Restaurants are still struggling to cope with the effects of COVID-19, as rising prices, supply chain headwinds, and labor shortages make it worse for an already troubled sector.
“This is one of the most challenging operating environments I’ve ever encountered for this industry…and there hasn’t been any loosening up yet,” AJ Kumaran – Raising Cane’s co-CEO/COO – told Yahoo Finance in a recent interview.
According to a recent report by the National Restaurant Association, labor has been one of the most difficult obstacles restaurants have to overcome. Nearly half of all operators cite recruitment and retention as their top challenges for 2022.
In fact, the trade group noted that the restaurants-and-accommodations sector had a whopping 1.7 million job openings during the middle of 2021 the highest number in the 20-year history of the data set.
Kumaran explained the reasons Raising Cane’s was successful in bucking the trend. He revealed that the chicken fingers chain was the first company to announce that it would never lay off a single employee. And we never did.”
Raising Cane’s has invested over $100 million in wages to combat labor shortages. Kumaran also described Raising Cane’s culture as “cool” & “fun.”
“We all made it through together. “At one point, there were 3,000 crewmembers and today we have 54,000 crewmembers,” he stated.
Raising Canes was among only three restaurants to be named to Forbes’ “Best Employers for New Grads” Top 100 List. It was also named to the coveted “100 Best Workplaces in America” list by Glassdoors in 2021, owing to its “fast-paced culture and growth opportunities.”
Supply chain issues are still a serious problem today…AJ Kumaran, Raising Cane’s CO-CEO & Co-CEO
Dickey’s Barbecue pit CEO Laura Dickey said that there are still labor shortages at her family-owned restaurant chain.
Dickey said that there are more than 550 restaurants and that each market was affected in some way by the labor shortfall. However, Dickey added that it’s slowly recovering but it’s still far from where it was pre-pandemic.
“We are still experiencing labor shortfalls, staffing shortages and, even people who have returned work, they want to return with reduced hours,” she said.
Growth in digital channels
Dickey says that while to-go and dine-in have been making a comeback in recent months, Dickey attributes the success of the pandemic to contactless delivery and online order.
Dickey said that online ordering saw a 300% increase at its peak and that the company’s online sales channel grew from 8% before the pandemic to a staggering 98% at one time.
The company continues to invest heavily in its technology and digital sales channels because of the surge. They have upgraded their website and app and added other payment options like Apple Pay (AAPL), PayPal (PLA).PYPL), and improving its online loyalty program.
Supply chain problems are a ‘crazy problem’
Raising Cane’s Kumaran observed that supply chain issues are still “an insane problem today”.
Dickey agreed, explaining that the barbecue chain was forced into its own production plant when their top sausage supplier couldn’t keep up.
She explained that they had estimated that it would take them 24 months to reach capacity.
Inflation has caused a worsening supply chain, causing more problems for businesses already operating on razor-thin margins.
The prices of basic food items like chicken, ground meat, and cream cheese have seen substantial increases since the pandemic. They increased by 3.4% per year in 2020 and 3.9% annually in 2021. This is a significant improvement compared with the 1.9% increase in 2019 according to the Consumer Price Index.
The latest CPI print for March showed a 8.5% increase compared to the previous month. This marked the fastest increase since December 1981. It also follows a 7.9% increase in February.
Kumaran lamented that “the cost of goods has risen tremendously over 70% inflation for some of the food products.” Raising Cane’s will increase prices to maintain quality and operations, he said. These price increases will be visible on menus starting in May.
The executive admitted that raising prices makes him sick. But he acknowledged that it was a business decision that was necessary in order to keep the staff happy and make the company profitable.
Laura Dickey also mentioned profitability and quality as the catalysts for the BBQ company’s November 2020 price increases. Future cost increases are not out of the question.
Dickey explained that the swings we have seen are between 8% to 13% depending on the items. However, we have an average inflation rate of 8.6% across all our ingredients and all our products.
The CEO explained how inflation has affected consumer behavior. She referred to increased couponing and loyalty points redemptions in the face of price increases and recession fears.
She said, “There’s an incredible amount of stress in buying behavior.”
“We’re just getting warmed up”
Despite all the challenges faced by the sector, it has remained resilient.
According to the National Restaurant Association, 2022 sales will reach $898 billion, up from $864 billion in 2019.
“The consumer has demonstrated quite well over these past couple of years that they like and will continue using restaurants in their everyday lifestyle,” Hudson Riehle (the trade group’s senior vice-president for research) previously stated to Yahoo Finance. He pointed to a rise in demand for dining out, which shows that consumers consider it an “essential part” of their lives.
Fast growth is evident in eateries.
Dickey’s Barbecue Pit has opened six new franchises in the last month. They plan to expand both domestically as well as internationally.
Raising Cane’s is currently opening 10 new markets and 100+ company-owned restaurants will be opening their doors in the new year.
“We want to grow restaurants all over the globe, and continue being a brand with a great team, a cool culture, and the best craveable chicken dinner. Kumaran stated that they want to be active in every community.
He stated, “There’s still much to be done…but I believe we are just getting warmed up.”
Alexandra is a Yahoo Finance Senior Entertainment and Food reporter. Follow her on twitter @alliecanal8193
Follow Yahoo Finance Twitter, Facebook, Instagram, Flipboard, LinkedIn,YouTube, Reddit
