Tag Archives: Dine Brands Global

Customer service suffers at short-staffed restaurants as Covid takes toll

A waiter works at a restaurant in Alexandria, Virginia, on June 3, 2022.

Olivier Douliery | AFP | Getty Images

Jeff Rothenberg has grown accustomed to long wait times at restaurants, even when tables are visibly open.

“Another restaurant we went to had open seats outside, but when we went to the host, they mentioned that the kitchen was short-staffed,” Rothenberg, an operations director at a California-based fintech firm, told CNBC. “So although he had seating, he was going to put us on a 30-minute waitlist to be seated.”

Rothenberg was on the 30-minute waitlist for nearly an hour, he said. Then, after he was seated, he waited another 45 minutes for his food to arrive.

“It was the type of experience that makes me not want to eat out as much,” he said. “I felt bad for the servers, because they were trying, but they could only do so much, not having enough cooks.”

It’s a scenario that has been repeated across the food service industry since the Covid pandemic began in 2020, and it’s taking a toll on restaurants and their staff, as well.

Lockdowns in spring of that year led to layoffs and furloughs for many cooks and waitstaff, prompting the federal government to back billions of dollars in forgivable loans for small businesses. The disease ravaged the U.S. workforce, killing more than a million people over the course of two-plus years while sickening many millions more, according to the Centers for Disease Control and Prevention.

As states relaxed their restrictions, restaurant employment recovered, although the industry is still down 750,000 jobs — roughly 6.1% of its workforce — from pre-pandemic levels as of May, according to the National Restaurant Association.

Customers are noticing the difference. In the first quarter of 2022, customers mentioned short staffing three times more often in their Yelp reviews than in the year-ago period, according to the restaurant review site. Mentions of long waits rose 23%.

“I think the experience has been different since Covid. I see that the restaurant industry has changed a lot,” Nev Wright, a health-care worker, told CNBC outside Firebirds Wood Fired Grill in Eatontown, New Jersey. “It wasn’t always like this — now it takes time, with expenses and shortages of staff and everything.”

The American Customer Satisfaction Index found that consumers were less happy with fast-food chains this year compared with 2021 — the sector’s score slipped to 76 out of 100, from 78. Customers were less satisfied about the speed and accuracy of their orders and about the cleanliness and layout of the restaurant.

The customer satisfaction scores for independent and small chain restaurants also dropped this year, to 80 out of 100, from 81, according to ACSI’s annual report. Some national full-service chains saw their scores fall even more year over year: Dine Brands’ Applebees dropped 5%, Darden Restaurants’ Olive Garden 4%, and Inspire Brands’ Buffalo Wild Wings 3%.

‘Everything is very weird’

Eatontown resident Theresa Berweiler said that over the past year she has been met consistently with early closing times and long waits at restaurants, even when they aren’t busy.

“I’m 64 years old, and I’ve never seen anything like this,” the receptionist told CNBC on Wednesday outside a local Chick-fil-A. “Everything is very weird. Covid has definitely changed the world, and I’m not sure for the better.”

Restaurants aren’t the only businesses seeing the labor crunch hit customer service. U.S. consumer complaints against airlines more than quadrupled over pre-pandemic levels in April, according to the Department of Transportation. Hotelier Hilton Worldwide isn’t satisfied with its own customer service and needs more workers, CEO Christopher Nassetta said on the company’s quarterly earnings call in May.

For restaurants, staffing challenges have put pressure on an industry already struggling with inflation and recovering lost sales from the pandemic. Alexandria Restaurant Partners, a group that owns and manages eight restaurants across Florida and Northern Virginia, has dramatically changed the way it does business.

“We’re not sure where all the workforce went, but a lot of them have disappeared, from managers to chefs to hourlies,” said Dave Nicholas, a founding member of ARP.

A chef prepares food in the kitchens of Café Tu Tu Tango, a popular restaurant in Orlanda, Florida.

Source: Alexandria Restaurant Partners

Now, Nicholas said, his focus is on hiring and retention. The group opened a recruitment position and now has two full-time recruiters working to bring much-needed employees into jobs with higher wages and better benefits than the group has ever had. 

“Before, you could hire them as fast as you needed them. These days, that’s not the case,” Nicholas said. “Our mission is to be the employer of choice. That comes with benefits we maybe didn’t have before, down to servers, busboys and dishwashers. The cost of that has been enormous, but the cost of turnover is enormous, so we weighed it.”

But not all workers are taking home more pay, even if their baseline wages increased. Saru Jayaraman, director of the Food Labor Research Center at the University of California Berkeley and president of One Fair Wage, which advocates abandoning the tipped wage, said frustration from understaffing often results in lower tips for workers. In turn, lower pay leads many restaurant employees to quit, exacerbating the issue.

