Lucy Nicholson/Reuters
A McDonald's employee passes an order to a driver at a drive-through restaurant in Los Angeles.
- Executives and analysts say that a "war for talent" is sweeping the restaurant industry and creating massive problems.
- Chains like Dunkin' Donuts are struggling to fill positions, with some brands falling short of sales goals due to labor shortages.
- With unemployment low and a plethora of alternative jobs available, chains are scrambling to find a way to hire workers and convince them not to quit.
The restaurant industry is battling to keep kitchens full and tables served as chains struggle to find people willing to work.
"I do believe moving forward the biggest challenge in the industry is going to be the war for talent," Gene Lee, the CEO of Olive Garden parent company Darden, said in a recent call with investors.
Lee isn't alone in his concerns. Dunkin' Donuts executives have been discussing the problem for years, with former CEO Nigel Travis saying that a franchisee told him he could only fill 60% of the positions he needed.
Analysts are also calling a lack of employees one of the biggest problems in the restaurant industry today.
"You've got an environment where, really, the economy is strong," BTIG analyst Peter Saleh told Business Insider. "People are trading up into better jobs. There aren't as many employees or capable employees to do the jobs these companies need."
Unemployment is low, at 3.9% in August. Despite the tight labor market, restaurants still rely on workers to wait on customers, make food, clean locations, and much more. If positions cannot be filled with qualified employees, it is difficult for executives' big-picture strategies to actually succeed.
"For some brands, it's actually capping their sales potential," said John Hamburger, the founder of industry trade publication Franchise Times Corp.
"If you can't find enough people to fill a shift, you just can't possibly do the potential volume of what some of these restaurants are supposed to be doing," Hamburger continued. "There's a lot of brands that are having a lot of trouble trying to find workers."
'If you want a job, you have a job.'
Jeff Chiu/AP Images
People can now work in the gig economy, instead of at fast-food chains.
In 2018, workers have the option to simply opt out of fast-food jobs instead of being stuck flipping burgers at minimum wage.
"For the first time in the history of the world, if you want a job, you have a job," Mizuho analyst Jeremy Scott said, referencing Uber drivers specifically.
The gig economy may not provide health care, but it can be an appealing alternative for people choosing between working in a fast-food kitchen and having the freedom of picking their hours and driving their own vehicle. And, with retail giants like Macy's, Target, and Walmart desperate for seasonal workers, there are also plenty of more traditional options for people who are dissatisfied at fast-food jobs.
"The labor market is getting tighter and tighter," Saleh said. "There are less folks willing to take those, call it, 'starter' jobs or 'lower-end' jobs."
The brands that will likely be hit hardest by the war for talent are the chains where workers are already unhappy, UBS analyst Dennis Geiger wrote in a February note to clients.
UBS Evidence Lab's analysis of Glassdoor data found that Wendy's, Sonic, and KFC had the lowest employee satisfaction ratings in 2017. McDonald's and Dunkin' Brands were also poorly rated.
These chains are scrambling to find solutions. A number of companies used tax breaks earlier this year to give workers bonuses or provide new benefits, such as training and education opportunities.
Another solution is to simply cut the positions that chains are struggling to fill. When it is almost impossible to hire competent workers, replacing roles such as cashiers with robots likely becomes not only appealing, but necessary.
"The only way to truly deal with this is to reduce the number of labor hours that are required to run your concept," Saleh said.