A&W Restaurants CEO says labor shortage across industry is creating ‘domino effect’
due to labor shortage COVID-19 The pandemic and free-wheeling government stimulus could change the fast-food industry forever.
Since the easing of COVID-19 restrictions, restaurants across the US have had a hard time finding workers as job seekers have a record 11 million jobs to choose from.
Employment in food services and drinking establishments changed little for the second consecutive month in September after an average monthly profit of 197,000 from January to July, according to the Labor Department’s September non-farm payrolls report released Friday. The industry has approximately 1 million fewer employees as of February 2020.
A&W Restaurants CEO Kevin Bazner told Granthshala Business that labor shortages are creating a “domino effect” across the industry. “No manager, you lose the staff next door and you can’t open a restaurant before you know it.”
There are many reasons for the labor shortage.
Some workers are hesitant to return to work for fear of COVID-19. Additionally, government policies such as the Child Tax Credit and increased SNAP benefits may encourage people to stay home. Others, until recently, have been beneficiaries of $300 per week in supplemental unemployment benefits. In total, all government programs have left people with $400 billion more in savings than before the pandemic.
“These programs often discourage work,” said Andy Puzder, former CEO of CKE Restaurants Holdings, the parent company of restaurant chains including Carls Jr. and Hardee’s. “And if you discourage work, you actually discourage a younger generation from the self-esteem and respect that a job brings.”
He said the business owners he speaks with are saying that work ethic has been damaged by the pandemic. Fast-food restaurants are offering up to $19 an hour and still can’t find workers. When they do, young workers are saying they don’t want to work full-time, nights or weekends.
Bazner said many A&W restaurant locations are operating at 60% to 70% of pre-pandemic levels. This has resulted in many restaurants shifting to the drive-thru model only because there is not enough support to clean the dining rooms and restrooms.
The change has been a “godsend,” according to Bazner, who said A&W is seeing same-store sales in the high teens compared to 2019.
Restaurant operators are also grappling with higher costs in the supply chain. Rising energy costs and labor issues are driving up transportation costs while the prices of beef, pork and other commodities are increasingly high.
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If current government policies remain in place and labor remains difficult to find, the drive-thru could be the only part of fast food that survives, according to Puzder.
“It’s cheaper — labor-wise — to run a drive-thru business, so you can be more profitable,” he said. “I think people are going to look for the kinds of alternatives that don’t have the labor. “