On the career path, fast food is a stepping stone most people rush to hop off. Now the industry is working harder than ever to change that.
Tired of the scramble to fill openings and the high cost of training new employees, fast-food chains are offering benefits that were unheard of 10 years ago — including 401(k)plans, health insurance, even stock options. Some are building more career ladders and giving managers bonuses for retaining employees.
“Not a lot of people wake up and say they want to go into this industry,” concedes Aylwin Lewis, chief operating officer of Tricon Global Restaurants Inc., the Louisville, Ky., operator of the Taco Bell, Pizza Hut and KFC chains. “We want to show people this is a destination.”
Burger King, a unit of British food and drink marketer Diageo PLC, provides 401(k) retirement plans for workers in its 500 corporate restaurants. The chain’s franchisee association plans to launch a 401(k) plan for the 8,000 franchised locations soon, according to spokesman Rob Sayre. Tricon offers some restaurant employees stock options and recently has begun tying bonuses to how well managers retain employees. McDonald’s Corp. this year launched a comprehensive suite of benefits for restaurant-level employees, ranging from 401(k)s to health insurance, home and car insurance and credit-union memberships, and it has a menu of benefits that franchisees can chose from.
It’s still an uphill fight to retain workers in an occupation widely derided as “flipping burgers” — shorthand for the ultimate dead-end job. It doesn’t help that starting wages still run $6 to $8 an hour, although employees who stick around can eventually earn more than $12 an hour.
But the chains are starting to see improvement in their notoriously high turnover rates. Five years ago, the average fast-food restaurant replaced its entire staff twice a year, or more. That revolving door, with its relentless recruiting and training costs, is a considerable drag on earnings. The average Burger King, for example, has just $1.1 million in sales each year, while the bill for training each of its new-hires runs $400 to $800.
Thanks partly to new benefits, Burger King reduced its turnover rate to 210% last year, from 223% in 1999 and is projecting a rate of 205% this year. Pizza Hut brought its turnover down from 147% in 1997 to about 120% in 2000. Taco Bell has reduced its turnover rate from 243% in 1997 to 200% in 2000. So far this year, turnover is at 144%.
“Reducing turnover results in lower training costs, better service and better control of the entire labor expense item,” says Peter Oakes, restaurant analyst at Merrill Lynch. “When companies are able to get their hands around labor that in turn improves earnings visibility which is what Wall Street is looking for.”
Fast food hasn’t seen a boom of applicants with the slowing economy. Most of those laid off are people with high-tech jobs and college degrees who aren’t flocking to the restaurant industry. Still, the average age of fast-food employees is creeping up, from the teens to the 20s, producing a less fickle and itinerant work force. Seeking stability and security, more grown-ups are taking the place of teenagers earning money for dates, clothes and CDs. The average age of a Burger King employee is 25 years old and at Wendy’s International Inc., the average employee is 27 to 28 years old.
Some chains are explicitly looking for a different kind of employee. Taco Bell isn’t “just hiring warm bodies” anymore, Mr. Lewis says. There is a real emphasis on hiring people who aspire to jobs as managers. Candidates see a map illustrating the series of promotions leading from dishwasher to regional general manager. “Hiring a bunch of high-school kids is not the road to,” Mr. Lewis says.
Indeed, the industry is discovering a large number of adults are willing to take a smaller paycheck in exchange for health insurance, a retirement plan and predictable working hours, with little overtime.
Living at home with her aging, 38-year-old Angela Crowder has been making hamburgers at the Burger King in Chesterfield, Va., for 15 years. She has made friends with regular customers and earned recognition from Burger King corporate headquarters in Miami.
She says she appreciates the dental plan and the 401(k) program. For her 10-year anniversary, she chose a boom box from a Burger King employee-rewards catalog; for her 15th, she’s eyeing a TV set. Every six months, she gets a raise in her hourly wage of about 25 cents and currently makes about $8 an hour. “There are times that I wish it was a bit more,” Ms. Crowder says, “but when the raises come out I am happy to get that.”
Yes, there’s the odor of hamburgers that clings to her uniform (“You can’t smell it yourself but someone else can,” she says). There’s stress — especially when a busload of adolescents pulls in. Her living expenses are fairly low, yet she is struggling to save up enough to buy a car. But still, she says, she finds the work challenging and feels secure. “I don’t have to worry about getting laid off,” she says.
As they have for years, the chains are holding up as shining examples those individuals who managed to take entry-level to a new level. The KFC chain holds out Damian Waugh as an example. The 23-year-old has worked his way from cashier to restaurant general manager. Mr. Waugh graduated from high school and, after scholarship money didn’t pan out, went to work at a KFC in Brooklyn, N.Y.
“I had always thought negatively about fast food,” says Mr. Waugh, who immigrated with his family to the U.S. from Jamaica in 1991. “I never thought it was a job where people would show you respect.”
Much to his surprise, he found he enjoyed working in the drive-through and began specializing in that area. Today he is in charge of hiring and training employees. He also began taking business classes at New York City Technical College; KFC pays for his tuition.
Hishas more than doubled, to more than $40,000, since he started. He even has been given Tricon stock options worth about $28,000. This year, he won an award for the results at his Brooklyn store and got an all-expenses-paid trip to the Venetian resort in Las Vegas.
Still, some veterans say a career in fast food means dealing with friends and acquaintances who look down their noses.
“People feel that if you work for fast food it is not a real job,” says Delores Beaulieu, 67, who has worked at a Connecticut Burger King for 20 years. “I tell them I enjoy my work and have good benefits. Maybe it is not for everyone but it is what I like to do.”