Quick Service Restaurants Offer Fix for U.S. Job Market
Rachael Wright had culinary training, a bachelor’s degree in nutrition and a dream of putting her education to work. After a couple of years waiting tables and trying to launch her career, Wright finally went where the jobs are: quick-service food.
In September, she started at Protein Bar, a Chicago-based eatery specializing in low-sugar, high-fiber menus. The company says it seeks to marry fresh ingredients with convenience: Food is served in easy-to-carry bowls so customers can nosh while they walk. After multiple interviews, Wright landed an assistant manager job at the company’s new store in Washington.
“I was looking for something in product development,” said Wright, 26. “Even if that doesn’t happen, having this background in the healthful food industry should help me along the right path instead of going from restaurant to restaurant.”
Restaurants and bars are heading toward their strongest year of job growth since 2004, according to the National Restaurant Association, a Washington-based trade group, led by a proliferation of fast-food and quick-service outlets. Food services accounted for nearly 30 percent of the 96,000 jobs created in August, which also marked 19 consecutive months of growth for the sector, according to the Labor Department.
The industry this year expanded payrolls by 2.9 percent as of the end of August, more than double the 1.4 percent increase in total U.S. employment, according to Labor Department data.
Fast-food chains including Wendy’s Co. (WEN), snack-and-beverage shops such as Starbucks Corp. (SBUX), and a newer crop of eateries like Protein Bar and Nando’s Peri-Peri, which offer made-to-order meals, are leading the growth.
Such outlets are flourishing even as total restaurant traffic remains stuck below pre-recession levels. Americans stepped out to eat 61 billion times in the 12 months ending July 31, down from 62 billion visits four years ago, according to market researcher NPD Group in Port Washington, New York.
At the same time, 2,872 new restaurants have opened in the 12 months ending March 31, a 0.5 percent gain over the prior year and the first improvement since 2009, according to NPD.
While the industry faces challenges next year from rising gasoline and food prices, quick-service restaurants, known as QSRs, for now are profiting from weak job gains and stagnant wages, which are sending people in search of inexpensive meals.
“Overall, the market’s relatively flat,” NPD analyst Bonnie Riggs said. “There are segments that are doing well. A lot of that growth is coming within the fast-casual segment and QSR.”
The Bloomberg U.S. Quick Service Restaurant Index -- made up of nine companies including Wendy’s and Jack in the Box Inc. -- has risen 4.5 percent so far this year, compared with a 15 percent gain for the Standard & Poor’s 500 Index.
Nando’s Peri-Peri arrived in the U.S. as the economic storm was bearing down in 2008. The restaurant combined a wide-ranging menu -- spicy chicken, sangria, fresh salads and desserts -- with limited service that required no tip and therefore was easier on customers’ wallets.
“Some of it is a trend in the industry as much as it is a part of the economy,” said Burton Heiss, chief executive officer of Nando’s Restaurant Group Inc. “It’s a natural way of saying we’re going to go out, but we’re going to be a little more wary of the checkbook.”
Washington-based Nando’s, part of a global brand based in Sandton, South Africa, with stores in more than 30 countries, will add three U.S. locations to its existing eight in the Washington area this year, hiring about 100 people.
Other operators are hiring as they look to restore customer service that fell victim to recession-era cost reductions.
“They’ve all been through the period where they cut too much labor,” said Malcolm Knapp, a New York-based consultant who has monitored the food service industry since 1970. “The quality suffered, the experience suffered.” Now, he said, in addition to opening new locations, “they’re also trying to make sure they serve their guests.”
Wendy’s is doing both. The Dublin, Ohio-based company plans to build 20 restaurants this year and is revamping its workforce as part of a “people reboot” to improve service, the company announced in January. Wendy’s is interviewing current employees, firing those who don’t measure up and retraining others.
“We understand the importance of our customers receiving a reliable and a predictable experience every time they visit,” Chief Executive Officer Emil Brolick said on an Aug. 9 conference call.
After a strong showing, the pace of new hires in the industry might be set to taper off. Food and beverage sales, on track to increase more than 12 percent this year, will slow to about 8 percent in 2013, according to Chris Christopher, director of U.S. and global consumer-economics research at IHS Global Insight Inc. (2172), in Lexington, Mass.
Fast-food could be hit hardest because its clientele is younger. “They typically are early in their careers and don’t make as much money,” Christopher said. “They still eat but they’ll eat the dollar special.”
Longer term, continued expansion will translate to more hires for companies such as Darden Restaurants Inc. (DRI), the world’s largest casual-dining chain operator, known for its Red Lobster and Olive Garden brands. The Orlando, Florida-based company is on track to create more than 50,000 new jobs by fiscal year-end May 2017, Chief Executive Officer Clarence Otis said during an Oct. 2 investor conference.
Because food service is built on low-wage, unskilled workers, it has the flexibility to respond quickly to economic change, especially when it comes to staffing.
“These are relatively low-risk hiring decisions,” said Todd Hooper, a San Francisco-based strategist at management consulting firm Kurt Salmon. “You’re hiring people who know their hours are flexible; there’s a lot of natural turnover.”
Twenty-one percent of all job losses during the recession were in lower-wage occupations, according to the National Employment Law Project in New York, a non-profit employee-advocacy group. During the recovery, those hires outpaced gains in higher-paying occupations, accounting for 58 percent of new positions since February 2010.
Food service has supplied more than 628,000 jobs since the recession ended in June 2009, according to the National Restaurant Association. Those include food-prep staff, who earn a median wage of about $9 an hour, and waiters and waitresses, who have a median hourly rate of $7.69, including tips.
“You can’t build a robust recovery on the backs of just low-wage jobs,” said Annette Bernhardt, NELP’s co-director of policy.
Job growth has to start somewhere, said Jason Hamilton, vice president of marketing at Snagajob.com Inc., a national employment service based in Richmond, Virginia, that advertises hourly positions. The number of restaurants placing help-wanted ads on the site is up 11 percent this month from a year ago and food-service openings have grown 52 percent, he said.
“If a job like that is created, somebody has the ability to take it and earn a little money and get ready for when the higher-paying job comes along,” Hamilton said.
With unemployment stalled above 8 percent since February, 2009, restaurants can afford to be selective. Protein Bar, part of PB Restaurants LLC in Chicago, had about 600 applicants for the 60 openings at its Washington location, drawing would-be workers from all walks of life, Chief Executive Officer Matt Matros said in an interview.
“We’ve benefited from a lot of humanities majors who can’t find a job in their associated fields,” Matros said. “All we can do is present the best possible place to work and give them a choice.”
Wright, who earned her degrees at Johnson & Wales University in Providence, Rhode Island, said she was competing with legions of experienced food workers, not just those with college degrees or formal training.
“It’s a very competitive field,” she said. “You have the people who have grown up in the restaurant atmosphere and they’ve worked in restaurants their whole lives. Then you have people like myself who are competing for the same job.”
Last month, Wright moved from Danville, New Jersey, to the Washington area to start her training at Protein Bar. She’ll earn about $40,000 a year plus health benefits and paid holidays.
“I’m thrilled,” she said. “It’s exciting to be part of a new trend.”
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