“It’s a vicious cycle of people being unhappy with the service that may tip less, then they don’t come back, and sales are down,” she said.

The restaurant industry has historically struggled with high turnover. The issue has only intensified during the Covid pandemic as employees seek better pay and working conditions, worry about getting sick, and have difficulties finding child care. The accommodation and food service sectors had a quit rate of 5.7% in May, according to the Bureau of Labor Statistics.

Nicholas said that despite ARP’s recent rollouts of retention bonuses and partner programs, in addition to higher wages and better benefits, it’s been a “battle” to contend with the labor market.

Full-service restaurants have been hit harder than limited-service eateries by the labor crunch, with staffing down 11% from pre-pandemic levels.

And that means the experience of eating out likely won’t be the same anymore.

“Going to a restaurant and having them bring over bread with butter,” said Nicholas Harary, owner of Barrel & Roost, a restaurant in Red Bank, New Jersey, “those days are over.”

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Dairy Queen launches Stackburger line as chain sees record sales in 2021

Dairy Queen’s Flamethrower Stackburger and small ice cream cone

Source: Dairy Queen

Dairy Queen is expanding its burger offerings as the fast-food chain looks beyond Blizzards and other desserts.

The new Stackburger line is Dairy Queen’s biggest menu expansion in two decades, with five burger flavors for U.S. customers: Flamethrower, Loaded A1, Bacon Two Cheese Deluxe, Two Cheese Deluxe and the Original Cheeseburger. They’re available as one-third pound double burgers or one-half pound triple burgers — hence the Stackburger name.

The burgers will be a permanent addition to menus at the company’s DQ Grill & Chill locations, which account for 72% of Dairy Queen’s more than 3,300 U.S. restaurants. The Stackburger line is also launching in Canada.

Dairy Queen is far from the only restaurant chain to widen its offerings to attract more customers. Panera Bread has been pushing for more dinner orders by adding items such as flatbread pizza to its menu, while Dine Brands’ IHOP made waves several years ago by briefly changing its name to IHOB to promote its burgers.

Warren Buffett’s holding company Berkshire Hathaway has owned Dairy Queen for 25 years. With a net income of $84.3 million in 2021, the fast-food chain is a relatively small component of Buffett’s empire, which reported net income attributable to shareholders of $89.8 billion for last year. Last year, Dairy Queen’s annual revenue rose 18% to $224.7 million, according to franchise disclosure documents.

The official launch on Tuesday is a long time coming. International Dairy Queen CEO Troy Bader said in an interview that the chain started looking at its menu critically nearly five years ago, around the time that he took the reins of the company. The company knew that it couldn’t “be everything to everyone,” so it tried to figure out what its customers wanted, according to Bader.

Dairy Queen landed on two foods: chicken strips and burgers. The chain revamped its chicken strip offerings first before it tackled burgers.

“I would say it’s one of the first true menu strategies that we’ve had within the Dairy Queen system in a very, very long time,” Bader said.

In markets such as the the Southeast, its food offerings already accounted for the majority of sales, topping its sweet treats offerings. And customers who bought their lunch or dinner there tended to still buy a Blizzard or ice cream cone, too.

Improving its burgers took several years, kicking off in earnest in 2019. Dairy Queen created a new bun that was airy yet sturdy enough to handle the weight of three burger patties. It swapped out its cheese options for white cheddar and a sharper American cheese.

Dairy Queen CEO Troy Bader

Source: Dairy Queen

“We were proud of our burgers, but we knew that we could do better with them,” Bader said.

Then the chain put the Stackburgers to the test. For almost 10 months, Dairy Queen tested the new menu items in Birmingham, Alabama; Sioux Falls, South Dakota; and South Bend, Indiana. Restaurants in the Canadian provinces of Ontario and Alberta were also included in the test. In total, nearly 100 locations were involved, making it the largest test for the chain in more than two decades.

The pandemic also caused some delays. A nationwide labor crunch exacerbated supply chain issues, so Dairy Queen opted to postpone the launch, which was originally slated for late fall in 2021. Bader said the chain wanted to make sure its vendors had enough employees to ensure that franchisees weren’t left in a lurch.

But the chain wasn’t concerned about customers staying home. Bader said Dairy Queen sales fell significantly for six weeks in the spring of 2020, as the pandemic led to lockdowns and fear about even visiting drive-thru lanes. After that month and a half, however, its business rebounded quickly.

“From period forward, we’ve had nothing but record sales,” he said.

In the two-year period from 2020 through 2021, the chain’s U.S. same-store sales climbed 17% compared with 2019 levels.

Bader is confident that the burgers will further fuel sales. Dairy Queen soft-launched the Stackburgers on Feb. 7 and has so far seen double-digit increases in units sold, without any advertising.

