Restaurants have a lot of problems these days. The supply chain is a mess, costs are rising and it’s hard to find workers.
Applebee’s and IHOP have not been immune to any of those issues. But it’s that last one that keeps John Peyton up at night.
“We’re at about 90% staffing for both brands across the country,” the Dine Brands CEO said in an interview with Restaurant Business. “That number’s been stuck at 90% now for a couple of quarters.”
The staffing shortage is Dine’s No. 1 long-term problem, he said. And with no way of knowing whether those missing workers will ever come back, the company has started investing in technology designed to help its restaurants do more with fewer people.
That includes handheld server tablets at both Applebee’s and IHOP that allow workers to cover more tables and turn them faster. About 500 Applebee’s are now using the hardware, and IHOP will be getting them as part of a new POS rollout over the next 18 months.
Dine has also begun exploring more high-tech labor aids, like robots, in an effort to make up for the shortfall, Peyton revealed.
An Applebee’s franchisee, for instance, is testing a robot that can run food and bus tables.
“The robot can deliver food from the kitchen to the table and it can take the dirty dishes and send them to the dishwasher, and that can help servers become more productive and efficient,” Peyton said.
The robot is at just one location for now, and Peyton said it’s “way too soon” to determine whether Applebee’s will add more of the machines: “We’re in the test-and-learn phase.”
The company is also looking at automated deep fryers, he said.
Restaurants’ labor challenges have fueled an increase in automation across all segments. In casual dining, Chili’s is testing server robots of its own and Texas Roadhouse is trying handheld server devices. Fast-food chains like White Castle and Jack in the Box are using robots to make food in some restaurants, while others are automating parts of the drive-thru. Meanwhile, about 1.5 million hospitality jobs remained unfilled last month.
“I haven’t concluded it’s normal,” Peyton said of the staffing shortage. “I think that the prudent thing to do is, assume it is, and plan for the event that that’s the outcome.”
Despite that and other headwinds, Applebee’s and IHOP have continued their strong comebacks from the pandemic. In the first quarter, Applebee’s same-store sales increased by 14.3% year over year, and IHOP’s were up 18.1%, according to earnings results published Wednesday.
“A good quarter like last quarter didn’t happen by accident,” Peyton said. He credited the company’s investments in things like technology, off-premise and menu innovation for driving the growth.
While staffing is Dine’s biggest long-term challenge, inflation has created the most pressure as of late. The company is expecting food costs to go up 13% to 16% this year. It’s also closely monitoring gas prices, which can account for as much as half of a restaurants’ energy expenses.
To offset the higher costs, both Applebee’s and IHOP have raised prices. Applebee’s franchisees in the first quarter raised menu prices 5% to 6% on average on top of 3% to 4% last year, executives said. IHOP franchisees have raised prices about 7.9% over the past year.
The hikes, which are roughly in line with broader food-away-from-home inflation, have not affected customer demand, executives said.
“None of our metrics at Applebee's suggest anything other than robust growth,” brand President John Cywinski said during an earnings call Wednesday.
Peyton added that grocery prices have increased faster than restaurant prices, and that within restaurants, quick-service prices have outpaced those of full-service.
“In this moment of headwinds and tailwinds, there is some compelling data from a consumer standpoint that explains, I think, our success in the first quarter and may give us momentum for the rest of the year,” he told investors.
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