Skift Take
The winners will be the ones who are willing to invest in paying competitively, building a safe work environment, and making sure leadership structures are in place with a clear path for employee growth.
— Erika Adams
This morning, Darden Restaurants CEO Eugene Lee succinctly summed up what has been reiterated over and over this earnings season: There is a war for talent happening in the restaurant industry.
Unemployment is down, the industry is hiring like crazy, and labor costs are such that restaurants are rethinking every step of the process in hiring and staffing in order to better retain their employees and keep those costs at a manageable level.
In this war for talent, the winners will be the ones who are already thinking differently about how to support their employees so that they can, in turn, represent the restaurant in the way that these leadership teams need them to. Having delicious food is only one part of the equation to succeed. People are the most important part of a successful operation, and plenty of companies are rethinking how to become better employers in order to find and retain those people.
A New Approach to Employee Training
At Chipotle, CEO Brian Niccol noted that the company has undergone a complete redesign of its employee training program this year. “We overhauled our training materials several months ago and have retrained three quarters of our field leaders through Cultivate University,” Niccol said on this quarter’s earning call. “That’s an in-restaurant and in-classroom one-week training session that we launched in April. That investment and the ongoing development of our field leadership continue to drive crew member engagement.”
Niccol also noted that the company is in the process of redesigning its forecasting and labor scheduling tool to better meet each restaurant’s needs. Not only will the redesign cut down on labor costs and better predict the amount of labor needed during each location’s busy and slow periods, but the new scheduling tool will be easier on employees, too.
“Our team members will have the ability to see their schedules remotely and swap shifts from mobile phones, taking these tasks out of the hands of the manager,” Niccol said. “We believe leveraging technologies such as this makes us a more desirable employer as we work to create a better experience for our crew members.”
Using Scale as Leverage
Lee, the CEO of Darden Restaurants, which includes Olive Garden, Cheddar’s Scratch Kitchen, LongHorn Steakhouse, and Seasons 52, among other concepts, says that Darden’s size and number of restaurants (over 1,500 nationwide across all brands) gives it an advantage when it comes to paying competitive wages, especially in the back of the house.
“I think it’s really hard for lower volume businesses to attract great team members because there’s just not enough income to share at the service level, and freedom in the business model to pay what you need to pay to attract really good talent in the back of the house,” Lee said on the company’s most recent earnings call. “We think bigger brands have a distinct advantage here, that our business model enables us to create an employment proposition that works for our team members.”
Lee pointed out that consumer confidence is “at an all-time high” but this isn’t a situation where the rising tide lifts all boats. “Brands that can hire, train and retain front-line employees to bring their brands to life are going to win,” he said.
Competitive Pay Is Crucial to Attract Talent
“We are living in good economic times, low unemployment,” Shake Shack CEO Randy Garutti noted on this quarter’s earnings call. “That means it’s harder than ever for us to find teams.”
And Shake Shake needs teams. This labor climate is coinciding with a period of rapid expansion for the brand: it opened its 100th location this past quarter, and the pace of openings will only be speeding up in the last three months of 2018.
For Garutti, hiring for these locations means paying more for the positions. “We’re going to open in Nashville, Tennessee,” Garutti explained on the call. “Minimum wage is $7.25. We’re going to start people at $13 an hour. That’s what it takes to get a great team member that can build and bring the hospitality that Shake Shack will bring to that market.”
Despite the fact that paying nearly double the minimum wage in a market like Nashville will definitely impact the brand’s bottom line, as Garutti acknowledged, it’s worth it. Employees who are paid well and given the opportunity to develop and grow into leadership roles are more likely to invest in the company. “As we grow, we’re going need a lot of leaders,” Garutti said. “We’re going to need a lot of people, and we’re going to pay for them.”
