Restaurant Job Growth Firm Despite Tighter Labor Market

 

Although restaurants continued to expand payrolls at a steady pace in November, there are indications that the labor pool is becoming shallower.  As the economy nears full employment and teen participation in the labor force remains dampened, the industry’s labor challenges are likely to intensify in the near future, according to the NRA’s Chief Economist Bruce Grindy.  His Economist’s Notebook commentary and analysis appears regularly on Restaurant.org and Restaurant TrendMapper.

The restaurant industry continued to expand payrolls at a solid pace in November, according to preliminary figures from the Bureau of Labor Statistics (BLS).  Eating and drinking places added a net 31,500 jobs in November on a seasonally-adjusted basis, the fourth consecutive month with gains above 30,000.

Overall, restaurant employment was up 3.6 percent through the first 11 months of 2015, which puts it on pace to register its fourth consecutive year with growth of at least 3.5 percent.  In addition, 2015 will mark the fifth consecutive calendar year in which restaurants added at least 300,000 jobs.

Although job growth has been strong in recent months, there are indications that the labor pool is becoming shallower.  In the November edition of the NRA’s Restaurant Industry Tracking Survey, recruiting-and-retaining employees topped the list of challenges facing restaurant operators’ businesses.  One in five operators say ‘recruiting-and-retaining employees’ is the number-one challenge currently facing their business, which is up from just 4 percent a year ago at this time.

The primary reason for the recent tightening in the labor market has been the steady improvement in the U.S. economy.  The national economy added a net 211,000 jobs in November, the 62nd consecutive monthly gain for a total of more than 12.6 million jobs.  In addition, the nation’s jobless rate stood at 5.0 percent in both October and November, the lowest level since April 2008.

However, another critical factor impacting the availability of workers for the restaurant industry is a sharp decline in the number of teenagers willing to dip their toes in the labor pool.

At its peak in the late 1970s, roughly 58 percent of 16-to-19-year-olds were in the labor force. This participation rate remained above 50 percent until 2001, when it started trending downward. The Great Recession exacerbated this decline, with the teen labor force participation rate plunging from 41.3 percent in 2007 to just 34.0 percent in 2014 – a record low.

The net effect was a decline of 1.4 million teenagers in the labor force between 2007 and 2014, a development that was reflected in the restaurant workforce. In 2007, 16-to-19-year-olds represented 20.9 percent of the restaurant workforce. By 2014, these teens made up only 16.6 percent of restaurant employees.

To be sure, the restaurant industry is still the economy’s largest employer of teenagers, providing jobs for 1.5 million individuals between the ages of 16 and 19. Put another way, one-third of all working teenagers in the U.S. are employed in a restaurant.

However, the shrinking teen labor pool has led many restaurant operators to look to alternative age cohorts to fill their staffing needs.  Factoring in an economy that is trending toward full employment, it is likely that this practice will intensify in the near future.

(via National Restaurant Association)

Restaurant Sales Regained Momentum in November

 

Restaurant same-store sales growth returned to positive territory during November making the improvement from last month’s year-over-year sales growth rate is the largest reported by the industry since June of 2015. This insight comes from data reported by TDn2K’s™ Black Box Intelligence™ through The Restaurant Industry Snapshot™, based on weekly sales from over 22,000 restaurant units, 120+ brands, representing $55 billion dollars in annual revenue.

Dallas, Texas (PRWEB) December 04, 2015

After disappointing restaurant sales in October, momentum was regained as same-store sales growth returned to positive territory during November. Although the 0.5 percent sales growth experienced in November can be considered relatively modest, especially compared with the average 2.2 percent same-store sales growth reported for the first nine months of the year, the 0.6 percent upward swing compared with the -0.2 percent same-store sales growth reported for October is encouraging. This improvement from last month’s year-over-year sales growth rate is the largest reported by the industry since June of 2015. This insight comes from data reported by TDn2K’s™ Black Box Intelligence™ through The Restaurant Industry Snapshot™, based on weekly sales from over 22,000 restaurant units, 120+ brands, representing $55 billion dollars in annual revenue.

