Thanks to vaccine distribution and loosening restrictions, sales and demand are finally starting to sync for restaurants. Nine of 11 regions tracked by Black Box Intelligence posted positive two-year sales growth during the week that ended April 4 (only California and New England did not). The period also marked the third consecutive week restaurants generated positive comps on a two-year stack.
Yet many restaurants continue to close early, or open late. Or simply elect to keep lobbies shuttered in favor of drive-thru, takeout, and curbside. In some spots, this is a preemptive, safety-first measure. But increasingly, it’s becoming a reflection of the sector’s mounting struggle to find workers.
Why this is happening can’t be pinned down to a sole culprit. It is, however, a combination of a few pressures. One is the $300 weekly unemployment boost extended through the beginning of September in President Joe Biden’s $1.9 trillion American Rescue Plan.
Fazoli’s CEO Carl Howard told QSR this affects restaurants up and down the ladder, from the front to the back and outside the restaurant. Distribution companies are struggling to find drivers because of unfavorable hours. Some suppliers raised prices in response. Product can be hard to come up.
Specifically for hourly restaurant crew members, though, Howard didn’t mince words. “If I was a kid and I didn’t really have a career path, and I’m 22, and I’m working at Fazoli’s where I’m trying to figure it out, and I’m making all this money to stay at home, I’m playing PlayStation till four o’clock in the morning. I’m not going back to work. Are you kidding me?”
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Greene Turtle CEO Geovannie “Geo” Concepcion called the current dynamic, “the biggest, hands-down, challenge [we face].” The sports bar and grill chain responded with retention bonuses for every tier of the organization. And created a stipend program where short-staffed managers get compensated for extra work when employees don’t show up or the crew is short.
“The spirit of what we’ve learned in COVID is we’ve gotten far with our team by doing as best as we can and treating folks right, and making it clear that where there’s a challenge, we’re going to try to adjust it and make sure you’re treated fairly as we figure out what the long-term solution is,” Concepcion says.
The end of the $300 benefit, he adds, could “usher in a next wave,” for restaurant labor.
“Technology was a way to increase efficiency and it now probably becomes a mission-critical way to operate,” Concepcion says.
Beyond the notion people might be making more unemployed than clocking in at a restaurant these days, Black Box said other industries hired at an accelerated pace over the past year. So as restaurants accounted for one in four of the 10 million jobs lost in the overall economy at one point, some competing sectors staffed up. To put that into perspective, if the economy as a whole suffered the same level of job losses as restaurants, there would have been some 30 million jobs gone. In December 2020, there were 2.5 million fewer people employed in food service and drink places than February. Or a 20 percent reduction in roughly nine months. Overall, the country’s workforce was down about 6.5 percent. That meant there was a more than 13 percentage-point gap between America’s labor impact and the restaurant one headed into 2021.
Restaurants added 175,800 jobs in March. It was, naturally, lower than February’s 309,000 rate (bouncing higher off a deeper bottom). Overall, restaurants added roughly 4.2 million jobs since April 2020—a month where 5.5 million jobs vanished. At that juncture, the sector employed 6.3 million people, which represented the lowest figure in three decades.
As of March, restaurants employed more workers than any time since the crisis began at 10.5 million. Yet that’s still about a million fewer employees, year-over-year, and 1.8 million down from February 2020. Factor in Black Box’s March sales report, which showed sales down just 6 percent compared to two years ago, and the labor alarm starts to go off.
What sets it blaring, however, is the fact labor was not humming along pre-crisis, and you have safety concerns added today. The rise of the gig economy, wage rate debates, and the shrinking number of teens in the workforce, all stirred up staffing issues before a global crisis dropped in.
“While millions of restaurant jobs were lost to the pandemic last year, other industries have been hiring at an accelerated pace,” Black Box said to the earlier point, “attracting employees away from the restaurant industry and contributing to the staffing challenges that already existed pre-pandemic.”
At the beginning of 2020, only 13 percent of limited-service restaurant companies reported being fully staffed in hourly, non-management positions. Full-service brands fared slightly better at 38 percent.
The bigger challenge has been staffing back-of-house roles. A year ago, only 10 percent of full-service restaurant companies reported their kitchens to be fully staffed.
Landed, a platform that helps retail and food companies hire candidates, ran data from its 900-plus roles and 65,000 job matches. It found, in the early days of COVID, fewer than 1 percent of posted job roles contained terms such as carside, curbside, to-go specialist, drive-thru, and delivery. By December, it was north of 30 percent. More than 85 percent of Landed clients added curbside takeout since the beginning of the pandemic.
Expanding on Black Box’s back-of-house note, on average, FOH roles receive 3.3 times the number of applicants and interest than BOH roles do on Landed, despite BOH being where most of the jobs are. There are currently four times more BOH than FOH roles listed on the platform. “With the introduction of curbside takeout and delivery, to-go orders have increased dramatically, adding to the stress of already understaffed BOH teams and causing more BOH team members to request moves to less stressful FOH roles,” the company said.
