Why Restaurant Brands Are Struggling To Find Workers Even Amid Historic Unemployment

The COVID-19 economic crisis is very different from past downturns. For one, in past crises restaurants often offered an important lifeline for the newly unemployed, but since service-sector jobs now mean a higher chance of infection, even laid off from other sectors aren't looking for work in foodservice.

As of mid-July, only about half of the 6.1 million food-service jobs that the U.S. lost in March and April had returned, according to Bureau of Labor Statistics data.

As a recent article on Bloomberg points out, key demographics like teenagers, at the urging of their parents, and the elderly are staying away for health and safety reasons. Plus, emergency-enhanced unemployment checks have kept others on the sidelines.

Industry trends

While many traditional restaurants continue to struggle as consumers avoid dining rooms, fast-food chains and those with carryout have reported steady improvement this summer as socially distancing consumers opt for drive-thrus.

Hoping to capitalize on the rebound, franchisors have been announcing hiring plans. For example, McDonald’s Corp. said in June that it planned to hire 260,000 this summer. The announcement follows similar, yet smaller, plans from Subway, Yum Brands, Taco Bell, Dunkin and many more. Unfortunately, employees aren’t quite as eager to come back as employees, and the lack of workers is complicating efforts.

Even prior to the pandemic, the QSR and fast casual segment had been dealing with an overall labor shortage. As the labor market continued to shrink, franchisors boosted their benefits, including paid sick leave, career opportunities and educational scholarships, to retain their most valuable asset — store employees. Now, franchisors are looking for new ways to appeal to potential employees, including higher salaries.

Hiring challenges

Michael Lippert, president of GPS Hospitality LLC, which operates almost 500 Burger King, Popeyes and Pizza Hut locations, told Bloomberg that hiring has been particularly tough because fewer teenagers are applying. This has pushed up wages and led the company to expand overtime, previously reserved for management, to hourly workers. Last week, the company held a virtual job fair, with a target of hiring 3,000 workers.

Wendy’s Co. is forecasting 4% wage inflation for the year. The higher wages are “what you need to pay at the moment on a year-over-year basis to actually staff your restaurants,” said Gunther Plosch, the company’s chief financial officer, on Wendy’s second-quarter earnings call on Aug. 5.

Moving forward, it is likely that these benefits will become more important than ever if restaurant franchisors hope to stay competitive and bring in new employees.