This week we examine the complicated reasons why some foodservice operators can't find help, despite high levels of unemployment. We also look at consumers' preferences for fast-casual over fast food restaurants, follow up on last week's McDonald's story, and much more.
Massachusetts has 250,000 unemployed people. So, why can't upscale restaurants find workers? Well, according to an article in the Boston Globe, it's complicated. First, while some hesitate to admit it, there does appear to be a shortage of qualified help, particularly cooks and chefs. It also appears that in this era of the celebrity chef that some recent culinary school grads have an inflated idea of both their capabilities and what their compensation should be.
The second problem is that many of the restaurant jobs are part time and potential workers are looking for full-time employment. But the fact remains that restaurants only need many of their employees four to six hours a day. The restaurant may only need the wait staff a couple of hours around lunch time and then a few hours in the evening. One restaurant operator quoted in the story said he couldn't find wait staff even though they earned $120 to $250 a night in tips. The article quotes one labor expert who states that restaurants could fill many open positions if they offer "more hours and a little training."
This leads to another point raised last year by an article in the Wall Street Journal. The writer quoted several employers who bitterly bemoaned the lack of skilled machinists and technicians. But, when asked why they didn't train workers themselves they replied that if they did, some other company would hire them away.
And, this in turn reminds us that fast feeders, with the negative image they have due to low pay and lack of benefits, will hire and train workers with no experience and no demonstrable job skills.
Economic News This Week
- Initial jobless claims for the week ending Nov. 9 fell to 339,000 from an upwardly revised 341,000 the week earlier. The less volatile 4-week moving average fell to 344,000, a decline of 5,750. The lower number of claims filed in the end of the summer may have been an aberration. At least it appears that the number of layoffs is not increasing.
- Productivity increased 1.9 percent in the U.S. Labor Department's preliminary estimate for the third quarter, significantly less than consensus estimates. Further bad news was the Department revised second quarter productivity down to 1.8 percent from the previously announced 2.3 percent. High productivity is thought to mean more profits for business and an incentive for increased hiring.
- Industrial production declined 0.1 percent in October according to the Federal Reserve. Decline in utilities and mining pushed production lower but manufacturing production increased 0.3 percent. This was the first negative month since July.
- Capacity utilization fell 0.2 percent, showing once again that the economy is weak.
- The New York Federal Reserve's Manufacturing Index for the Empire Region fell to a surprising minus 2.2 percent for November, down from plus 1.52 in October and much less than the consensus forecast of plus 4 percent. New orders, shipments and employment were all in negative territory.
- Christmas sales will be up 2 percent this season according to the Nielson Company. The researcher states consumers are still "feeling the pinch" and will be fiscally cautious. Meanwhile, sales forecasts from some major retail chains are downbeat according to the Wall Street Journal, prompting many to start seasonal sales promotions early this year.
- The National Association of Home Builders Sentiment Index stayed even in November at 54, the same as the downwardly revised Index for October. This simply means more builders find the market for new homes is expanding.
- U.S. consumers' economic confidence is slowly improving and was at minus 27 last week up considerably from minus 39 a month ago. The Gallup Poll points out minus 27 remains far below any score thru September of this year.
Foodservice News This Week
- The perceived differences between fast food and fast-casual restaurants are not as great as commonly believed, according to Technomic. When asked about the importance of various attributes such as food quality, cleanliness, service and value, fast-casual diners were ahead of fast food customers but by a surprisingly small margin of 2 percent to 3 percent. Technomic's Mary Chapman theorizes the data shows consumers place importance on an "over-arching attribute buckets." In other words, consumers don't perceive a wide variance between fast food and fast-casual operations but make decisions on a number of factors.
- McDonald's held an investor meeting last week and stated that menu expansion has come at the expense of customer service. The chain announced it is taking a number of steps to improve service including more systematic roll outs of new items and the introduction of new prep tables. The hamburger giant will open roughly 1,500 new restaurants in 2014 but remodels will be cut back to 300. Reaction to McD's plans met with some skepticism on the part of some investment analysts while at least a few were impressed.
- Restaurant food costs will rise a moderate 2 percent next year, according to SpenDifference, a full-service supply chain support company that works with 20 national and regional chains. The report identifies a number product categories where operators can obtain savings, including a focus on poultry and pork over beef.
- Foodservice trends for 2014 include restaurants in retail stores. This ranges from upscale menu operations in high-end retailers to juice and yogurt bars in bike shops to Checkers in Walmart. Baum + Whiteman restaurant consultants also see a proliferation of "tasting only menus" and upscale "food halls" replacing food courts in shopping centers and malls.
- And the most satisfying burger chain is... In-N-Out Burger with a score of 66 percent, according to Empathica Inc., which calculates a "percent delighted score". Next on the list is Five Guys (57 percent), Whataburger (49 percent), Culver's (48 percent), Steak N Shake (46 percent), Krystal (43 percent), Sonic Drive Ins (43 percent), Dairy Queen (40 percent), Jack in the Box (36 percent), White Castle (36 percent), Carl's Jr. (35 percent), Hardee's (34 percent), Wendy's (34 percent), McDonald's (32 percent), Checkers 30 percent), and Burger King (29 percent).
- High-tech burgers are coming. A better burger operation called Bolt Burgers is scheduled to open in the District of Columbia the end of this month. Customers can do online preordering or with touchscreen kiosks when they enter or by tablets at the tables. The "technological centerpiece" of the restaurant is a no-flip grill that can make 1,200 burgers an hour, which the owner says will produce a "perfect burger every time."
- On the Border Mexican Grill will open a new prototype in Schuamburg, Ill., later this month. The new restaurant features an open kitchen, brighter colors, more rustic finishes and 2 "El Presidente" booths, which are special sections perfect for celebrations and gatherings.
- Growth Chains: Dunkin' Donuts has signed a multi-store development agreement for 12 locations in Memphis. Krispy Kreme Donuts has a four-unit franchise agreement for the Anchorage, Alaska area. Baskin Robbins has signed an agreement for four new stores in the greater Los Angeles area. Fuddruckers has an agreement for five restaurants in New Orleans. French Fry Heaven, with 9 stores currently, has 40 more in development. Corner Bakery Café has signed 2 multi-store agreements to open 15 stores in Arizona and 10 in Wisconsin. Pizza chain Your Pie, which currently has 18 units plans to have 100 by 2015. Blaze Fast Fired Pizza has signed a development agreement with a franchisee to open 19 units in Texas, Louisiana, Mississippi, and Alabama plus an agreement with another franchisee for 6 units in North Carolina. Smoothie King plans on adding 25 units in Kansas City, Mo. over the next 5 years.
- Comparable Store Sales Reports: AFC Enterprises (Up 5.1 percent), COSI (down 3.6 percent), Diversified Restaurant Holdings (up 3.7 percent), Ignite Restaurant Group (Joe's Crab Shack up 3.3 percent, Brick House Tavern up 4.0 percent, and Macaroni Grill down 2.7 percent), Pizza Inn (down 3.5 percent) and Potbelly (up 2.5 percent).
For details and same store sales for other chains, please click here for the Green Sheet.