While fast-food competitors such as McDonald’s are testing or adding plant-based burgers, Dairy Queen is sitting out for now.

“There’s so much new news with our Stackburgers and with the labor situation with our franchisees, we didn’t want to introduce too many new items for them,” Bader said. “When we think about plant-based proteins it’s something that we’re continuing to monitor, to watch and see what role it can play within the Dairy Queen system.”

Berkshire Hathaway is preparing to hold an in-person annual shareholders meeting on April 30, its first since the pandemic began. Bader said Dairy Queen will forego Blizzards and instead highlight pre-packaged items, such as its nondairy Dilly bars, for investors’ safety and comfort.

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Higher restaurant wages whack profits—some warn more pain is still ahead

Employees prepare orders for customers at a Chipotle Mexican Grill restaurant in Hollywood, California.

Patrick T. Fallon | Bloomberg | Getty Images

Customers are returning to restaurants in droves, but workers haven’t, putting even more pressure on fast-food chains to retain market share and protect profits while navigating a tight labor market.

Restaurant executives have painted a bleak picture of staffing challenges to investors on their earnings calls in the last two weeks. CEOs like Domino’s Pizza’s Ritch Allison, Chipotle Mexican Grill’s Brian Niccol and McDonald’s Chris Kempczinski shared details on how eateries have shortened hours, restricted ordering methods and lost out on sales because they can’t find enough workers. Some chains have been hit harder by the labor crunch, like Restaurant Brands International’s Popeyes, which saw about 40% of its dining rooms closed due to understaffing.

“This is kind of where we’re separating the wheat from the chaff,” said Neuberger Berman analyst Kevin McCarthy.

Raising wages is one popular approach to staffing problems, although it isn’t a perfect solution. McDonald’s wages at its franchised restaurants have risen roughly 10% so far this year as part of an effort to attract workers. Higher labor costs have led to increased menu prices, which are up about 6% from a year ago, according to McDonald’s executives.

Starbucks plans to spend roughly $1 billion in fiscal 2021 and 2022 on improving benefits for its baristas, including two planned wage hikes. The decision reduced its earnings forecast for fiscal 2022, disappointing investors and shaving off $8 billion in market cap. But McCarthy thinks more companies should take a page from the company’s playbook and invest in their employees.

“The stock is down, but I think they’re a winner out of this. Great move on their part, long-term definitely the right decision,” he said.

McCarthy said he’s been assuming that restaurant companies are losing roughly 5 points of traffic due to understaffing.

Looking ahead to the rest of 2021 and into 2022, most publicly traded restaurants said they expect the problem to persist for at least several more quarters. Texas Roadhouse CEO Gerald Morgan told analysts on Thursday that there are “a little bit” more people in the applicant pool, but he still thinks there’s a long way to go before the company has enough employees to meet demand.

Mark Kalinowski, founder of Kalinowski Equity Research, said executives for privately held restaurant companies are more pessimistic about the timeline for the labor market’s recovery.

“Typically when you have high-level people at private companies saying this is going to get worse, it usually is,” Kalinowski said.

He has lowered estimates for Starbucks’ fiscal 2022 results and Domino’s U.S. same-store sales growth next quarter after the companies’ latest earnings reports.

“Not every company is going to necessarily see a change in the sales forecast, but the margin side of things, you got to pay closer attention to, particularly for concepts that have 100% company-owned locations in the U.S. or are significantly company stores,” Kalinowski said.

Kalinowski said he’s favoring stocks with a higher concentration of franchised restaurants. McDonald’s, for example, only operates 5% of its U.S. locations, while the rest are run by franchisees.

More restaurant earnings are still ahead. Outback Steakhouse owner Bloomin’ Brands, Wingstop and Applebee’s owner Dine Brands and IHOP parent Dine Brands are among the companies expected to report their latest results next week. Some analysts, like Wedbush Securities’ Nick Setyan, have tweaked their estimates, given the earnings reports from peer companies.

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QR codes have replaced restaurant menus. Industry experts say it isn’t a fad

The coronavirus pandemic ushered in the instantaneous, widespread use of QR codes, but restaurant industry experts think that the technology will stick around long after the health crisis ends.

Invented by a Japanese engineer in 1994 to keep track of car parts more easily, quick response codes entered the mainstream years later as smartphones with cameras took over. But it wasn’t until the ongoing pandemic forced businesses to double down on sanitizing that they became a ubiquitous sight inside U.S. bars and restaurants, replacing physical menus.

Bitly, a link management service, said that it’s seen a 750% increase in QR code downloads over the last 18 months. Bitly President Raleigh Harbour said that restaurants have realized how valuable the technology is, beyond facilitating touchless service.

“They’re able to adjust their menu offerings on the fly to account for elements like inflation, fluctuations in food and commodities prices, and other variables,” Harbour said.