Just since the pandemic, Landed employers increased pay rates for BOH line-cook roles by 18 percent, on average.
To accentuate all of this, 40 percent of restaurants said they’re “severely understaffed.” We’re talking down at least a dozen people in certain setups.
And a full 80 percent of employers are keeping at least one crew member role posted at all times.
No surprise then why chains like IHOP, Taco Bell, Firehouse Subs, and others are hosting massive hiring events. Taco Bell is even interviewing candidates from their cars, drive-thru style, in some spots.
Additionally, why Chipotle is expanding its benefit offerings to include debt-free degrees and why Whataburger is forking up six figures on GMs (now promoted to operating partners).
As highlighted in a recent Business Insider story, there’s a McDonald’s in Florida paying people $50 just to show up for a job interview. “At this point, if we can’t keep our drive-thrus moving, then I’ll pay $50 for an interview,” Blake Casper, the franchisee, told BI, adding this is the most difficult hiring market since the late 90s.
He called the rise in McDonald’s sales—in part due to its chicken sandwich launch—coupled with the lowered number of candidates, “a perfect storm right now.”
Casper’s $50 program didn’t convince many people to show up. Rather, he said referral programs, signing bonuses, and allowing candidates to apply via text message worked better. Casper’s 60 restaurants hired 115 new workers last week, according to BI. Additionally, he said he’s considering raising starting wages from $12, which is already $3 higher than Florida’s minimum wage, to $13.
Another example of how much it takes, beyond just wages, Chipotle offers an “All Crew Bonus program” where restaurant employees can earn an extra month’s worth of pay each year or debt-free degrees. The brand paid out more than $13 million in tuition support just in 2020.
During COVID, Chipotle introduced 24/7 access to healthcare experts for employees they could access on mobile devices. It paid over $40 million in bonuses and assistance pay throughout the pandemic. Plus, individuals affected by COVID received pay equal to their upcoming two-week schedule or average hours worked.
Even so, churn was a reality and will continue to be for restaurants, which operate in a cyclical, seasonal arena loaded up with part-time workers. Chipotle’s turnover metrics in 2020 were 141 percent at the hourly level, 31 percent for restaurant salary (down 4 percent from 2019), 16 percent for field managers, and 12 percent for staff employees.
This past year, Chipotle’s rate of internal promotion was 77 percent in the U.S. That measures to 1,444 promotions to apprentice, and 928 to GM.
“We know there is a 50 percent turnover rate when GMs are not onboarded properly,” the company said in its recent sustainability report. “That’s why we’re so committed to making significant improvements in our onboarding process.”
Crew orientation is four hours, with all crew training programs lasting a week. Kitchen managers get two weeks. Service managers four. Apprentices six. Internal GMs three. And external GMs 12.
QSR recently caught up with Mathieu Stevenson, CEO of Snagajob, to discuss the state of hourly jobs and restaurant hiring across America. To put it lightly, there is no easy answer on the table.
Let’s go right to the heart of the topic. I know there’s no one answer for this, but why do you think restaurants are having such a hard time finding employees right now?
Many businesses are not yet operating at full capacity due to staffing shortages, and that could be attributed to different factors, including workers who aren’t comfortable working without a vaccine, stimulus checks, unemployment benefits and tax refunds. Many have even moved on from the food and beverage industry entirely due to a huge increase in available delivery and warehousing jobs.
Economists predict that there could be as many as 10 million more jobs between now and year’s end and restore the labor market to its pre-pandemic level. But for employers, the fact remains that workers are hard to find.
A lot of operators point to expanded unemployment benefits as the main culprit. This idea people can make as much staying at home right now as working in a restaurant. Is there a possibility this ends up as a reckoning point for restaurants, in terms of benefits, pay, and how they treat workers?
While economists have calculated that roughly half of unemployed Americans are temporarily earning more from benefits than they did at their former jobs, they also expect that once health concerns and childcare issues are alleviated, many people will return to work.
As such, restaurants expect the industry to bounce back as we head into summer and fall. Many restaurant owners are working tirelessly to offer more competitive pay and benefits packages to attract talent.
On that note, what are some ways restaurants can attract qualified talent? How do you combat this setback?
Restaurants can offer a range of employee benefits to stay competitive—flexible hours and scheduling, increased pay, vaccination incentives, employee discounts and training, to name a few. In a recent Snagajob survey, we found that the top three benefits employers are offering include: flexible hours and scheduling (89 percent), employee discounts (76 percent) and job skills development and training (54 percent).
Here are a few things that restaurant owners can start doing right now to attract applicants:
Focus on retention of current employees. It should be a high priority from executive leadership to general managers. We’re seeing this across the board with major fast-food brands raising wages for general managers.
