The catering industry is one of the hardest hit during the severe epidemic. Last year, to reduce costs, bars and restaurants massively dismissed their own employees. Demand for goods and services has begun to recover as vaccines and restrictions are eased, but workers for various reasons are in no hurry to return to work. According to the US Department of Labor, the percentage of unemployed people in industry rose from nine percent in May to ten percent in June.
Measured wages, full social package
To attract people, catering chains began to massively increase staff salaries. Enrique Lopezlira, California Institute Labor Center worker, thinks, It's not just about wages: "The increase in wages will entice workers, but we also see an increase in layoffs from these jobs. I believe, in the long run, employers will have to improve the overall quality of their own jobs.”.
Any company improves working conditions in different ways. Big supermarkets Walmart and Target will close their stores on Thanksgiving, so that employees can spend time with loved ones. Best Buy Trading Company will start paying up to 100 $ every month for the services of tutors for children and will increase the allowance for caring for relatives.
Oh, so big restaurant chains incentivize their own employees..
McDonald’s (NYSE: MCD)
In May, the company said, which over the course of several months will raise staff salaries by an average of ten percent. Entry-level workers will earn from 11 to 17 $ per hour, and shift leaders - 15-20 $. By the end of the summer, McDonald's expects to hire 10,000 new employees.
But McDonald's may not get off with just a salary. Yesterday, 12 July, became known, that the company will increase vacation pay, introduce child care allowance, and will bear part of the cost of education.
Chipotle Mexican Grill (NYSE: CMG)
Restaurant chain Chipotle has promised to raise salaries by the end of June to an average of 15 $ per hour. The company plans to recruit 20,000 new employees for the summer, therefore introduced a system of referral bonuses for ordinary employees and managers. More Chipotle talks about growth prospects. According to the company, an employee in just 3.5 years can rise to the position of manager with a salary of 100 thousand dollars a year.
To cut higher costs, Chipotle has raised the price of its meals.: burritos and so on 4%.
Darden Restaurants (NYSE: DRI)
In March, Darden told, what will he spend 17 million dollars for bonuses and salary increases for employees. Each hourly employee will receive at least 10 $ per hour.
But more company executives are worried about tips and the initiative of President Joe Biden. In 43 states, an employer has the right to pay his employees 2,13 $ per hour, if, including tips, his salary is not below a certain minimum level. Biden promised, that will achieve the minimum wage in 15 $ per hour excluding tips.
Texas Roadhouse (NASDAQ: TXRH)
In the spring, the company's management announced, that recruitment is the biggest problem. “Attracting and retaining employees has never been so difficult. To stay competitive, We need to raise wages, - said the head of Texas Roadhouse Gerald Morgan.
The company raised food prices by 1,75%.
Papa John’s (NASDAQ: PZZA)
The pizzeria announced a new program last week: everyone, who will bring the newbie, will receive 50 $. The new employee will receive the same amount. Papa John's expects to spend $2.5 million on the initiative by the end of 2021.
The company does not raise wages, and introduces temporary bonuses, as hopes, that next year employees will become more accommodating.
And that?
With the growth of salaries in the industry, costs will definitely increase and the marginality of the business will decrease.. Companies have two options: or earn less, or raise prices, like Chipotle or Texas Roadhouse. But there are also positives..
According to analysts, the main visitors of fast food chains are low-income people, who often work in the industry themselves. As wages rise, they will be able to spend more on lunches and dinners.. Even higher wages and a revival in the labor market in general encourage consumers to spend more, including catering.
Globally, an increase in wages and food prices leads to an increase in inflation.. In May, the US consumer price index rose by 5%, and FED at the June meeting raised inflation expectations in 2021 from 2,4 to 3,4%. Due to inflationary pressure, the regulator may start to reduce stimulus measures and tighten monetary policy.
Marginality of companies
| Ticker | Gross margin | Operating margin | Net margin | |
|---|---|---|---|---|
| McDonald’s | MCD | 51,4% | 40,3% | 26,3% |
| Chipotle Mexican Grill | CMG | 24,9% | 6,0% | 6,4% |
| Darden Restaurants | DRI | 20,8% | −1,9% | −1,6% |
| Texas Roadhouse | TXRH | 67,7% | 3,5% | 3,1% |
| Papa John’s | PZZA | 30,7% | 6,3% | 3,3% |
McDonald’s
Ticker
MCD
Gross margin
51,4%
Operating margin
40,3%
Net margin
26,3%
Chipotle Mexican Grill
Ticker
CMG
Gross margin
24,9%
Operating margin
6,0%
Net margin
6,4%
Darden Restaurants
Ticker
DRI
Gross margin
20,8%
Operating margin
−1,9%
Net margin
−1,6%
Texas Roadhouse
Ticker
TXRH
Gross margin
67,7%
Operating margin
3,5%
Net margin
3,1%
Papa John’s
Ticker
PZZA
Gross margin
30,7%
Operating margin
6,3%
Net margin
3,3%