“At a national level, many of the key economic indicators are still positive: job growth is expected to be reported as strong for November, unemployment is still slowly declining and consumer sentiment continues to be relatively strong compared with previous years. It is not surprising that the restaurant industry was able to rebound and post positive same-store sales growth during November, albeit small, especially when factoring the effect of increasing average guest checks,” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “However, it is difficult to be too optimistic for the fourth quarter, given the declining trend in same-store sales growth we have been reporting on throughout the year. Growth continues to be positive, but we are definitely experiencing a slowdown in restaurant sales.”

At the end of November, quarter-to-date same-store sales growth is 0.2 percent; a big drop from the 1.5 percent posted during the third quarter. Year-to-date same-store sales growth is now 1.8 percent as we head into the last month of the year.

There is favorable news for the industry observed in the increase of same-store sales during November as a result of an improvement in traffic and not because of companies increasing their prices. Same-store traffic growth was -1.7 percent during November, a significant 1.1 percent improvement over the -2.8 percent reported for October. “However the chain restaurant industry as a whole continues to have a chronic traffic problem,” continued Fernandez, “and it has worsened during the last couple of months. The average same-store traffic growth for October and November was -2.2 percent, compared with an average -1.1 percent for the first nine months of the year.”

The steady drop in average guest check growth is a key component in the slowdown in sales experienced since July. While the average guest check growth in comparable stores during the first six months of the year was 3.4 percent, the average for the five months since then was only 2.5 percent. Furthermore, the 2.0 percent growth posted in November is the lowest year-over-year increase in average guest check reported by the industry since June of 2014. A factor behind this decrease in average guest check growth seems to be a decline in same-store beverage sales, which have reported negative growth during the last three quarters while food sales growth has been able to remain positive.

As has been the case during most of this year, the segments in limited service (Quick Service and Fast Casual) were the top performers based on same-store sales growth during November, significantly outpacing the sales growth of the full service segments of the industry.

Although at the regional level there are significant differences in sales growth performances, the slowdown in sales has been widespread and affected all regions of the country. The average same-store sales growth for October and November combined was lower than the average for the three previous months in all 11 regions of the country tracked by Black Box Intelligence. The best performing region was California for the fourth consecutive month, with same-store sales growth of 2.9 percent and -0.2 percent traffic growth during November. The worst performing region for the third consecutive month was the Southwest (Louisiana, Arkansas, Oklahoma and New Mexico), which posted -3.3 percent same-store sales growth and -4.6 percent for traffic. The impact of the energy industry downturn seems to continue to be a factor in oil producing states, since in addition to the slump in the Southwest, the Texas region was one of the only three that experienced negative sales growth during November and has now endured three consecutive months of same-store sales growth.

From a market perspective, 103 (53 percent) out of the 193 DMAs tracked by Black Box Intelligence reported positive same-store sales growth during November. Although an improvement from the 42 percent of DMAs that posted positive growth during October, this represents a considerable decline from the average 71 percent of DMAs that had positive sales growth during the June through September period.

As restaurant sales dropped in October, so did the number of new jobs created by the restaurant industry according to TDn2K’s People Report’s™ latest reports. Jobs in restaurants grew by 3.9 percent year-over-year during October; while the average growth rate for the previous three months was 4.6 percent. Even with this slowdown in October, the chain restaurant industry continues to consistently outpace the rest of the economy when it comes to job creation. As a comparison, the average year-over-year growth rate in total number of non-farm jobs was only 2.0 percent during the September through October period. The restaurant industry is creating jobs at more than twice that rate.

The pressures of the tightening labor market continue to be felt by restaurants in the form of rising turnover levels. After three months of flat restaurant management turnover rates, rolling 12 month turnover started climbing again and now has increased during eight of the last 12 months ending in October. Meanwhile, restaurant hourly turnover remains in its upward trend that started back in September of 2013. Rolling 12 month hourly employee turnover in restaurants has increased during 26 consecutive months. Staffing and retention has become a major concern for operators and expectations are for continued challenges in this area in months to come.