Make your team your recruiting engine. Workers who are recruited from referral produce 25 percent more profit for their companies than new hires who are recruited the old-fashioned way. Offer current employees a referral bonus if they bring in a great candidate.
Look for transferable skills. Many great candidates have what it takes to be a great employee but not the exact background you’re looking for. Get creative and think outside the box with the applicants you do have.
Businesses have also moved towards more tech-enabled management and optimization tools for worker staffing, scheduling, backfilling, and hiring. Many employers are embracing a more agile workforce powered by the gig economy and less reliant on the traditional hiring route.
How can restaurants bridge the gap between workers’ expectations and employers’ needs? It’s an especially interesting question given the COVID challenges and recovery. Restaurants want more workers to meet higher demand, but simply can’t staff up.
Restaurants can help address the gap between worker’s expectations and employer’s needs by offering a healthy mix of perks, like flexible hours, incentives and competitive pay. If an owner cannot keep enough people as full-time employees for financial reasons, there are other routes employers can take, as millions are looking for gig work at the moment.
Unfilled shifts put your managers behind, stress out your team, cause high turnover and damage your customer experience. At Snagajob, we’ve addressed this with a unique Ripple technology that helps managers build a flexible workforce and shift coverage instantly.
Do you think this is going to change as vaccines become more widespread? Or should restaurants strap in for the long haul?
With mass vaccinations, COVID-19 cases down and states opening back up, we’ll see a huge uptick in quick-service jobs being filled. We’re already seeing more and more families choosing to go out to eat and a surge in student summer hiring.
In terms of flexible hiring and staffing, yes, we believe this is where the industry is headed. Even in the pre-pandemic, workers expressed desire to have more control over their schedules, as well as the ability to pick up shifts that best suit their lifestyles. Rather than viewing this shift as a hindrance, savvy business leaders should instead recognize it as an opportunity to meet workers halfway and develop a more satisfied, sustainable workforce.
Are there ways for restaurants to appeal to frontline employees beyond just pay? Especially younger generations. Are there perks they can focus on that will appeal to hourly workers?
Beyond the aforementioned benefits, I think a huge part of this is offering employment opportunities to younger people who don’t have prior experience. Look beyond their lack of experience and invest in skills and development training that will help them in the position and beyond. The value of training cannot be overstated as it not only helps to build a more skilled workforce, but also shows employees you care and are willing to invest in them- in turn, helping to boost retention and recruitment efforts.
Attracting younger talent also takes work—and with the ever-changing landscape of media—recruitment can be a doozy. Lately, large fast-food companies are targeting Gen Z through apps like TikTok, Instagram and Snapchat—some are even offering short video applications. They’re also making it easier than ever to apply by partnering with services like ours, which allow people to send in applications with just a few clicks.
What are your thoughts on the minimum wage debate, particularly in a cyclical, high-turnover business like restaurants? Would it help or hurt the industry?
Restaurant owners should look into their compensation plans to secure employees in this current landscape. With so many workers shifting to alternative careers in the delivery and warehousing space, it’s imperative to keep up with trends in both pay and benefits in the restaurant industry as well.
While minimum wage is rising across the country, millions of workers still earn wages at or below the federal minimum and 40 percent make $12/hr or less. It’s clear underemployment is still a very real problem making it challenging for hourly workers to get ahead in today’s market.
Democratizing the gig economy would allow for the way people work to be validated across industries. Allowing more people—not just those with a specialized skill or a vehicle to leverage—to supplement their income via elective and flexible hourly work is the best way to combat underemployment in this country. With more than 80 percent of hourly workers willing to work multiple jobs to get the hours they need more needs to be done in an effort to help this workforce live a sustainable lifestyle.
Looking ahead, what labor challenge do you think will define the coming months, something perhaps on the horizon but not grabbing headlines today?
The biggest problems employers will face are certainly recruitment and retention – especially with smaller mom and pops. They may not have the resources available to invest in wide-scale recruitment campaigns across social media and sponsored posts. It’s imperative to get creative with your approach to filling and retaining positions.
The good news is that we’re seeing a light at the end of the tunnel—with summer just a few months away, we’re predicting an increase in quick-service restaurant positions—traditionally around 25 percent of student summer jobs are in the restaurant industry. Due to the pandemic, we’re seeing a shift in students looking for alternative work in warehousing, delivery and grocery sectors. Quick-service restaurant jobs are currently down 27 percent compared to pre-pandemic norms, seeing a 2 percent month over month decline and 1 percent year over year growth.
We expect a one-to-two-month delay in summer hiring; with most jobs filled in late May through early July. In fact, 88 percent of businesses who hire teens for the summer plan to do so this year. As businesses staff-up in anticipation of consumers returning, teen jobs will be available in rebounding industries—restaurants, hospitality and entertainment. This will coincide with an overall return to normalcy in the national economy.