The new norm: “constantly hiring”
Region: Wisconsin, Illinois, Indiana
Locations: 95 stores; 50 percent corporate-owned; 50 percent franchised
Employees: 40 at corporate headquarters; 750 across corporate stores
“The mass [labor] exodus during COVID is a reality. The estimates I’ve seen say that around 20 percent of restaurant workers left and aren’t coming back; we’re not down 20 percent in staffing, but we’re certainly down 10 to 15 percent,” says Jason Westhoff, president at Cousins Subs.
“Realistically, we’re constantly hiring. I was a CFO for 10 years and I’ve never seen anything like this: it is definitely an employees’ market,” adds Westhoff, who came to Cousins Subs 10 years ago after working with one of the largest franchise groups in Wisconsin, which owned 40 Applebee’s locations and 80 Pizza Hut stores.
“In this industry, 100 percent turnover is really good, and at Cousins we’re running about 120 percent hourly employee turnover—that’s about 13 percent less than where we were at the end of last year.”
Cousins Subs corporate growth model has shifted over the last couple of years and the parent company is buying stores from franchise operators who are looking to exit the system. “We’ve made it known to our franchisees that if they’re interested in selling, we’re interested in buying,” he says.
When he joined Cousins 10 years ago, there were 16 corporate stores; now there are 45, and 20 of those were acquired within the last two years. The number of employees across the company is down, but the average hourly wage is up 16 percent year-over-year, which has reduced Cousins’ profitability by 1.5 percent, and that’s despite the fact that most locations have had to scale back the number of hours they’re open.
“That 1.5 percent would be even worse if we hadn’t [increased] prices as inflation occurred so it’s having a real material impact,” continues Westhoff. “The crazy thing is, even when we’re not working as many hours as we normally would, we’re paying so much more for the employees that it’s having an adverse impact on the bottom line.”
Cousins corporate stores are averaging a 99 percent up-time, meaning that most are open from 10 a.m. to 8 p.m., against the goal of being open 10 to 10.
“Our franchisees are more like 93 percent [up-time], because many are single-unit owners that have to cover extra hours, so they close early to give themselves breathing room. On the corporate side, we have the luxury of being able to shift staff between stores.”
While hourly wages are up significantly, the number of shift hours being covered by Cousins Subs’ salaried employees are also up—and that, Westhoff notes, is where being understaffed has saved Cousins in labor expenses.
“Our standard workweek for a salaried manager is 45 hours, so one week they may work 40 hours and the next week 47 hours because they’re picking up shifts when staff are not available,” Westhoff says. “We’re also paying $100 bonuses per shift for hourly people who are working their regular shift at one store but are willing to work a shift at another store to fill in when workers are out.”
Location, location, location equals labor solution
Multi-unit franchisees also have the option of staff sharing, and Cousins Subs franchisee Tom Jones is one of the lucky owner-operators who has defied the odds and remained open 100 percent of the time, never having to reduce hours. His five franchise units have stayed open seven days a week, 9 a.m. to 10 p.m.
Jones credits loyal staff, teamwork, and the close proximity of his five stores to one another: “All of the stores are within a 15-minute drive of each other, having them geographically close together is why we haven’t had to adjust hours. Even when we had 10 to 15 people out with COVID, employees were willing to go from one store to another.”
Although he also lives within a 10- to 20-minute drive of each restaurant, you won’t find Jones making sandwiches or running the register—but he does stay actively engaged in hiring staff and meeting weekly with his managers. That hands-on leadership is key, and in Jones’ case, it’s a deep-seeded commitment. He’s been part of the Cousins team for 24 years, since his first job as a 16-year-old, through the company’s tuition-reimbursement program that led to a marketing degree and a job at Cousins corporate—and ultimately to purchasing his first Cousins store in 2006.
“I’ve always taken hiring seriously and I’m always looking to acquire new talent; in fact, I’m never not hiring,” Jones says. “It’s better to be overstaffed than understaffed. Although labor has never been higher as a cost, I would rather have a few extra bodies than have employees burn out.”
Part of his HR strategy is making sure the employees he wants to keep are the ones who want to stay. While wages have gone up across the industry, Jones decries the trend to start quick-service workers at $15 to $17 an hour.
“You can’t have these set wages for everyone; I offer what is fair and what I can afford, so I don’t start everybody at $15 an hour. I know my employees’ talent level and if someone is really great I pay them more,” he says. “One thing that distinguishes us from [Cousins] corporate stores and from operators like Jimmy John’s and Jersey Mike’s is that we offer our benefits package to all of our full-time employees.”
Counted among full-time staff is anyone averaging more than 30 hours a week, and they receive paid time off; health, dental, and vision insurance; and 401K with employer match.
“Corporate and the [national] brands gear their benefits packages to full-time salaried managers; our benefits are geared to all full-time employees, including cashiers and sandwich makers who don’t want to go into management or leadership roles—some of these team members have as much tenure as the managers,” Jones says.
He employs 110 people across his five stores and systemwide his franchise group produces $5 million a year, with an AUV of $1 million.
Know when to hold ‘em, know when to fold ‘em
The first step to solving the labor shortage, Westhoff says, is retention. Retaining people is easier than hiring, and it’s especially important to retain the good ones. But even retaining bad employees, until you find someone to replace them, is sometimes necessary.
“There used to be a bottom 20 and a top 20, those days are gone,” he says. Enhanced compensation packages, bonus programs, and flexible schedules are all part of the retention strategy. Even so, it’s an uphill battle: In August, Cousins Subs was looking at hiring 90 managers across the third quarter—roughly one new hire a day.
For frontline staff, two incentives Cousins has recently implemented are daily pay,
which allows workers to capture 40 percent of their wages on a daily basis, and a shift gamification program that rewards employees just for showing up.
Roughly a third of their employees are enrolled in the daily pay program and those participants average taking money out twice a week. There’s no charge to employees if they wait until the day after their shift to take the pay, but there’s a $3 transaction fee if they take it the day of the shift they’re being paid for.
“The shift gamification rewards program is run by a company called Onaroll and employees who are on time for every shift in a week can redeem the rewards for gift cards,” Westhoff says.
It’s an incentive for employees to play the long-game with their jobs, but it’s not cheap, essentially costing Cousins Subs $14 per employee per month.
“It’s a pretty serious expense and when you add it up it equates to a 25-cents per hour raise for all our employees, but we figured it was a better use of the money than giving everybody a 25-cents per hour raise because it rewards employees who are more engaged, and the more engaged employee is typically the better employee, so it’s a good way to retain your good employees,” Westhoff explains.
“We’re just betting on the fact that we’re going to improve our retention rate, or reduce our turnover rate, to the extent that this program pays for itself.”