According to TDn2K’s White Box Social Intelligence™ based on a sample of almost 8.5 million online mentions, guest sentiment towards chain restaurants became more positive during November compared with previous months. Out of three key guest satisfaction indicators tracked in the Restaurant Industry Snapshot (“food”, “service” and “intent to return”), all showed a higher percentage of positive sentiment mentions than in any of the previous seven months. Tied to this increased positive sentiment seems to be the buzz around holiday events and promotions that started to take over the social chatter for restaurants in November.

The top performing segment during November based on percentage of positive mentions for all three guest satisfaction attributes was Fine Dining (this segment was also the top performer for “service” and “intent to return” the previous month). This might also be tied to holiday events planned for and promoted by the brands in this segment. However, nearly all industry segments saw an increase in their positive-sentiment conversations during November, providing some encouraging news for the industry as we head into the last month of the year.

TDn2K™ (Transforming Data into Knowledge) is the parent company of People Report™, Black Box Intelligence™ and White Box Social Intelligence™. People Report provides service-sector human capital and workforce analytics for its members on a monthly basis. Black Box Intelligence provides weekly financial and market level data for the restaurant industry. White Box Social Intelligence delivers unparalleled consumer insights and reveals online brand health. Together they report on over 32,000 restaurant units, over one million employees and $55 billion in sales. They are also the producers of two leading restaurant industry conferences: Summer Brand Camp and the Global Best Practices Conference each held annually in Dallas, Texas.

(via Press Release Rocket)

New York 2016 Wage Increases & Reminders

 

As 2015 winds down, it is important to keep in mind these important changes that will effect New York businesses the new year ahead. Failure to comply with these requirements could subject an uninformed employer to substantial liability.

Minimum Wage Increase

Effective December 31, 2015, New York State's minimum wage will increase a quarter from 8.75 to $9.00. Payroll changes must be made in advance, so this shall be a reminder for all employers.

Workers who are covered by New York's Hospitality Wage Order, their wages will now be raised to $7.50 an hour. The overtime rate for those receiving gratuities will be $12.00 per hour.

Please note that pursuant to the report and recommendations of the Hospitality Wage Board, food service workers (e.g., wait staff, bussers) and service employees (e.g., valets, bathroom attendants, coat check personnel) now are entitled to the same tipped minimum wage and overtime rate.

In addition, if an establishment is considered as a fast food provider, the minimum wage in New York City shall be $10.50, effective December 13, 2015. For employees in the rest of New York State, it will be $9.85 hourly.

New York is not the only region to increase minimum wages in 2016. See the chart below for the minimum wage increases for other states:

Notice of Rate of Pay

Pursuant to New York’s Wage Theft Prevention Act (WTPA), New York business owners must provide a “Notice of Pay” form to all employees upon a change in their rate of pay. For all employers outside of the hospitality industry, the New York State Department of Labor (NYDOL) has opined that it will not be necessary, as long as the new rate of pay is referenced in the employee’s next pay stub. Employers do not need to provide a new Notice of Pay as a result of the increase in the minimum wage.

However, hospitality employers are not so lucky. Because of the language of the Hospitality Industry Wage Order, hospitality employers must provide a Notice of Pay form to those employees who are affected by the increase to the minimum wage (including all tipped employees) on or prior to December 31, 2015. The notice must contain the following information:

• The employee’s normal rate(s) of pay and the basis thereof (e.g., hourly, shift, weekly, salary);
• If applicable, the employee’s overtime rate of pay;
• The employee’s regular pay day;
• Any allowances claimed against the minimum wage (e.g., tip credit, meal credit, lodging allowance, etc.);
• The name of the employer (including any “doing business as” name);
• The address of the employer’s main office and a mailing address (if different); and
• The employer’s telephone number.

The notice must be written and signed by both parties (employer and employee) and retained by the employer for at least six years.

The NY Department of Labor has sample Notice of Pay forms that employers can use. It is not required to use the NYDOL forms, but it is recommended since it will ensure full compliance with the NY law. You can find all of the sample forms available on the NYDOL's website.

The notice must also be provided in both English and the employee's native language (if not English), contingent upon if the NYDOL has created the Notice of Pay form in the employee's native language. English, Spanish, Chinese, Haitian Creole, Korean, Polish and Russian are the languages currently available on the site.

