Fatburger, Johnny Rockets parent: Labor 'crisis' a ‘total nightmare’

FAT Brands Inc. CEO Andrew Wiederhorn, on Friday, provided insight into the "very difficult" problems facing restaurants and said the labor "crisis" has been a "total nightmare." 

FAT Brands is the owner of 14 different restaurant brands, including Fatburger and Johnny Rockets. 

Wiederhorn made the comment on "Mornings with Maria" on Friday shortly before the release of the nonfarm payroll report, which revealed U.S. hiring slowed sharply in August as the resurgence in new COVID-19 infections impeded job gains. 

Nonfarm payrolls increased by 235,000 workers in August, sharply missing estimates, and the unemployment rate fell to 5.2%, the Labor Department said Friday. Analysts surveyed by Refintiv had expected the addition of 728,000 jobs and the unemployment rate to fall to 5.2%. 

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The U.S. economy has averaged 586,000 jobs gained per month this year. 

On Tuesday, the National Restaurant Association released a mid-year report with information on the state of the industry, illustrating the continued impact of the COVID-19 pandemic. 

The report revealed that even with a "steady trend of job creation in the first half of the year, eating and drinking places are still nearly 1 million jobs, or 8%, below pre-pandemic employment levels." 

The report also noted that restaurants are among those industries with the highest levels of unfilled job openings. It pointed out that the ongoing labor squeeze and food costs are still top challenges. 

Wiederhorn stressed on Friday that his businesses have been faced with those challenges. 

"It’s been very difficult for our operators, for our own company-owned stores to staff them appropriately," Wiederhorn said. "It’s not about paying the wage, it’s about getting workers back to work and getting the subsidies to go away here." 

Ticker	Security	Last	Change	Change %
FAT	FAT BRANDS INC.	7.55	+0.11	+1.48%

He noted that "existing operators can shuffle their people around, they can take care of them, they can make it work." 

"Where we’ve seen it the hardest hit is really when you have a new operator who’s trying to hire new management, that’s really a challenge for them," Wiederhorn continued. 

He then acknowledged that the problem is "going to go away" soon "as long as they [the federal government] don’t send out more stimulus checks, but it’s just going to take a little while." 

The enhanced unemployment benefits designed to help people get through the pandemic is set to expire on Labor Day. 

About half of all states chose to put an end to the extra aid before this month’s deadline, with some governors arguing that those boosted benefits discouraged people from getting back into the workforce. 

The National Restaurant Association’s mid-year reports also revealed that six in 10 adults have changed how often they frequent restaurants over fears of the contagious delta variant as the number of cases has surged. 

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A survey conducted by the association between August 13 and 15 found that the delta variant "threatens to reverse the gains made in the first six months of the year." 

The survey found that 19% of adults said they stopped going out to restaurants, 37% said they ordered delivery or takeout instead of dining in and 32 said that if asked to wear a mask or show proof of vaccination to dine indoors again, they would be less likely to go to an establishment. 

Wiederhorn said on Friday that according to his data, his brands have not been affected by delta. 

"As far as the delta variant goes, we are not seeing a decline in foot traffic in our restaurants or in our sales," Wiederhorn said, noting that his "casual dining brands have been up between 10 and 18%" and his burger brands has seen an increase of as much as 12%. 

Wiederhorn provided the insight as FAT Brands added another chain to its growing portfolio after announcing a deal on Wednesday to acquire the Twin Peaks from Garnett Station Partners for $300 million, according to a company press release. 

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The deal marks the second major acquisition for FAT Brands in the past two months, following the June announcement of a $442.5 million acquisition of Global Franchise Group, the owner of several brands including Round Table Pizza and Great American Cookies.

Last year, FAT Brands reportedly acquired Johnny Rockets for about $25 million. 

Wiederhorn told FOX Business’ Dagan McDowell that the Twin Peaks acquisition "is a really nice contributor to our growth story," which helped FAT Brands justify the purchase price. 

"This brand has 82 locations open," he noted. "It has 18 more planned to open between now and next summer. That’s like a 25% growth." 

Wiederhorn pointed out on Friday that Twin Peaks has also experienced a "lift in sales" despite Delta fears. 

He pointed out that Twin Peaks has many locations in Texas, Florida and Georgia and that "they’ve been resilient in terms of reopening and staying open." 

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FOX Business’ Jonathan Garber contributed to this report.