(Bloomberg) -- Americans are rushing back to restaurants after staying away during the pandemic. To catch that demand, chains are opening thousands of new locations. It has the makings of a boom, except for one glaring problem: there aren’t enough workers.
Three years after Covid hit the US, the $900 billion US foodservice industry still can’t recruit enough employees. It has boosted pay and benefits, but that hasn’t worked. Chains including Jack in the Box Inc. and Domino’s Pizza Inc. say the labor woes are hurting business. In a recent survey, more than 60% of establishments said they’re understaffed.
Like much of the US labor market at the moment, the picture that official data paint of the restaurant industry can look contradictory. On one hand, foodservice employment levels are approaching where they were in early 2020 and the number of restaurants is still below pre-pandemic counts, implying there are plenty of workers to go round. Yet for every two job openings in foodservice, there’s only one unemployed person to potentially fill the gap, and job openings spiked to 1.7 million in December.
The strong employment numbers don’t account for sales growth that’s fueling a need for extra workers, said Anna Zhou, an economist at Bank of America (NYSE: BAC ) Institute who follows labor market trends. US restaurant and bar sales are projected to increase about 6% this year to nearly $1 trillion, according to the National Restaurant Association.
“Despite the really strong gains in the labor market, leisure and hospitality continues to be the sector where you haven’t seen the full recovery,” said Zhou. “They continue to struggle to fill every opening.”
Millennials and Gen Xers, mostly working in restaurant or retail jobs, make up a significant chunk of the more than 2 million people still missing from the labor force, Bank of America research showed last month. Many left to take care of children or elderly parents, quit because of a disability or disease or relocated to areas with lower costs of living, Zhou said, all long-term structural changes that leave restaurants desperate for cooks, cashiers and servers.
Even before the pandemic, many restaurants found it hard to hire. Pay is usually low and roles can be taxing, with staff on their feet, working in hot kitchens and dealing directly with the public. Now, the industry has been forced into an unprecedented growth spurt and must claw back the millions of jobs that were lost in 2020: food and beverage outlets are projected to have the largest employment jump of any industry for the decade through 2031, data from the Bureau of Labor Statistics show.
Burger King and Qdoba franchisee Matt Herridge’s staff have been quitting, too stressed and tired to work in his 11 restaurants across West Virginia and Ohio. One Burger King general manager, who’d worked there for more than a decade, left during the pandemic for a 9-to-5 office job at an auto servicing company, desperate for predictable hours and no night shifts.
“The way she described it to me — in tears even — ‘My son wanted to know how often he will get to see me.’ There’s a lot of stories like hers,” Herridge said. “Just folks who went out and found other types of work that felt a little bit more stable to them.”
At Domino’s, pizzas are taking longer to get to customers than they did in 2019 because the company can’t find enough delivery drivers. About 70% of Jack in the Box locations are operating on fewer store hours despite a wage increase last year.
“People don’t really want those jobs anymore,” said Lightcast senior economist Rucha Vankudre. “Given how much choice there is in the market right now, people are kind of moving away” from restaurants, she said.
Part of the problem is pay. The average hourly wage for a fast-food cook in the US was $12.25 in May 2021, compared to $21.22 for a construction laborer or $17.28 for a data entry role, government data show.
Many restaurants, including McDonald’s (NYSE: MCD ) Corp. and Domino’s, gave workers bonuses during the pandemic. Some smaller chains and franchisees that did the same are now struggling to wean them off.
Herridge started offering a $2-per-hour attendance bonus in late 2021, where employees get extra pay just for showing up. He’s since notched it down to $1 per hour extra, but said that competition from other industries would make it difficult to scrap entirely.
It doesn’t bode well for the Federal Reserve’s recent emphasis on stemming price hikes in the service sector.
“I have to raise prices when I raise wages. That’s just how it works,” said Herridge, who doesn’t have enough staff to get all of his Burger King locations back to 24-hour operations. “That’s going to be the primary driver of inflation still over the next year or so.”
To be sure, restaurants are in a better place than they were a year ago, when the omicron variant derailed reopening efforts as employees fell sick and customers stayed away. Dine-in visits were up 24% this January compared to the same time a year ago, the NPD data show.
But at Salsarita’s, a 75-unit chain based in Charlotte, North Carolina, Chief Executive Officer Phil Friedman is still struggling to hold onto staff.
At its nine corporate-owned locations, Salsarita’s increased average hourly pay by about $2 last year to nearly $15 to stem an exodus. While that’s helped, some are still leaving: Two employees in their 20s quit about a month ago after being told they weren’t allowed to use their mobile phones while working, Friedman said. Overall, the industry had a quit rate hovering around 6% in 2022, double the rate for all jobs.
“There are a lot of ways to make money without being in the restaurants,” he said. “We don’t have enough people wanting to do this. There’s no prospect for me to see that getting much better.”
Jazz Salm, 39, has worked on-and-off in foodservice for more than two decades, but she’d like to get out for good. Salm works 40 hours per week at a gas station preparing food, but doesn’t earn enough to keep up with soaring household costs. Though she began working a second job at a diner in Valatie, New York, last fall, she doesn’t want it to be for the long term.
“I’m hoping to find some stability so that I don’t have to work in the restaurant industry anymore,” she said.
©2023 Bloomberg L.P.
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