Worker shortage could turn fast food into drive-thru only
A&W Restaurants CEO says labor shortage creating 'domino effect' across the industry
The labor crunch caused by the COVID-19 pandemic and free-wheeling government stimulus money could change the fast-food industry forever.
Restaurants across America, since the easing of COVID-19 restrictions, have had a difficult time finding workers as job seekers have a record 11 million jobs to choose from.
Employment in food services and drinking establishments were little changed for a second straight month in September after averaging a monthly gain of 197,000 from January through July, according to the Labor Department’s September non-farm payroll report released Friday. The industry has nearly 1 million fewer workers than it did in February 2020.
The labor shortage is creating a "domino effect" across the industry, Kevin Bazner, CEO of A&W Restaurants, told FOX Business. "No manager, then you lose staff to next door and, before you know it, you can't open a restaurant."
There are many reasons for the labor shortage.
Some workers are hesitant to return to work due to COVID-19 fears. Additionally, government policies like the Child Tax Credit and increased SNAP benefits may be encouraging people to stay home. Others, until recently, have been the beneficiary of $300 per week in supplemental unemployment benefits. In total, people have $400 billion more in savings than before the pandemic due to all of the government’s programs.
"These programs often discourage work," said Andy Puzder, former CEO of CKE Restaurants Holdings, which is the parent company of restaurant chains including Carl’s Jr. and Hardees. "And if you discourage work, you really discourage a younger generation from getting the self-respect and the dignity that comes with the job."
He said business owners he speaks with are saying 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, younger workers are saying they don’t want to work full time, nights or weekends.
Bazner said many A&W Restaurants locations are operating at 60% to 70% of pre-pandemic levels. That has resulted in many restaurants shifting to a drive-thru only model because there isn’t enough help to clean dining rooms and restrooms.
The shift has been a "godsend," according to Bazner, who said A&W is seeing same-store sales comping in the high teens compared to 2019.
Restaurant operators are also grappling with higher costs across the supply chain. Surging energy costs and labor issues are driving up transportation costs while prices for beef, pork and other commodities are sharply higher.
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If current government policies stay in place and labor remains difficult to find, drive-thru may 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 be looking for those kinds of alternatives if they don't have labor."