After a brief slowdown in employee turnover during the summer, restaurants’ labor problems intensified in September, with retention slipping and demand for new hires soaring, according to People Report, the human resources-focused arm of researcher TDn2K.
About 70% of the companies surveyed for TDn2K’s monthly Snapshot report said their struggles to hire and retain both hourly and managerial employees worsened at the end of the third quarter. Part of the problem, the researcher said, is galloping demand. Restaurant jobs grew in number by 1.7% year over year during September, after a 2.1% increase the prior month.
The pressure does not appear to be abating. Fifty-eight percent of restaurant companies intend to increase the number of hourlies on their payrolls during the fourth quarter, and 51% have plans to add managers, TDn2K found.
That heightened demand was reflected in the recent earnings reports of several national restaurant companies. Texas Roadhouse, for instance, said it needs to add at least three server positions and the equivalent of half a full-time manager if it wants to boost average unit sales to $6 million annually. The casual-dining chain is hiking menu prices by 1.7% this month to cover the added expense, as well as wage inflation running in the mid-single digits.
Pledges to focus more intently on hiring and retaining top talent have also been cited as top priorities by Darden Restaurants and Brinker International.
The stepped-up hiring comes as the national unemployment rate drops to 3.7%, a 48-year low.
The net result will be continuing pressure to pay more for the limited number of candidates available, warned TDn2K. It has found through its research that pay is becoming a more important consideration to restaurant job holders and seekers.
That indication was validated by some of the companies that recently posted their earnings. The Chuy’s casual Mexican chain, for instance, blamed skyrocketing labor rates in large part for the company’s $7.5 million third-quarter loss.
“Higher wages and salaries will have to be a part of many restaurants’ employment offerings if they are to remain competitive in the market,” the researcher noted in its latest Snapshot.
TDn2K had reported in its previous Snapshot that turnover rates had fallen, and that the shift appeared to be the start of a trend rather than a blip. Results in September dashed that view, the company said.