The Great Resignation is beginning to create even more havoc for thinly staffed restaurant chains trying to rally back from being hammered during the pandemic.
This week, the Bureau of Labor Statistics reported that quits rates in the food service industry hit 6.8%, compared to an overall quit rate of 2.9%. Guggenheim analyst Gregory Francfort notes that the quits rate for food service is well above the 5% peaks observed in quits in 2006 and 2019 and 4.1% average over the last 20 years.
Nearly 4.3 million Americans quit their jobs in August as many people sought affordable wages amid the recovery from the pandemic, opted for lifestyle changes or lacked higher pay.
Workers continue to leave the retail and restaurant industries amid challenging demands on existing staff due to labor shortages and other measures, such as mask requirements for customers. With the persistent high quits rate in these industries throughout the pandemic, both will remain constrained due to a lack of available people willing to work in these jobs. That will continue to weigh on overall employment given the size of both industries, stated DataTrek's Jessica Rabe in a research note to clients.
Domino's Pizza became the first major restaurant chain to warn about the growing impact of The Great Resignation this week.
The company saw sales fall in the third quarter after 41 straight quarters of higher U.S. same-store sales increases, ending one of the most powerful runs in the fast food industry. Top line sales missed estimates, too.
Yes, staffing has been a challenge most certainly during the quarter as we highlighted, on a call with analysts Jeremiah Ritch Allison, the CEO of Domino's Pizza told What I can tell you is that when we look at the first quarter relative to third half of the year, we certainly saw more of an impact in the system around some things like reduced operating hours and some challenges with respect to delivery service times in particular. When we look at it in our own corporate store business, we certainly saw that our staffing levels relative to ideal were lower than we saw during the first half of the year. Domino's says it is expediting payment to company-operated restaurants and raising salary at new hire applications to address the issue.
Caribou Coffee CEO tells Yahoo Finance Live he is also dealing with staffing issues. The new coffee chain has 718 stores to staff, but is also looking at investing to accelerate its private store openings.
I wish we could say that we were immune from staffing challenges. We always see fall turnover when students go back to school and work. What we are seeing is inbound applicant flow is less than it is typically, says Butcher. I think there is a variety of reasons for that. For the most part our team has done well. The extra challenge has to fuel our existing stores and then staff all the growth we have coming for the next couple of years. Our next store managers are already in staff. Analysts believe it will be some time before the battle to secure workers for the industry cools down. In turn, that raises the risk of a stretch of mixed earnings reports for the sector into 2022.
This pressure is not Domino Specific and should, in our view, be a harbinger for the rest of earnings season, says Francfort.
The analyst joined several of his peers on Friday in cutting their sales and profit estimates at Domino's.
Brian Sozzi is an editor-in chief - at Yahoo Finance and an anchor at large. Follow Sozzi on LinkedIn and Twitter.