DOYLE'S DOMAIN
We are hosting a call on Monday to discuss the current investment thesis and new direction for Restaurant Brands (QSR).
- RBI is not DPZ in 2010!
- Can Burger King be fixed?
- Getting past 3G & New Intangibles
Quick Service Traffic Slows
For the first three weeks of February, the quick service traffic trends were running up 3.1%; in the last week, traffic fell (-0.38%)
A labor shortfall
The rebuilding of the restaurant workforce continued in February. But the latest JOLTS showed 1.5 million job openings in the combined restaurants and accommodations sector; that marked the 22nd consecutive month with at least 1 million openings.
Restaurants and bars added 69,900 jobs in February vs. 88,800 in January (revised lower by 10k). February marked the 26th consecutive month of employment gains in the restaurant industry, representing a total increase of nearly 2.5 million jobs as of February 2023; eating and drinking places were 108,000 jobs or 0.9% below their February 2020 employment peak. Nonfarm payrolls increased 311K in February, far stronger than the 223K consensus but less than the 504K in January. Note that the January figure was revised down from the 517K initially reported last month.
- The unemployment rate: 3.6% vs. 3.4% consensus and 3.4% prior.
- Average hourly earnings: +0.2% M/M vs. +0.3% expected and +0.3% prior.
- Average hourly earnings: +4.6% Y/Y vs. +4.7% expected and +4.4% prior.
Another measure of the industry’s current labor shortfall is job openings above normal or the JOAN Index. The JOAN Index measures the number of job openings that are in excess of the postings required to handle the regular churn in the workforce. In 2019, there were an average of 875,000 hospitality job openings monthly. Using this as a proxy for normal business conditions, it means there were 600,000 job openings above normal in January 2023 (calculated as 1.475 million total job openings minus 875,000 normal job openings). This represented the 19th time in the last 20 months with a JOAN Index reading of at least 400,000, illustrating the extended period during which hospitality businesses have been significantly understaffed. With restaurants providing nearly 90% of the total jobs in the combined restaurant-and-accommodations sector, it is likely that the restaurant industry is currently operating with a labor shortfall of at least 540,000 employees.
