Restaurant Industry Employs Fewer, Pays Less
Restaurant industry response to the economic downturn: slower growth, less staff, and smaller paychecks.
-- Chain Leader, 3/26/2009 9:08:00 AM
PRESS RELEASE: People Report recently conducted a special online survey to learn how restaurant chains are adapting to the current economic downturn, currently and in the near term. The survey, published this week was completed by hundreds of executives, representing 111 distinct chain restaurant companies from all industry segments.
We focused on those measures that are directly related to the human capital element of our businesses and classified them into three categories: 1. those that affect the total number of restaurants operated, 2. those that affect the labor-hours required within each of these restaurants, and 3. those that affect the cash compensation of the industry's unit level managers and employees.
Foodservice companies have clearly been forced to take some measures to face the current situation; 88% of the companies that participated in the survey have either already reduced or expect to reduce their number of units or number of new unit openings, their restaurant staffing levels, or their base salary increases and bonus payouts for restaurant employees. However, as is explained in detail below, the response has relied more on reducing the restaurant chains' expansion plans and cutting the staffing levels than on modifying the compensation practices.
1. Number of restaurants operated: 71% of companies reported they were closing units or reducing the number of planned unit openings (see Figure 1). A very considerable 41% of all participants reported they have or are planning to close units by the end of the year. On a positive note, most of the unit closings seem to be already in the past, which means we should see job losses in the industry starting to slow down. What about new jobs being created? Not on a significant scale, apparently, given that 77% of the companies said they have either eliminated or reduced the number of planned unit openings for 2009.
Figure 1
Percentage of Companies Adjusting Their Number of Units1
1 Includes closing units, eliminating new unit openings, or reducing the number of planned openings.
2. Labor hours required per unit: 69% of the companies reported reducing their staffing levels, either by reducing the number of managers or hourly employees per restaurant or by reducing their number of hours (see Figure 2). Consistently across all industry segments, more companies reduced their number of managers than the number of hourly employees per unit. Fifty-one percent of all companies reported reducing or planning to reduce the number of managers per unit, while only 34% of the companies reported reducing the number of hourly employees. As was the case with the number of restaurants being closed, it seems that most of the adjustments to the staffing levels have already been implemented. Another way that companies have adjusted their practices is through the reduction of hours for their workforce; 42% of the companies have reduced or plan to reduce the hours worked by their restaurant employees.
Figure 2
Percentage of Companies Adjusting Their Restaurant Staffing Levels1
1 Includes reducing number of managers per unit, number of hourly employees per unit, or number of hours.
3. Cash Compensation: Only 43% of the restaurant chains surveyed opted for adjusting their compensation practices, either by freezing their unit level base salaries or by eliminating bonus payouts (see Figure 3). The industry's response has been centered more on freezing salaries (43% of participating companies) than on eliminating bonuses (14% of companies).
Figure 3
Percentage of Companies Adjusting Their Restaurant Compensation Practices1
1 Includes freezing base salaries or eliminating bonus payouts.
Corporate Employees Feel the Pinch... Even More
The reaction to the crisis has been much more aggressive inside the walls of the corporate office, with 54% of all companies cutting staffing levels and 46% introducing a hiring freeze for all corporate positions. The response in terms of compensation tactics has also been more significant for corporate employees than for their unit level counterparts: 54% of the participating companies said they have frozen base salaries and 29% reported eliminated bonuses for corporate employees.
People Report currently serves over 120 chain restaurant operations that represent over 160 concepts, over half a million management and millions of hourly employee records. The company provides industry leading, benchmarked research for key human capital metrics, best employment practices, total rewards and compensation for chain operators, franchisees and independent restaurants.
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