How were Main Street restaurant fares in September?

Macroeconomic forces and geopolitics combine to create a negative backdrop for small and medium-sized businesses. Despite these significant headwinds, there are some reasons to be relatively more optimistic for the restaurant industry.

Large bellwether companies continue to experience and anticipate significant macroeconomic challenges. For example, the CEO of FedEx now expects a global recession. A host of related forces contribute to this prediction, including reduced consumer spending; high interest rates; currency exchange rates that make US exports more expensive; negative asset impact due to decline in assets (eg, stocks); And changes in business investment So, regardless of whether we are in (or will enter) a technological recession, economic growth will and will be slower than trend.

The restaurant industry was particularly hit by Covid. However, the industry has made progress in recovery: total restaurant sales rose from $66.3 billion in January 2021 to $86.2 billion in August 2022 (adjusted for inflation). Anecdotes abound of difficulty getting reservations at certain restaurants. Moreover, despite significant macroeconomic clouds, there are countervailing forces that can moderate the impact of the recession on restaurants by bringing in alternative sources of demand. These include: workers are increasingly returning to their offices, which should increase demand for restaurants, coffee shops and bars that cater to office workers; An increase in the number of domestic and international tourists, who for now demonstrate a heightened appetite for travel; And employment in the restaurant industry is well below pre-pandemic trendlines. This suggests that small shocks to demand that may result from a macroeconomic contraction should have relatively little impact on “lean” or understaffed operations such as restaurants.

Recession? Inflation? Inflation? Competing narratives and evidence make it difficult to understand where small and medium-sized restaurants and their employees stand. To help reconcile competing claims, We analyzed the employment data of hundreds of thousands of employees working in more than fifty thousand restaurants. Homebase also surveyed the pulse of more than 100 restaurant owners between mid-September and mid-July. To understand how they are doing in light of current events.

The number of hours worked by restaurant employees in September 2022 declined compared to September 2020, following a relatively strong spring and early summer.

Hours worked
(7-day average; compared to January 2020 (ie, pre-Covid))
1. Some significant reductions due to major US holidays. A pronounced dip in mid-February 2021 coincides with a period of power shortages in Texas and severe weather in the Midwest. Source: Homebase data.

The percentage of restaurant workers working in September 2022 is about six percentage points lower than the same period in 2021.1

Working employees
(7-day average; compared to January 2020 (ie, pre-Covid))
1. Some significant reductions due to major US holidays. A pronounced dip in mid-February 2021 coincides with a period of power shortages in Texas and severe weather in the Midwest. Source: Homebase data.

Restaurant owners are evenly split on whether they intend to open a new location of their current business in the next one to two years.

As of mid-September, approximately 39% of restaurant owners intend to expand their business by opening a new location within the next one to two years. This figure is up nearly four percentage points from July 2022 The percentage of current business owners who do not plan to open a new location fell by more than four percentage points over the corresponding period For both July and September, restaurant owners’ expansion plans were significantly higher than those in other industries. For example, in September, the overall percentage of owners who planned to open a new location within 12-24 months was nine percentage points lower than the figure for restaurant owners.

Survey questions: Do you intend to open a new location of your current business within the next 12-14 months?
formula: Homebase Owner Pulse Survey. Ns>100 in mid-July and mid-September

Owners’ hiring intentions for the next one to two years were adjusted upward in September

Approximately 95% of restaurant owners expect to hire at least one additional employee in the next one to two years. As of mid-September, restaurant owners want to increase their employment numbers by 56% over the next one to two years. This contrasts with an expected increase of 44% in July 2022. These figures are consistent with the increasing intent of owners to properly staff their operations and open new locations of their existing businesses.

Although the owners now want to hire more workers over the next one to two years than they did in July, they expect it will be more difficult to hire workers.

Most restaurant owners plan to hire new employees within the next one to two years, as indicated on the previous slide. However, compared to July 2022, restaurant owners now believe that hiring staff is going to be more difficult. In fact, 27% of owners now believe it will be difficult to hire staff in the next one to two years, up from 22% of restaurant owners who expressed the same sentiment in July 2022.

Survey questions: Do you think it will be easier, the same or harder for your organization or business to hire staff 12 months from now than it is today?
formula: Homebase Owner Pulse Survey.

Given how difficult hiring can be, we asked restaurant owners what the best way to find good employees is (hint: referrals).

Turnover is relatively high in the restaurant industry. Finding good staff is difficult at the best of times. In a tight labor market, this can be daunting. The Homebase September Pulse survey reveals that employers see referrals as particularly effective because they represent three of the top five search channels that employers use to recruit good employees. top five

Survey questions: Based on your experience, which of the following is the best way to find good employees?
formula: Homebase Owner Pulse Survey.

One of the most challenging aspects of running a restaurant is hiring and managing employees

Recruiting employees (37%), managing employees (12%) and related employment costs (9%) were among the top five cited challenges that restaurant owners must contend with. Intermediate supply costs (15%) and a low degree of economic uncertainty (6%) round out the top five challenges facing owners today.

Survey questions: What are the most challenging aspects of running a business today?
formula: Homebase Owner Pulse Survey.

To retain and manage their employees, restaurant owners are using various strategies

Recruiting and retaining good staff is challenging in the current environment. As a result, we asked restaurant owners what strategies they are using to retain workers. Among those owners using a retention strategy, the most frequently cited strategy was the use of achievement rewards (29%). Twenty-two percent of owners mentioned implementing the new tip policy. About nineteen percent of employers are offering employees their preferred shift. The top five are offering more pay (12%) or gift cards or gas cards (10%).

Survey questions: Are you implementing any of the following strategies for employee retention (select all that apply)?
formula: Homebase Owner Pulse Survey.

Along with leaner workforces and increased sales, restaurant owners reported increases in employee productivity (nominal).

More than a third of restaurant owners report that their employees are more productive this year than last year, and more than 10% of owners report that their employees are significantly more productive at this time than last year.

When asked what accounts for this growth, several owner managers pointed to improvements in processes and technology:

“Clear expectations communicated, step-by-step processes available, clear disciplinary action”

“Keeping morale high. communication Treat employees with respect and understand that you can’t run the business without them.”

Economic and staffing challenges have affected employee camaraderie in surprising ways

More than 45% of restaurant owners believe their employees are more (or significantly more) productive this year than last year. With leaner operations, 67% of owners believe the current economic climate has created more camaraderie among their teams.

The primary means of this greater camaraderie lies in employees’ willingness to jump in to take their teammates’ transfers (50%). Employee communication also increased (16%) with improved processes and tools. Owners noticed a more general willingness among their employees to help each other (14%) because they spent more personal time together (12%).

Survey questions: How, if at all, has the current economic climate created more camaraderie within your team?
formula: Homebase Owner Pulse Survey.

California recently passed groundbreaking legislation to protect fast food workers. Restaurant owners in the state have some concerns

The state of California recently passed landmark legislation (AB 257) that included the establishment of a Fast Food Council to set a minimum standard for wages, hours and working conditions for restaurant workers. Fifty-three restaurant owners in the state of California were included in our Owner Pulse survey. These restaurant owners expressed concern about the unintended consequences of the bill, including increased costs for consumers (51%), increased competition for labor (40%), and the need to reduce labor costs (32%) that it could lead to. More automated operations (21%). Given the newness of the law, only one owner communicated with his/her/their employees about the law and only one owner was asked about the bill by an employee.

Survey questions: [Summary of AB 257]: Given this bill, do you have any of the following concerns (select all that apply)?
formula: Homebase Owner Pulse Survey.

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