(Information courtesy of the NYC Alliance)

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Restaurants Expected to Rebound after October Slump

 

After disappointing restaurant sales in October, momentum was regained as same-store sales growth returned to positive territory during November. Although the 0.5 percent sales growth experienced in November can be considered relatively modest, especially compared with the average 2.2 percent same-store sales growth reported for the first nine months of the year, the 0.6 percent upward swing compared with the -0.2 percent same-store sales growth reported for October is encouraging. This improvement from last month’s year-over-year sales growth rate is the largest reported by the industry since June 2015. This insight comes from data reported by TDn2K’s Black Box Intelligence through The Restaurant Industry Snapshot, based on weekly sales from over 22,000 restaurant units, 120-plus brands, representing $55 billion dollars in annual revenue.

“At a national level, many of the key economic indicators are still positive. Job growth is expected to be reported as strong for November, unemployment is still slowly declining and consumer sentiment continues to be relatively strong compared with previous years. It is not surprising that the restaurant industry was able to rebound and post positive same-store sales growth during November, albeit small, especially when factoring the effect of increasing average guest checks,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. “However, it is difficult to be too optimistic for the fourth quarter, given the declining trend in same-store sales growth we have been reporting on throughout the year. Growth continues to be positive, but we are definitely experiencing a slowdown in restaurant sales.”

At the end of November, quarter-to-date same-store sales growth is 0.2 percent; a big drop from the 1.5 percent posted during the third quarter. Year-to-date same-store sales growth is now 1.8 percent as we head into the last month of the year.

There is favorable news for the industry observed in the increase of same-store sales during November as a result of an improvement in traffic and not because of companies increasing their prices. Same-store traffic growth was -1.7 percent during November, a significant 1.1 percent improvement over the -2.8 percent reported for October. “However the chain restaurant industry as a whole continues to have a chronic traffic problem,” Fernandez says, “and it has worsened during the last couple of months. The average same-store traffic growth for October and November was -2.2 percent, compared with an average -1.1 percent for the first nine months of the year.”

The steady drop in average guest check growth is a key component in the slowdown in sales experienced since July. While the average guest check growth in comparable stores during the first six months of the year was 3.4 percent, the average for the five months since then was only 2.5 percent. Furthermore, the 2.0 percent growth posted in November is the lowest year-over-year increase in average guest check reported by the industry since June 2014. A factor behind this decrease in average guest check growth seems to be a decline in same-store beverage sales, which have reported negative growth during the last three quarters while food sales growth has been able to remain positive.

As has been the case during most of this year, the segments in limited service (quick service and fast casual) were the top performers based on same-store sales growth during November, significantly outpacing the sales growth of the full service segments of the industry.

Although at the regional level there are significant differences in sales growth performances, the slowdown in sales has been widespread and affected all regions of the country. The average same-store sales growth for October and November combined was lower than the average for the three previous months in all 11 regions of the country tracked by Black Box Intelligence. The best performing region was California for the fourth consecutive month, with same-store sales growth of 2.9 percent and -0.2 percent traffic growth during November. The worst performing region for the third consecutive month was the Southwest (Louisiana, Arkansas, Oklahoma, and New Mexico), which posted -3.3 percent same-store sales growth and -4.6 percent for traffic. The impact of the energy industry downturn seems to continue to be a factor in oil producing states, since in addition to the slump in the Southwest, the Texas region was one of the only three that experienced negative sales growth during November and has now endured three consecutive months of same-store sales growth.

From a market perspective, 103 (53 percent) out of the 193 DMAs tracked by Black Box Intelligence reported positive same-store sales growth during November. Although an improvement from the 42 percent of DMAs that posted positive growth during October, this represents a considerable decline from the average 71 percent of DMAs that had positive sales growth during the June through September period.

As restaurant sales dropped in October, so did the number of new jobs created by the restaurant industry according to TDn2K’s People Report latest reports. Jobs in restaurants grew by 3.9 percent year-over-year during October; while the average growth rate for the previous three months was 4.6 percent. Even with this slowdown in October, the chain restaurant industry continues to consistently outpace the rest of the economy when it comes to job creation. As a comparison, the average year-over-year growth rate in total number of non-farm jobs was only 2.0 percent during the September through October period. The restaurant industry is creating jobs at more than twice that rate.

