What Restaurants must deal with for the balance of 2023?
A little over a month into 2023, the evidence is far more concrete that several key issues that would present the restaurant industry for the balance of this year. Here are the issues that are hovering over the restaurant owners and operators:
More Fast Act-like laws:
If you don’t understand why California’s first-of-its-kind new wage law is a deafening wake-up alarm for all restaurateurs, get thee to a search engine.
Because of its passage, fast-food operators on the West Coast are looking at a jump in wages during 2023 to as much as $22 an hour. Full-service operations—chain and independent—are not covered by the law, which gives fast-food workers and unions direct say on what crewmembers should be paid. But if fast-food pay soars to that level, how can other restaurant employers avoid a similar quantum leap in what they pay?
Ironically, California operators could get a respite, the result of the industry collecting the million-plus signatures needed to get a Fast Act referendum on the 2024 ballot. The industry is suing the state to prevent adoption until voters decide if they truly want the measure to take effect.
Elsewhere, however, the union that pushed the Fast Act into law has vowed to introduce similar legislation in a host of states and municipalities. A version is already being circulated in Minneapolis—without the West Coast bill’s narrow focus on fast food.
Industry lobbyists agree that Fast Act-like bills will be introduced in coming months in Washington, Oregon, Illinois, New York and Massachusetts. The big uncertainty is whether the industry can quash the proposals when they appear.
Unions move beyond Starbucks and coffee chains:
One of 2022’s big surprises was the apathy shown by restaurants about unions’ staggering gains during the year. After decades of struggling in vain to penetrate big chains, organized labor succeeded in turning nearly 300 Starbucks units into union shops.
The movement spilled over to about a half-dozen small coffee brands. Yet the rest of the industry seemed more concerned about lining up sufficient supplies of chicken wings.
The explanation we heard time and again was that unions were Starbucks’ issue, not an industry concern. Even when Chipotle and Peet’s found themselves contending with organizing drives, other operators yawned. Why should they fret about the margin-gobbling effects of collective bargaining when market conditions were already pushing payroll costs to nose-bleed heights? Besides, unions’ successes still amounted to just a few hundred stores in a trade with about 1 million outlets.
It’s a riff on the observation we heard a year ago, when only two Starbucks staffs had opted for union representation. Now the count is nearing 150 times that negligible figure. And each success brought more attention and momentum. That’s without non-unionized workers seeing what sort of raises collective bargaining can deliver, since Starbucks has yet to hammer out new wage agreements.
Are the unions really going to say, “Hey, enough of this success. Let’s coast for a while”?
Team Members (Employees) don’t come back:
This is less of a what-if than a question of how strong and long-lasting the aversion to restaurant jobs will prove to be. Sorry to be a Grinch, but the prognosis isn’t good. A study from the University of Houston’s hospitality college found that former restaurant workers are still too angry about their treatment during the worst of the pandemic to even think about re-entering the hospitality business.
Meanwhile, the social dynamics that made first jobs a rite of passage for past generations of teens are still on the wane. Parents, students and academia all see far more value in pursuing other life-enriching experiences. The industry has yet to come up with a better proposition than higher wages and slightly better benefits.
Prices hit the tipping point:
Inflation would have devastated the industry in 2022 if restaurant guests had been less accepting of menu-price increases. Consumers’ pent-up demand for restaurant fare outweighed their resistance to an 8% climb in prices.
But when will that built-up desire be sated? If grocery prices and the cost of other essentials remain at staggering levels, when will restaurant patrons come down with a debilitating case of sticker shock?
Immigration reform doesn’t happen:
Potential new hires by the hundreds of thousands are clamoring to enter the U.S. and find work. Restaurateurs have at least 600,000 open positions to fill. Clearly desire and opportunity are aligned. Now all that’s needed is removing the barriers that keep the parties apart.
As you read this, the U.S. is adhering by order of the Supreme Court to a policy of turning away immigrants who lack the documentation to cross the border and find work. Meanwhile, some state governors are bussing new arrivals to far-afield locations to make a political point.
All parties agree that the situation is a mess that sorely needs righting. They’ve been in agreement on that point for years. A new Congress brings hopes that something finally might be done. Ideally, it will be a comprehensive repair to a situation that’s been horribly broken for decades.
But will action really be taken, or are we about to see the can kicked further down the road again?