The Great Resignation is ripping through the restaurant industry

The Great Resignation is beginning to create even more havoc for thinly staffed restaurant chains trying to rally back from being hammered during the pandemic.

This week, the Bureau of Labor Statistics reported that quits rates in the food service industry hit 6.8%, compared to an overall quits rate of 2.9%. Guggenheim analyst Gregory Francfort notes the quits rate for food service is well above the 5% peaks seen in quits in 2006 and 2019, and 4.1% average over the past 20 years.

Nearly 4.3 million Americans quit their jobs in August as many people sought out higher wages amid the recovery from the pandemic, opted for lifestyle changes, or lacked affordable childcare.

"Workers continue to leave the retail and restaurant industries amid challenging demands put on existing staff due to labor shortages and other measures, such as mask requirements for customers. With the persistent high quits rate in these industries throughout the pandemic, both will remain constrained due to a lack of available people willing to work in these jobs. That will continue to weigh on overall employment given the size of both industries," opined DataTrek's Jessica Rabe in a research note to clients.

Domino's Pizza became first major restaurant chain to warn this week on the increasing impact of The Great Resignation.

It's getting harder to find drivers to deliver pizza. Image: Getty
It's getting harder to find drivers to deliver pizza. Image: Getty

The company saw sales fall in the third quarter after 41 straight quarters of U.S. same-store sales increases, ending one of the most impressive runs in the fast food industry. Top line sales missed estimates, too.

"Yes, staffing has been a challenge most certainly during the quarter as we highlighted," Domino's Pizza CEO Ritch Allison told analysts on a conference call. "What I can tell you is that when you look at the third quarter relative to the first half of the year, we certainly saw more of an impact in the system around some things like reduced operating hours and some challenges with respect to delivery service times in particular. And when we look at it in our own corporate store business, we certainly saw our staffing levels relative to ideal were lower than we saw during the first half of the year."

Domino's says it's raising wages at company-operated restaurants and speeding up new hire applications to address the issue.

Caribou Coffee CEO John Butcher tells Yahoo Finance Live he is also dealing with staffing challenges. The privately owned coffee chain has 718 stores to staff, but is also looking to accelerate its new store openings.

"I wish we could say we were immune from staffing challenges. We're not. We always see fall turnover when students go back to school and work. What we are seeing is the inbound applicant flow is less than it is typically," Butcher says. "I think there is a variety of reasons for that. But for the most part our team is faring pretty well. We have the extra challenge of having to staff our existing stores and then fuel all the growth we have coming for the next couple of years. We are ready. We have many of next store managers already on staff. It's just a daily battle."

Analysts believe it will be some time before the battle to secure workers for the industry cools down. In turn, that raises the risk of a stretch of mixed earnings reports for the sector into 2022.

"This pressure is not Domino’s specific and, in our view, should rather be a harbinger for the rest of earnings season," says Francfort.

The analyst joined several of his peers on Friday in cutting their sales and profit estimates on Domino's.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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