Service at McDonald’s is getting slower while the company is feeling the pressure on its operating hours as it struggles to fully staff its restaurants, CEO Chris Kempczinski said.
Speaking at the company’s third-quarter 2021 investor call on Wednesday, Kempczinski noted that McDonald’s is finding it “very challenging right now” to find skilled workers for jobs in its restaurants.
“Certainly, it’s a very challenging staffing environment in the U.S., a little bit less so in Europe, but still challenging in Europe. In the U.S. for us, we are seeing … that there is wage inflation. Our franchisees are increasing wages there over 10 percent wage inflation year-to-date that we’re seeing in our McOpCo (McDonald’s Operated Company) restaurants were up over 15 percent on wages, and that is having some helpful benefits, certainly, the higher wages that you pay it allows you to stay competitive,” Kempczinski said.
“But we’re also seeing is that it’s just, it’s very challenging right now in the market to find the level of talent that you need,” the CEO added.
Kempczinski said the lack of skilled workers is impacting the food giant’s speed of service and in turn putting “pressure” on its operating hours.
“And so for us, it is putting some pressure on things like operating hours, where we might be dialing back late night for example from what we would ordinarily be doing. It’s also putting some pressure around speed of service, where we are down a little bit on speed of service over the last, kind of, year-to-date and we did in the last quarter. That’s also a function of not being able to have the restaurants fully staffed,” Kempczinski said.
However, the CEO noted that the issue is “not unsolvable,” pointing to McDonald’s’ operated companies, which he said place more focus on engaging with staff and providing them with training in an effort to keep them motivated.
“That can make a difference,” the CEO said. “But certainly, I was hoping and expecting that we’re going to see the situation improved, maybe a little bit more quickly than what’s materialized. And I think it is going to continue to be a difficult environment for the next several quarters.”
Multiple companies, particularly those in the dining and hospitality sector, as well as small-business owners, are increasing pay for employees in an effort to counteract shortages and attract workers amid nationwide labor shortages and hiring difficulties owing to the COVID-19 pandemic.
The McDonald’s CEO also acknowledged supply chain issues currently playing out across the globe which has seen the price of goods soar along with consumer shortages.
Kempczinsk said commodity costs for McDonald’s were up 2 percent or so for the first nine months of this year, but that he expected this to grow to between 3.5 percent and 4 percent for the full year, which will put a little bit of additional pressure on the fourth quarter.
To offset the wage increases, labor pressures, and soaring supply prices, the fast-food company has raised its prices, with Kempczinsk noting that those increases are set to reach around percent year-over-year by the end of 2021, Kempczinsk said.
“We haven’t seen, I’ll say any more resistance to our price increases than we’ve seen historically. So that 6 percent has been pretty well received by customers,” he said.
President Joe Biden has attempted to alleviate supply shortages and disruptions before Christmas, and earlier this month said he had received confirmation from UPS, FedEx, Walmart, and other companies, as well as the Port of Los Angeles, to increase the number of shifts to deal with a backlog of container ships, labor shortages, and warehousing issues.
Despite the labor shortage, McDonald’s’ global comparable sales were up 12.7 percent in the third quarter and increased 10.2 percent on a two-year basis, according to its third-quarter earnings released on Wednesday. The company posted total revenues of $6.2 billion.