After spending the bulk of 2020 and first part of 2021 getting battered, restaurants are ready to stage their comeback. Now that capacity limits have been lifted and dining establishments can largely operate restriction-free, many are eager to welcome guests back and start enjoying a much healthier stream of revenue.
There's just one problem: The restaurant industry is currently experiencing a massive labor shortage, and if it's not fixed soon, countless establishments could risk having to shutter once again, either on a temporary or, in a worst-case scenario, permanent basis.
Of course, losing more restaurants would be brutal for real estate investors. Commercial landlords across the country are already grappling with vacancies after the loss of so many dining establishments in the course of the past year and change. But if restaurants can't find employees, they can't operate -- it's that simple.
One chain, however, is doing its part to draw in new hires. Chipotle (NYSE: CMG) is raising employee wages, which could be just the thing that helps the fast-casual mainstay through the next number of months.
Workers need more incentives
The U.S. unemployment rate is still substantially higher than it was before the pandemic began. So why can't restaurants hire? The reason largely boils down to the fact that right now, it makes little sense for the jobless to go back to low-paying jobs.
The American Rescue Plan, which put $1,400 stimulus checks into Americans' bank accounts, also gave workers on unemployment benefits a $300 weekly boost through early September. As a result, a lot of laid-off restaurant workers are making more money on unemployment right now than they would at a job.
Because labor shortages are becoming so problematic, 25 states are ending boosted jobless benefits early. But in the remaining 25 states, so far, they're set to stay in place until Labor Day.
Chipotle, however, is taking steps to address this issue by increasing its pay to an average of $15 per hour, well above the federal minimum wage of $7.25 an hour. The fast-casual chain is also adjusting its compensation structure so that some employees -- those who get promoted to general manager -- will be eligible to earn a six-figure salary after only a few years on the job.
Chipotle is looking to hire 20,000 employees ahead of the summer, and in addition to raising wages, it's also implementing a $200 employee referral bonus. And it's not the only chain that's seeking to expand its headcount. McDonald's wants to hire 25,000 new employees in Texas, while IHOP is looking to add 10,000 employees to its roster.
Compensating for poor practices
Chipotle's move to increase wages is a strategic one at a time when so many restaurants are struggling to hire. But it may also be raising wages as a gesture of goodwill after coming under fire for the mistreatment of workers.
New York, in fact, is suing Chipotle for violating labor laws regarding employee scheduling. And in Massachusetts, Chipotle was found guilty of over 13,000 child labor violations resulting in hefty fines for the company. Still, it could be that Chipotle's primary -- and sole -- goal in raising wages is to ensure that it's adequately staffed for the coming months.
Either way, restaurant owners may want to take a lesson from Chipotle. Customers are gearing up to come back in full force. If they can't be accomodated, they'll take their hungry selves elsewhere, and after the struggles of the past year, the last thing any restaurant can afford to do is lose business.