Labor is a problem in the industry right now. Sales are ramping up. Operators are hiring. And they’re struggling to fill jobs. Help-wanted ads are everywhere, and industry executives are publicly calling it one of the worst shortages the business has experienced in years.
The issue was highlighted again on Friday when restaurants added 187,000 jobs. That was robust, but perhaps not as robust as maybe it should have been given sales levels and intense demand. Many operators we speak with lay the blame squarely with the inability to hire workers.
The lack of labor, despite generally high unemployment, is a complex problem that could take some time to unravel.
One multi-unit Subway operator I know sent an email, explaining why they believe the industry is lacking workers. We included much of their comments here, to help explain exactly why so many restaurants are having problems.
“I have spent 70%+ of my time in the last few weeks recruiting and interviewing. I have only been able to hire nine people and we need 40 to 50 right now. Hourly team members more so than supervisors, assistants and managers are the area that we do not seem to hire.”
By the way, I know a lot of Subway operators. All of them seem busy all the time right now, mostly working in their stores because they can’t find staff.
This franchisee has been paying $3 an hour more than local minimum wages and recently added a $2-an-hour bonus while excess unemployment benefits last. “Very limited success.”
One refrain from a lot of folks is for the industry to simply “pay higher wages.” But it is. Wages have gone up 4.6% between January and March, according to federal data. That’s 18% on an annualized basis. David Maloni, executive vice president of analytics for Arrowstream, said that the industry has not been above 1.8% since 2007.
It’s worth noting that Subway operators run low-volume restaurants and have customer bases that have been reluctant to order higher-priced items. It’s not so easy for the company to make up higher labor costs on price. Yet most operators we speak with said they simply can’t get workers, period.
“We currently have three stores closed because of no team members. We have a number of stores running very restricted hours (opening at 11, closing at 7 p.m., closed Sunday nights, closed all day Sunday). We have turned off third-party delivery to reduce the load and stress on the teams.”
Other efforts won’t work, either.
“Last week, because we had only received a handful of applicants in the prior seven days, we instituted a $300 sign-on bonus for a number of our locations.”
“What I have been telling our team is: Right now is not about sales and profits, it is about keeping our managers and key people until the fall. If we find ourselves in September without some of our great team members, then we will be in real trouble.”
So why is staffing so difficult? This operator mentioned a few factors: COVID anxiety—which is legitimate, as many people refuse to work in restaurants so long as coronavirus is an issue—child-care issues and opportunities in other, higher-paid industries.
“No-skill construction labor is going for $18 per hour around here,” the operator said. “Then we have the government not helping businesses with their actions.”
Concern about the impact of excess unemployment benefits and stimulus checks on employment has been common among operators, most of whom blame the payments for the lack of workers. “Extended unemployment where team members are making $15.50 per hour to stay at home and watch Netflix or play video games.”
The operator noted the stimulus checks and child care tax credits are also hurting labor, and believes that the credit should be need-based and the excess benefits repealed. But “even if they did that, we would still have a hell of a time staffing right now. Let the markets dictate and the government should not be a major factor in this equation.”
We believe there are other factors at play, too, notably a lack of teens working, in part due to COVID.
But it’s also a subject of an intense increase in demand and the need for workers. Restaurants have added more than 600,000 jobs in December. It accounted for 70% of all job growth in April, the second highest percentage for a single sector on record after … December, according to Maloni.
The economy has to work all of this out, and it will likely do so over the next few months. In the meantime, just keep the good employees.