages in the quick-service industry’s present scenario.

Also keep in mind this is what employees are sharing on Glassdoor, not what the restaurants themselves are reporting. Bartaco, for instance, told QSR its GM pay is “$25,000” above what Glassdoor is suggesting.

Crew wages (hourly average)

In-N-Out: $17
Wendy’s: $12
Sonic Drive-In: $12
McDonald’s: $12
KFC: $12
Jack in the Box: $12
El Pollo Loco: $12
Carl’s Jr. $12
Wingstop: $11
Taco Bell: $11
Popeyes: $11
Hardee’s: $11
Culver’s: $11
Chick-fil-A: $11
Burger King: $11
Arby’s: $11
Jimmy John’s: $10
Chicken Salad Chick: $10
Bojangles: $9

GMs (annual)

In-N-Out: $56,600
Wendy’s: $56,400
Sonic Drive-In: $55,500
McDonald’s: $55,500
El Pollo Loco: $54,600
Del Taco: $54,200
Arby’s: $53,300
Taco Bell: $52,800
Bojangles: $52,700
Culver’s: $52,400
Hardee’s: $51,600
KFC: $51,300
Popeyes: $51,00
Chick-fil-a: $50,900
Chicken Salad Chick: $50,300
Jack in the Box: $48,300
Carl’s Jr. $47,100
Wingstop: $44,900
Jimmy John’s: $42,600

The winning brands

William Blair’s report measures a net promoter score from a labor angle. Essentially, the percentage of employees who would recommend their job to a friend. There’s a lot of stability in this exhibit. “When companies get the foundational intangibles right, the reward is often manifested in multiple years of top-ranked NPS,” the company said. It’s one of those 1,000-foot looks that wears down year-to-year volatility and turns out something with larger implications.

For instance, 60 percent of the top 10 scores in 2022 were repeats of 2021; 40 percent of 2021’s list were there in 2020; and 50 percent of 2020’s rankings could be seen in 2019. Go back another year and 80 percent of 2019 repeated in 2018.

The standout: In-N-Out has topped the list for seven straight years. It’s the only brand to maintain a top-10 ranking every calendar since 2016.

William Blair.

Black Rifle Coffee Company and Dutch Bros. cracked the 2022 top 10—No. 4 and No. 5, respectively—while Shake Shack and Portillo’s were the only chains with sequentially improving scores from elevated 2021 levels. Compared across, nearly half of the restaurants upped in rank, led by Portillo’s, which surged 47 spots to No. 40.

William Blair.

As always, it bears asking what employees are giving restaurants credit for. That crystalizes below.

William Blair.

Into fast casual

A fast-riser in this year’s study was chicken chain PDQ, a brand founded in 2011 that was the culmination of two years of research from CEO Nick Reader—formerly CFO of the Tampa Bay Buccaneers, the NFL’s youngest at the time—and Bob Basham, cofounder of Outback Steakhouse. Fellow Outback cofounder Tim Gannon, the man credited with creating the Bloomin’ Onion, was also involved in PDQ’s early growth.

PDQ grabbed the top overall spot in the segment for the first time, moving up from No. 7 last year. The brand didn’t lead any single measured attribute, but won on consistency. All of its ratings were above average and were similar or bumped higher on a relative basis for everything but work/life balance.

Hourly wages in fast casual climbed 14 percent. Also notable, diversity/inclusion remained the highest averaged rated subcategory, followed by culture/values.

Crew wages (hourly)

Tender Greens: $16
Mendocino Farms: $16
Sweetgreen: $15
CAVA: $15
Shake Shack: $14
Pret-A-Manger: $14
The Habit: $14
Chipotle: $14
Café Rio: $14
Veggie Grill: $13
Raising Cane’s: $12
Portillo’s: $12
MOD: $12
Five Guys: $12
Blaze: $12
Torchy’s Tacos: $11
Smashburger: $11
Potbelly: $11
Pei Wei: $11
PDQ: $11
Panera: $11
Noodles & Company: $11
Einstein Bros.: $11
Cosi: $11
QDOBA: $10
Piada: $10
Freddy’s: $10
Zaxby’s $9

GM (annual)

Tender Greens: $92,900
Shake Shack: $84,000
Portillo’s: $81,800
Sweetgreen: $76,100
Mendocino Farms: $74,800
Pret-A-Manger: $71,300
Raising Cane’s: $69,600
Veggie Grill: $67,100
Cosi: $66,600
Torchy’s: $66,100
CAVA: $65,300
Pei Wei: $63,00
Panera: $61,800
Chipotle: $61,100
PDQ: $60,000
Habit: $59,500
MOD: $58,600
Potbelly: $58,400
Einstein Bros.: $57,600
Noodles: $56,900
Smashburger: $56,300
Piada: $55,500
Café Rio: $55,200
QDOBA: $55,200
Blaze: $53,700
Five Guys: $53,600
Freddy’s: $52,800
Zaxby’s: $50,300

And onto the ratings:

William Blair.

The specialty field

William Blair’s specialty rankings encapsulate beverage and snack brands. Publicly traded Dutch Bros., which at 603 U.S. stores is now America’s fourth-largest coffee chain (behind Starbucks, Dunkin’, and Tim Hortons), secured the top position for the second consecutive run. Starbucks held that title previously.

Dutch Bros.’ employee proposition came to light in its recent quarterly recap, too. The brand’s tailing 12-month shop-level turnover was 66 percent, well below the industry average, as it entertained 64,000 applicants and hired 3,500. “We’re not having any problem hiring good people, and that goes across the system,” CEO Joth Ricci told investors.

For managers, Q2 turnover was in the low double digits, while operator turnover was almost nonexistent. In the past year, Dutch Bros promoted 50 operators. As of June 30, 115 of these employees are running 336 company-run shops, which averages out to 2.9 units per operator.

Hourly wages upped 8 percent in the overall category, per Glassdoor, and diversity/inclusion was the highest average rated subcategory as well.

Crew wages (hourly)

Philz Coffee: $16
Peet’s: $16
Joe & The Juice: $16
Starbucks: $15
Pressed Juicery: $14
Jamba: $13
Dutch Bros.: $13
Dunkin’: $12
Baskin-Robbins: $12
Tim Hortons: $11
Caribou: $11
Tropical Smoothie Cafe: $10
Krispy Kreme: $10
Smoothie King: $9

GM (annual)

Peet’s: $65,700
Philz: $62,900
Starbucks: $62,000
Pressed: $61,700
Krispy Kreme: $60,400
Caribou: $48,400
Jamba: $46,600
Tim Hortons: $45,400
Dunkin’: $44,000
Tropical Smoothie: $42,000
Smoothie King: $41,600
Joe & The Juice: $40,000
Dutch Bros.: $35,300
Baskin-Robbins: $27,900

How it unfolded:

William Blair.

A glance into casual dining

For casual dining, we’ll just take a look at the GM pay and category breakdowns. Hourly compensation is difficult to measure through review sites considering the role of tips.

GM (annual)