People Report recently conducted a special online survey to
learn how restaurant chains are adapting to the current economic
downturn, currently and in the near term. The survey, published
this week was completed by hundreds of executives, representing 111
distinct chain restaurant companies from all industry segments.
We focused on those measures that are directly related to the
human capital element of our businesses and classified them into
three categories: 1. those that affect the total number of
restaurants operated, 2. those that affect the labor-hours required
within each of these restaurants, and 3. those that affect the cash
compensation of the industry's unit level managers and
employees.
Foodservice companies have clearly been forced to take some
measures to face the current situation; 88% of the companies that
participated in the survey have either already reduced or expect to
reduce their number of units or number of new unit openings, their
restaurant staffing levels, or their base salary increases and
bonus payouts for restaurant employees. However, as is explained in
detail below, the response has relied more on reducing the
restaurant chains' expansion plans and cutting the staffing levels
than on modifying the compensation practices.
1.
Number of restaurants operated: 71% of companies reported
they were closing units or reducing the number of planned unit
openings (see Figure 1). A very considerable 41% of all
participants reported they have or are planning to close units by
the end of the year. On a positive note, most of the unit closings
seem to be already in the past, which means we should see job
losses in the industry starting to slow down. What about new jobs
being created? Not on a significant scale, apparently, given that
77% of the companies said they have either eliminated or reduced
the number of planned unit openings for 2009.
2. Labor hours required per unit: 69% of the
companies reported reducing their staffing levels, either
by reducing the number of managers or hourly employees per
restaurant or by reducing their number of hours (see Figure 2).
Consistently across all industry segments, more companies reduced
their number of managers than the number of hourly employees per
unit. Fifty-one percent of all companies reported reducing or
planning to reduce the number of managers per unit, while only 34%
of the companies reported reducing the number of hourly employees.
As was the case with the number of restaurants being closed, it
seems that most of the adjustments to the staffing levels have
already been implemented. Another way that companies have adjusted
their practices is through the reduction of hours for their
workforce; 42% of the companies have reduced or plan to reduce the
hours worked by their restaurant employees.
3.
Cash Compensation: Only 43% of the restaurant chains
surveyed opted for adjusting their compensation practices,
either by freezing their unit level base salaries or by eliminating
bonus payouts (see Figure 3). The industry's response has been
centered more on freezing salaries (43% of participating companies)
than on eliminating bonuses (14% of companies).
Corporate Employees Feel the Pinch... Even
More
The reaction to the crisis has been much more aggressive inside
the walls of the corporate office, with 54% of all companies
cutting staffing levels and 46% introducing a hiring freeze for all
corporate positions. The response in terms of compensation tactics
has also been more significant for corporate employees than for
their unit level counterparts: 54% of the participating companies
said they have frozen base salaries and 29% reported eliminated
bonuses for corporate employees.