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65 Percent of Fast Food Restaurants Report Increased Employment in Q4
Despite a labor shortage and looming unemployment rate, turnover and recruiting problems are slowly subsiding.
Fast-food restaurant employment improving.

While industries such as retail, manufacturing, and financial services have cut tens of thousands of jobs, the foodservice sector continues to beef up payrolls, with 65 percent of fast food restaurants reporting an increase in employment levels at both the hourly and management levels, according to Workforce Index, a quarterly review from People Report, a Dallas, Texas-based research and consulting firm specializing in restaurant labor-force trends.

Limited-service, fast-casual and family dining saw similar growth during the third quarter. According to the report, 65 percent of fast-casuals increased management staffing, with nearly “six out of 10 companies foreseeing an appreciable increase in the number of managers hired in the coming quarter.”

More than 100 restaurants, including Chick-fil-A Inc., Claim Jumper Restaurants, IHOP Corp., Pizza Hut, Roy Rogers Restaurants, Rubio’s Restaurants Inc, and Sonic participated in the survey that yielded the quarterly findings.

Comprised of five components—employment, recruitment, vacancies, employment expectations, and turnovers—the index covers the fast food, fast-casual, casual, and fine-dining segments of the foodservice industry. The numbers corresponding to each component range in value from a low of 0 to a high of 100. Any value over 50 indicates growth, while anything below 50 indicates a decline.

“While employment is strong and turnover has stabilized in recent months, it is important not to forget that we are still in the midst of a continuing labor shortage,” says Michael Harms, human capital analyst and co-creator of Workforce Index.

While the Bureau of Labor Statistics has identified the hospitality industry as a high growth industry, estimating that there will be 1.6 million new jobs by 2012, it will also experience a serious shortage of qualified workers. The bureau has predicted a 10 million worker shortage by 2010, and up to a shortage of 35 million by 2035.

Harms’ statement and the bureau statistics are somewhat reflected in People Report’s quarterly barometer, which registered an overall reading of 66.8 for the fourth quarter of 2007, the lowest reading since its inception during the third quarter of 2006, which logged 73.4.

The index indicated that the foodservice industry posted a net gain of 67,000 jobs during the third quarter 2007 versus the 99,000 jobs that were created during the second quarter. Moreover, turnover is stabilizing and a slight decrease in recruiting difficulty has been realized, despite the 4.7 percent unemployment rate and looming labor shortage.

Overall results for the fourth quarter show an index of 68.4 from employment levels, down from 71.9 in the third; 65.9 for recruiting difficulty down nearly two points from the previous quarter; 60.6 for vacancies, down more than two points; 76.7 for employment expectations and 46.1 for turnover.

Fast food had the highest overall workforce index of 71.1. Employment levels were at 77.2, up nearly three points from the third quarter. Recruiting difficulty rose slightly, but vacancies dropped from 61.2 in the third quarter to 55.9 in the fourth. Turnover remained virtually unchanged at 47.5, while employment expectations remained steady at 75.7, but lower than the third quarter’s index of 83.6.

Shyam Patel, director of research operations at People Report, says foodservice industry employment levels are still expected to increase.

While employment is strong and turnover has stabilized in recent months, it is important not to forget that we are still in the midst of a continuing labor shortage.”

“It’s still expanding, just not as strongly as previous quarters,” he says. “The turnover rates are declining, too. Since 2001, they had been on the rise, but the decline needs to be taken with a grain of salt because the turnover is at record levels. We still see a high number of vacancies. We continue to see recruiting difficulties. It’s hard to find qualified candidates.”

Fast-casual and fine dining segments shared similar numbers. The overall index for fast-casual was 69.6, while fine dining logged 69.3. Employment levels hovered around 73, while vacancies were about 64. The recruiting difficulty index for fine dining was 66.1, while fast-casual logged a 63.2. Employment expectation for both segments stayed in the mid 70s and turnover saw numbers in the upper 40s.

The industry segment recording the lowest overall index was the casual-dining segment, where 63 percent of the surveyed companies reported no increases or decreases in the number of management and hourly employees during the third quarter. In addition, the casual-dining companies surveyed do not expect a decrease in management hires or hourly hires in the final three months of the year.

With a workforce index of 56.4, down 10 points from the third quarter, employment levels for casual dining dropped sharply from an index of 67 in the third quarter to 49.2 in the fourth. Recruiting difficulty saw a decline of nearly five points to an index of 62.5, while vacancies increased more than two points to 63.3. Turnover, however, fell from 46.6 in the third quarter to 38.8 in the fourth.

The full copy of the People Report Workforce Index is available here.
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“There’s a lot of uncertainty in the economy right now,” Patel says “There’s a lot of fluctuation right now, especially with casual dining. We have seen energy and food costs increase and it’s hard to determine the cause and effect. The number of units opened by restaurant chains has been on the decline. That might mean there are not enough people to open these places or a decline in sales.”