KEY POINTS
  • Franchisees and large restaurants are looking for labor in an increasingly tight market.
  • Additional stimulus via both direct payments to individuals and enhanced unemployment benefits is a potential double-edged sword for restaurants.
  • Consumers have more cash on hand and are returning to dine out, but some operators feel the economic stimulus efforts are incentivizing workers to stay home.

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Daniel Halpern is looking to hire 800 workers, and it hasn't been easy.

Halpern is CEO of Jackmont Hospitality, an Atlanta-based foodservice company that franchises about 45 restaurants including TGI Fridays across the country.

Diners are returning. But Halpern hopes that in the weeks to come his locations will be properly staffed to ensure that the patrons he's been waiting for will have the experience they've come to expect.

At the moment, Jackmont employs around 1,200 workers. Before the pandemic hit, its workforce was 2,700, more than double that.

"For those of us in the service industry, staffing is paramount to having success. When we get out of the crisis, we want to be able to open and offer our guests a quality experience," Halpern said. "We are constantly trying to staff — it is the number one issue on our calls with our general managers."

Two people have a drink outside Baja Sharkeez in Huntington Beach, CA on Tuesday, April 6, 2021.

Average wages at his restaurants are around $13 an hour, before tips. He also offers benefits, but says he's looking to incentivize servers by paying them daily tips on cards and discussing additional perks like sign-on bonuses.

Additional stimulus via both direct payments to individuals and enhanced unemployment benefits is a potential double-edged sword for restaurants. Consumers have more cash on hand and are returning to dine out. But some operators like Halpern feel it's incentivizing workers to stay home. Beyond that, major retailers like Amazon have hired hundreds of thousands of workers over the course of the pandemic, likely impacting the service sector's labor pool.

Tropical Smoothie Cafe is seeing the labor crunch play out at its nearly 1,000 company-owned and franchised locations, which typically employ 16- to 22-year-olds. CEO Charles Watson said hiring is the company's biggest headwind right now.

"There is a dearth of labor in the restaurant business and in the service business like we have never seen. … There is simply no labor in many to most of the markets that we have cafes in — simply put, people would rather stay home and get paid than go to work," he said. "That's creating big problems for us in terms of our most important thing, which is customer service."

A Now Hiring sign is posted in front of a Taco Bell restaurant on February 05, 2021 in Novato, California.

In March, nonfarm payrolls increased by 916,000 for the month while the unemployment rate fell to 6% —this marked the highest total job increases since August 2020, a sign the economy is bouncing back.

The National Federation of Independent Business said the challenge of trying to find qualified employees is weighing on small business owners. While sentiment overall increased in March, 51% of owners reported few or no "qualified" applicants. What's more, 42% of all owners reported job openings they couldn't fill — a record high reading and 20 points above the group's historical average over the last 48 years of 22%.

"Main Street is doing better as state and local restrictions are eased, but finding qualified labor is a critical issue for small businesses nationwide," NFIB Chief Economist Bill Dunkelberg said in a statement. "Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force. However, owners remain determined to hire workers and grow their business."

Domino's CEO Ritch Allison also acknowledged labor market tightness on CNBC's "Power Lunch" Monday. The company has hired tens of thousands of workers, including delivery drivers, over the course of the pandemic.

"It's a very competitive market. So we look at ourselves as competing for customers and also competing for drivers, for team members — we've got to be great at both," he said.

Large restaurant companies have announced hiring events recently for tens of thousands of positions. Through Thursday, McDonald's will be hosting an event to fill 25,000 roles in the state of Texas alone, Reuters reported. The fast food giant hired 260,000 last year when restaurants reopened for diners.

IHOP, owned by parent company Dine Brands, said it would hire 10,000 employees to fill positions for part and full-time workers at 1,600 locations in the U.S.

And Yum Brands' Taco Bell is renewing its hiring parties across the country on April 21, at nearly 2,000 locations. The company is looking to hire 5,000 workers, converting parking lots and patios into job fairs to keep applicants safe in the ongoing pandemic.

"It's no secret that the labor market is tight, which is why we are thrilled to host our fourth round of Hiring Parties in partnership with our franchisees," said Kelly McCulloch, Taco Bell's chief people officer, in a statement.

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