Prices for food away from home rose 0.8% in July, climbing 4.6% over the last 12 months, according to the Bureau of Labor Statistics. Commodity prices for key goods like coffee and hogs have been soaring this year. Restaurants have also raised prices after hiking wages to attract workers.

Shortages have been another area of concern for restaurant owners. Chicken wings, burger patties and tequila are among the items that operators have struggled to source due to supply chain issues tied to the pandemic.

A QR code also gives restaurants more information on their customers. Reservation services like OpenTable, SevenRooms and Resy pass along data on whoever made the booking to restaurants – but not everyone else at the table.

“If you run a restaurant that doesn’t take reservations, you don’t know who your guest is until they pay,” said Bo Peabody, co-founder and executive chairman of Seated, a restaurant booking service that rewards diners for visiting certain eateries. “What the QR code might allow you to do is learn who that guest is right when they’re sitting down.”

Peabody also owns Mezze Restaurant in Massachusetts, sits on the board of Boqueria Restaurant Group and is a venture partner at Greycroft, where he invests with a focus on restaurant tech. Mezze and all of Boqueria restaurants have used QR codes in place of menus during the pandemic, according to Peabody.

Restaurant tech experts see even more opportunity in QR codes beyond just physical menus. The pandemic ushered in an online ordering boom for restaurants, and industry experts are forecasting that change will also stick around. The shift to QR codes helps bring online ordering on premise, instead of solely being tied to delivery and takeout transactions.

Noah Glass, CEO at digital ordering platform Olo, told analysts on the company’s earnings call that digital on-premise transactions made up 1% of overall industry transactions for the first time. The shift can be attributed to both QR codes and the rise of self-ordering kiosks.

“That’s a big move in an industry that does 60 billion transactions in a typical year to see 1% moving to digital on-premise,” Glass said.

Through Olo or point-of-sale service Toast, for example, a QR code can direct customers to a link to order and pay on their phones, even in full-service restaurants.

“This allows restaurants who have less staff to run more efficiently – something our customers are finding integral to their operations as restaurants across the country are facing staff shortages,” said Toast CEO Chris Comparato.

Peabody suggested that QR codes could allow restaurants to track customers’ past orders, allowing diners to reorder with ease the next time that they visit, like the features used by third-party ordering platforms like Grubhub and Doordash.

“Bringing all that stuff into the restaurant is the promise of the digital connection with the guest, which for sure starts with the QR code,” said Peabody.

Seated began offering additional rewards to its users when they scanned the QR code and filled out the contact tracing form. Those rewards can be applied to gift cards or credits with vendors like Uber or Starbucks.

“Even when contract tracing goes away, just being provided with something interesting can get you an incentive and comfortable with using a QR code menu,” said Peabody.

Restaurants also can implement QR code payments on receipts, so customers can pay without pulling out a credit card or cash, said Comparato. It’s both more convenient for customers and faster for servers, allowing restaurants to seat more customers by turning tables more quickly.

However, QR codes aren’t the answer for all restaurants. Some switched back to physical menus just as easily as they removed plexiglass barriers between tables when states began dropping restrictions in late spring and early summer this year. Darren Seifer, food and beverage analyst for The NPD Group, said that fine-dining restaurants are less willing to replace their menus or ordering process with QR codes.  

“I see some hesitancy with some of the finer restaurants because it isn’t as classy as getting the check at the end of the meal,” Seifer said.

Dine Brands, the parent company of IHOP and Applebee’s, plans to have both options available to customers.

“People have different levels of digital comfort,” CEO John Peyton said. “Some people will prefer and enjoy the QR code and using the phone, and others will rather have the traditional menu.”

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Some People Shy Away From Restaurants as Delta Variant Spreads

Some consumers are rethinking their return to dining out, according to executives and industry data, a shift that threatens the U.S. restaurant sector’s rebound.

Restaurants that survived waves of closures last year had headed into the summer with rising optimism as most of the country ended dine-in occupancy restrictions. Bigger delivery and online ordering business boosted sit-down chains in recent months, including Ruth’s Hospitality Group Inc. and Outback Steakhouse owner Bloomin’ Brands Inc.

However, individual operators and recent industry data now point to a more mixed picture, particularly in U.S. markets hit hard by Covid-19 outbreaks and renewed coronavirus-related advisories. Recent consumer surveys show the Delta variant prompted Americans who say they are the most restricted in their activities to start pulling back their activities again late last month.

Chris Downs, a 32-year-old mechanical engineer from St. Louis County, Mo., had returned to dining out at restaurants in May after getting vaccinated, allowing him to celebrate his dad’s birthday and see friends again. Now, with Delta, he’s stopped dining out for fear of getting the virus.

“I am back to mostly cooking all meals at home,” Mr. Downs said.

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