Upon the closing of the third quarter, the status of the restaurant industry remained fairly similar to the past few years. Most restaurants have not seen any improvement on the sales and traffic side, particularly with the devastating hurricanes that caused widespread damage in Texas and Florida in August and September. Likewise, workforce challenges remained present, with a few small movements in certain areas. Take a look at the most notable workforce trends from the third quarter of 2017.
1. Unemployment breaks 16-year record
The national unemployment rate hit 4.2 percent in September, the lowest rate in almost 17 years. Economists have said that the nation is nearing full employment, which does not have a precise number attached to it but historically has been around 4 percent. This obviously illustrates the lack of available workers to fill the open jobs in the restaurant industry and proves to be a double-edged sword. Although a low unemployment rate typically demonstrates a stable economy and ample opportunities for workers, it also puts quite a bit of pressure on businesses as they struggle to fill jobs.
2. Turnover is decreasing
As unemployment rates reach one extreme, turnover rates seem to likewise have reached another. Employee turnover levels in restaurants have stead
ily risen over the past few years and now, seemingly, have peaked. Although record-high turnover is certainly troublesome for operators, the small blessing in disguise is that, like unemployment, there’s not much room left for turnover to continue rising. That’s precisely what restaurants are now seeing, particularly in the quick service and upscale casual/fine dining segments. Although still topping the charts, employee turnover levels are gradually starting to come back down.
In fact, three out of the four dining segment groups measured in the Workforce Intelligence (formerly People Report) Workforce Index™ reported declining turnover levels during the third quarter, with the Upscale Casual/Fine Dining group posting the largest decrease. Overall, 41 percent of companies tracked by Workforce Intelligence (formerly People Report) reported decreasing turnover at the hourly level. Fortunately, this trend will likely continue in the coming months.
3. Recruiting is still the top challenge
There is one thing operators will not find any relief from, though, and that is recruiting challenges. For the ninth quarter in a row, the Recruiting Difficulty index posted the highest value in the Workforce Index. Additionally, 63 percent of companies reported an increase in recruiting difficulty for hourly employees and 53 percent reported an increase for managers. Recruiting Difficulty has been hovering around these lofty levels for the past several years, as workers have more and more opportunities for employment and potentially higher compensation elsewhere.
Low unemployment rates clearly have a hand to play in several aspects of the workforce, and recruiting difficulty is no exception. Black Box Intelligence (formerly TDn2K) research has found that recruiting enough qualified workers for restaurants now may include rethinking benefits offerings and maintaining competitive pay with other industries.
4. Fast casual takes the hardest hit
Throughout the past two years, few restaurants have managed to escape the numerous financial and workforce troubles plaguing the industry. Fast casual in particular, though, has been suffering the most. The Fast Casual/Family Dining segment group posted the highest values out of all segments for every employment measure in this quarter’s Workforce Index. Most notably, their values for turnover, recruiting difficulty and employment expectations were much higher than their peers.
These challenges could be attributed to a number of factors. The most likely cause is that fast casual has been facing abysmal sales growth for over a year now. This is largely due to the recent aggressive growth of the fast casual segment, with the birth of new concepts as well as the rapid expansion of existing brands. This amount of growth could lead to increased competition for talent within the segment, as employees have more opportunities for work and perhaps the potential for higher pay at other fast casual concepts.
5. Change could be forthcoming
The biggest takeaway from this past quarter is that the restaurant industry may be nearing rock bottom on the workforce front. While this sounds like devastating news, it means that things will likely not get much worse before they start getting better. However, that is not an invitation for operators to kick back and wait for things to turn around. Staying ahead of these difficulties will be an active challenge, and restaurants must continue to focus on building a strong workplace to keep up in this competitive environment.
Since you’re here, you should check out “Understanding Corporate Compensation and Employee Benefits in the Restaurant Industry” for an in-depth analysis of labor costs, compensation issues and navigating the legislative landscape.
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