Want to see what a “normal” workforce looks like? Check out your local cubicle farm.
The percentage of Americans working from home has settled at just over 40% of the full-time workforce, five times where it was in 2019, thanks to “hybrid” office arrangements in which people split the week between the office and home.
And this is where it’s expected to stay. “This is the new normal,” Nick Bloom, a Stanford professor of economics and expert on working from home, said at the Restaurant Finance and Development Conference earlier this month.
“Airports are back to prepandemic levels, NFL games, concerts are back. Everything we see now is back to prepandemic levels,” he said. “But one part of the economy that has not returned to prepandemic levels is anything related to working from home.”
The implications for restaurants, including where and how consumers are dining out, have been substantial. The new normal has had a major impact on the health of central cities and has changed the days and times people have been most likely to dine out. It has made winners of some chains and losers of others and has fueled the rise of an entire segment.
Most of the people who work from home, 29.3%, do so in hybrid arrangements, in which they typically work two days a week at home and the rest in the office, according to Bloom. Another 12% work from home full-time.
While that’s well below pandemic highs, the percentage of Americans working from home is up five-fold since 2019, Bloom said. He expects that percentage to increase over time, in fact, as younger, more work-from-home managers and executives take power at companies.
The economic impacts of this have yet to be felt but could be substantial. The consulting firm McKinsey & Co. predicts that demand for office space will be 13% lower in 2030 than it was in 2019. That’s its “moderate” scenario. In a severe scenario, the most affected city will see demand fall by 38%.
Americans, it seems, dislike long commutes and enjoy working from home. “It’s really hard to recruit and retain talent if you force workers back five days a week,” Bloom said. “They’ll quit.” He said the ability to work from home is equivalent to an 8% pay increase in terms of employee satisfaction.
Many restaurants were built to target the office crowd. Even if they didn’t, the impacts of the new hybrid workforce can be felt in other ways, good, bad and indifferent.
The biggest impact by far has been the “donut effect” on big, U.S. cities, in which workers have abandoned central cities and spend a lot more time in the suburbs. The issue is particularly acute in large, northern cities such as New York, Chicago and San Francisco that have core centers with a lot of office space, and less acute in Southern cities that are more spread out.
Foot traffic researcher MRI Springboard found that traffic in downtowns of big U.S. cities was down 23% between January and May compared with the same period as 2019. Traffic in smaller cities, on the other hand, has increased.
This doesn’t mean spending isn’t happening in big U.S. cities. While spending at lunchtime has plummeted, spending on dinners in these cities has increased.
They’re going out earlier, too. Restaurateur Danny Meyer somewhat famously noted that a 6 p.m. dinner reservation has become the new 8 p.m., “the most prized table of the night.”
That probably won’t change, either. Americans are “inside all day. By the time they get to 6 p.m., they’re getting antsy,” Bloom said. “They’re going into town.”
They’re also far more likely to dine out on weekends. Brunch has become the busiest daypart in terms of sales, replacing Friday lunch as the industry’s most lucrative period, according to data from Square.
Likewise, demand for entertainment has soared. Golf participation is up 52% since 2019, and almost all that increase has been on weekdays.
That demand can be seen in a restaurant business suddenly flush with “eatertainment” concepts featuring everything from puzzles to pickleball. Consumers, it seems, want some entertainment when they do go out.
And of course the issue has had a big impact on certain chains, particularly in the fast-casual sector, that had targeted business districts and urban markets for their locations.
“COVID has had a larger impact on our business than many of our competitors, and its lingering impact on consumer mobility patterns, including work-from-home trends, has been a challenge for us,” Shake Shack CEO Randy Garutti said in May, according to a transcript on the financial services site AlphaSense. His chain’s recovery from the pandemic has been much slower than many other chains, in part because of its heavy concentration in urban markets like New York.
Unsurprisingly, chains like that, as well as Sweetgreen, are focused more on suburbs and drive-thrus.
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