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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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Generac, Shopify, La-Z-Boy and others

Check out the companies making headlines before the bell:

Generac (GNRC) – The maker of generators and power equipment saw its stock rise 2.6% in the premarket after beating top and bottom-line estimates for the fourth quarter. Generac earned an adjusted $2.51 per share, 11 cents above estimates, as both commercial and residential sales increased more than 40%.

Shopify (SHOP) – Shopify fell 4% in premarket action despite reporting better-than-expected quarterly profit and revenue. The e-commerce platform operator said revenue growth for 2022 would be slower than the 57% it achieved in 2021.

Kraft Heinz (KHC) – The food maker’s stock was up 1.3% in the premarket after reporting its adjusted quarterly profit of 79 cents per share beat estimates by 16 cents. Revenue was also above Wall Street forecasts.

La-Z-Boy (LZB) – La-Z-Boy tumbled 12.5% in premarket trading after the furniture company reported a quarterly profit of 65 cents per share, well below the 89-cent consensus estimate. The company best known for its signature recliners noted multiple production issues related to Covid-19, leaving it unable to fully satisfy demand.

Wynn Resorts (WYNN) – Wynn Resorts reported a quarterly loss of $1.37 per share, wider than the $1.25 per share loss expected by Wall Street analysts, although the casino operator’s revenue beat estimates. A nearly 28% drop in Wynn’s Macau revenue weighed on overall results. Wynn fell 2.3% in the premarket.

Trade Desk (TTD) – The stock surged 10.5% in the premarket after the programmatic ad company reported adjusted quarterly earnings of 42 cents per share, 14 cents above estimates, with revenue also topping Wall Street forecasts.

Hilton (HLT) – The hotel operator missed estimates by 2 cents with adjusted quarterly earnings of 74 cents per share. Revenue was slightly above estimates as it more than doubled from a year earlier amid a travel recovery.

ViacomCBS (VIAC) – ViacomCBS announced it will change its corporate name to Paramount Global, effective Thursday, in an effort to emphasize its Paramount+ streaming service and to take advantage of Paramount’s brand recognition. Separately, the media company reported an adjusted quarterly profit of 26 cents per share, missing the 43-cent consensus estimate. Shares slumped 11.3% in premarket trading.

Airbnb (ABNB) – Airbnb reported record revenue for 2021, better-than-expected fourth-quarter results, and issued an upbeat current-quarter forecast. The home rental company benefited from consumer preferences shifting away from hotels during the pandemic and said current-quarter bookings are likely to exceed pre-pandemic levels for the first time. Airbnb shares rallied 3.5% in the premarket.

Roblox (RBLX) – Roblox stock plummeted 15.2% in premarket action after reporting a loss of 25 cents per share for its latest quarter, nearly double the 13-cent loss analysts had anticipated. The social gaming platform operator also saw lower-than-expected revenue amid flat daily active user metrics and engaged gaming hours that fell short of forecasts.

Cedar Fair (FUN) – Cedar Fair rejected a takeover bid from rival theme park operator SeaWorld Entertainment (SEAS), according to a statement by SeaWorld which confirmed earlier reports of an offer but did not acknowledge the reported $3.4 billion price. Separately, Cedar Fair reported better-than-expected quarterly revenue with record in-park spending by visitors. Cedar Fair stock slid 12.3% in the premarket, while SeaWorld fell 4.2%.

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Stocks making the biggest moves midday: Merck, Moderna and more

Check out the companies making headlines in midday trading.

Merck — Shares surged more than 9% after it announced its new antiviral pill cut the risk of death or hospitalization by 50% for Covid patients. The pharmaceutical company plans to file for emergency use authorization.

Moderna, Regeneron — Companies with other Covid-19 drugs fell after Merck’s oral pill showed positive data in a clinical trial. Moderna’s stock fell nearly 13%, while shares of Regeneron dropped more than 5%.

United Airlines, Delta Air Lines, American Airlines, Southwest Airlines — Airline stocks rallied as Merck’s oral Covid drug showed promising results. United Airlines rose nearly 6%, Delta Air Lines gained more than 5% and American Airlines rallied roughly 4%. Southwest Airlines jumped more than 4% as well following an upgrade on the stock by JPMorgan.

Penn National Gaming, Hilton Worldwide, Norwegian Cruise Line — Travel and entertainment stocks jumped following the positive results from Merck’s Covid pill. Penn National Gaming rallied more than 6%, Live Nation Entertainment added about 5%, Hilton Worldwide gained more than 4% and Norwegian Cruise Line rose nearly 4.8%.

Lordstown Motors — Lordstown Motors saw its stock sink more than 15% after it announced an agreement to sell its Ohio assembly plant to iPhone maker Foxconn for $230 million. Shares of Lordstown Motors had rallied by as much as 21% by Thursday as reports indicated the deal was in the works.

Zoom Video Communications — Zoom and Five9 terminated what would have been a $14.7 billion deal. Five9 shareholders rejected the proposed acquisition by Zoom. Zoom shares gained 2.2% and Five9 shares rose 3.2%.

Walt Disney — Shares of the media giant popped 3% on news that Disney and Scarlett Johansson settled a lawsuit involving the “Black Widow” movie. Johansson had sued Disney over the release of the movie on the Disney+ streaming service at the same time it was debuting in theaters.

Exxon Mobil – The oil giant advanced more than 2% after the company updated Wall Street on its expected third-quarter results. In a filing with the Securities and Exchange Commission, Exxon said that higher oil and gas prices could lift earnings by as much as $1.5 billion. Analysts at Bank of America said the company is on track for its highest earnings per share since the third quarter of 2014.

International Flavors & Fragrances – Shares of International Flavors popped more than 6% after the company announced its chief executive Andreas Fibig plans to retire. The company said Fibig will remain at the helm of the company until a successor is found.

— CNBC’s Jesse Pound and Maggie Fitzgerald contributed reporting

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