Forget that “Where”™s the beef?” line from the old Wendy”™s commercials. For Connecticut”™s restaurant industry ”“ as for so many others ”“ the question these days is, “Where”™s the workforce?”
With a less-than-robust summer season behind it ”“ and concerns about what a return to largely indoor-only dining might mean in an era of staff shortages and supply chain disruptions ”“ Connecticut Restaurant Association President and CEO Scott Dolch says the sector is still far behind where it needs to be.
According to restaurant software management platform Upserve, profit margins for restaurants can range from 0 to 15%; it says the average typically is between 3 and 5%.
“We might generate a lot of sales ”“ we”™re a $9 billion a year industry in Connecticut,” Dolch told the Business Journal. “But a lot of that goes back out the door.”
The worker shortage ”“ many shoreline restaurants that rely on high school and college student help during the summer wound up doing around 60 to 65% capacity instead ”“ has resulted in rising labor costs.
“We”™re still 23,000 jobs short of pre-pandemic in our industry,” he continued. “(Jobseekers) are taking the position that they can just go to the restaurant next door and find the salary they want ”“ which is only sometimes the case.”
Dolch admitted that he has no solution to the conundrum of why those who lost their jobs during the pandemic have not returned en masse.
“Even some of the best restaurants in Connecticut are having to cut hours, or are now closed on certain days,” he said. “Tables indoors were not being used for the most part, as customers showed how much they enjoyed dining outdoors. That all affects our business.”
Fuel costs are also on the rise, with the result that palm oil is over twice what it was a year ago, and the cost of soybean and canola oils nearly tripling. The national average for gasoline was about $3.48 per gallon as of Oct. 25, compared with $2.20 a year ago.
“The costs of fuel and inflation are getting out of hand,” Dolch said. “As a result you have to hire more people or raise prices ”“ and raising prices will only get you so far, because people”™s pocketbooks and wallets are getting squeezed as well.”
Quick service restaurants ”“ which encompasses everything from traditional fast-food joints like McDonald”™s, Subway and Wendy”™s to fast-casual concerns like Texas Roadhouse, Panera and Shake Shack ”“ are “more efficient because their price points are different” than an independently owned and operated businesses, in part because of the bulk-buying such chains can afford.
Even so, Texas Roadhouse recently raised its menu prices 4.2% to reflect the rising costs of beef. During a conference call, CFO Tonya Robinson said the chain believes commodity inflation “could be pretty impactful for a bit of time,” while CEO Jerry Morgan acknowledged, “We”™re still hustling to find people. I still think there”™s a long way to go to get enough people out there that could supply all of us with our needs.”
McDonald’s prices are up about 6% this year, while Subway’s offerings are about 40 cents higher than they were a year ago.
Dolch described the full-service scenes in New Haven and downtown Hartford, usually bastions of bustle, as “ghost towns” due to the ongoing paucity of business lunch and dinners.
“I”™m telling restaurateurs that their job is still survival,” he said. “The next six months are going to be critical. What I”™m fearful about is getting to next spring. So many restaurants are now carrying 19 or 20 months”™ worth of debt. Landlords who gave them three months off, or who took a $500,000 loan as the only way to stay open, are now facing the consequences.
“Then they lose the outdoor dining option,” he added. “We know that the weather around here can change tomorrow. You can”™t bank on it being a warmer fall or next spring coming more quickly.”
As for holiday parties ”“ business or family? “No one knows,” Dolch said.
“It”™s going to take getting to the two-year mark, mid-March, until we can really see where we are.”
While the CRA and the National Restaurant Association are appreciative of the Restaurant Revitalization Fund ”“ part of the American Rescue Plan Act ”“ which delivered $28.6 billion to 1,303 establishments, “The other 2,066 that were eligible in Connecticut got nothing,” Dolch said. “What was unfair was that the program basically picked winners and losers, so those 2,000 restaurants are on the brink.”
In addition to continued lobbying of the state and federal governments for further relief, Dolch said the CRA plans to roll out job fairs, as well as increase efforts to get students and even the formerly incarcerated employment.
Dolch himself was recently promoted by the CRA board from executive director to the president/CEO position ”“ becoming the first person to have the latter title.
He laughed when asked how his day-to-day job has changed.
“I”™m still doing what I”™ve been doing,” he said. “And I”™m taking calls all day from our members. Sometimes just allowing them to vent, understanding what they”™re going through, is just as important — trying to help them come up with solutions to the challenges they”™re facing is a part of it.
“Part of my job is being Dr. Phil,” he quipped.