The pressures of the tightening labor market continue to be felt by restaurants in the form of rising turnover levels. After three months of flat restaurant management turnover rates, rolling 12 month turnover started climbing again and now has increased during eight of the last 12 months ending in October. Meanwhile, restaurant hourly turnover remains in its upward trend that started back in September of 2013. Rolling 12-month hourly employee turnover in restaurants has increased during 26 consecutive months. Staffing and retention has become a major concern for operators and expectations are for continued challenges in this area in months to come.

According to TDn2K’s White Box Social Intelligence based on a sample of almost 8.5 million online mentions, guest sentiment towards chain restaurants became more positive during November compared with previous months. Out of three key guest satisfaction indicators tracked in the Restaurant Industry Snapshot (“food”, “service,” and “intent to return”), all showed a higher percentage of positive sentiment mentions than in any of the previous seven months. Tied to this increased positive sentiment seems to be the buzz around holiday events and promotions that started to take over the social chatter for restaurants in November.

The top-performing segment during November based on percentage of positive mentions for all three guest-satisfaction attributes was fine dining (this segment was also the top performer for “service” and “intent to return” the previous month). This might also be tied to holiday events planned for and promoted by the brands in this segment. However, nearly all industry segments saw an increase in their positive-sentiment conversations during November, providing some encouraging news for the industry as we head into the last month of the year.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from over 193 DMAs representing 120-plus restaurant brands and over 22,000 units that are clients of Black Box Intelligence, a TDn2K company. Data is reported in six distinct segments: quick service, fast casual, family dining, casual dining, upscale casual, and fine dining. TDn2K is also the parent company to People Report and White Box Social Intelligence. People Report tracks the workforce analytics of one million restaurant employees. White Box Social Intelligence delivers consumer insights and reveals online brand health in relation to operational metrics. TDn2K reports on over 32,000 restaurant units, 1 million employees and $55 billion dollars in sales.

(via QSR Magazine)

Restaurant Performance Index Rose in October

 

Driven by stronger same-store sales and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index posted a moderate gain in October. The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 102.1 in October, up 0.7 percent from a level of 101.4 in September. In addition, October represented the 32^nd consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“The October gain in the RPI was buoyed by broad-based improvements in the current situation indicators,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators are somewhat more optimistic about both sales growth and the economy in the months ahead.”

The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators. The Index consists of two components—the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor, and capital expenditures), stood at 102.5 in October—up 1.2 percent from September and the highest level in three months. In addition, the Current Situation Index remained above 100 for the 20^th consecutive month, which signifies expansion in the current situation indicators.

A majority of restaurant operators reported higher same-store sales for the 20^th consecutive month, with October’s results representing the strongest performance since July. Sixty-one percent of restaurant operators reported a same-store sales gain between October 2014 and October 2015, up from 51 percent who reported higher sales in September. In comparison, 22 percent of operators reported a same-store sales decline in October, down from 27 percent in September.

While sales levels improved in October, the customer traffic results were similar to the August and September readings. Forty-one percent of restaurant operators reported an increase in customer traffic between October 2014 and October 2015, down slightly from 42 percent in September. Thirty-six percent of operators said their traffic declined in October, compared to 38 percent in September.

Restaurant operators also continued to report healthy capital spending activity in October. Seventy-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the 13^th consecutive month in which a majority of operators reported making an expenditure.

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures, and business conditions), stood at 101.6 in October—up slightly from a level of 101.4 in September. October represented the 36^th consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators remain generally optimistic about business conditions in the coming months.

Restaurant operators reversed a downward trending sales outlook with somewhat more optimistic expectations. Forty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 35 percent who reported similarly last month. Meanwhile, only 6 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 12 percent last month.

Similarly, restaurant operators are somewhat more optimistic about the direction of the overall economy. Nineteen percent of restaurant operators said they expect economic conditions to improve in six months, while only 9 percent expect conditions to worsen. This represented the strongest net positive reading in five months.

Looking forward, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 62 percent who reported similarly last month.

(via FSR Magazine)