It would be hard to think of a tougher year for the restaurant industry than 2020, which saw the coronavirus pandemic turn the world upside down. But as we head into 2021, there is light and hope on the horizon. A slew of new vaccines is rolling out across the country, while the $900 billion federal relief bill should provide a bridge to quick-service restaurants and other small businesses to the better times ahead. Quick-service restaurants, in turn, appear poised to lead the recovery, having performed better than the rest of the industry as they ramped up drive-thru and delivery service.
Still, big issues loom on the horizon as well, including likely efforts by the new Biden administration to scuttle the business-friendly tilt of the last few years in favor of a more pro-union agenda. The National Labor Relations Board is likely to once again emerge as a flash-point in the battle over rules and regulations that have a major impact on the quick-service sector, such as the much-debated “joint-employer” rule. If nothing else, there will be much to keep an eye on for Dunkin’ franchise owners in the year ahead, on the federal, state and local levels.
Quick-service restaurants, in turn, appear poised to lead the recovery, having performed better than the rest of the industry as they ramped up drive-thru and delivery service.
Biden Embraces More Labor-Friendly Approach
Not surprisingly, the incoming Biden administration will be singing a different tune from its predecessor. The new president is expected to pursue policies that will be far friendlier to labor unions and to efforts to organize workers in various sectors, including quick-service restaurants. Under Trump, the National Labor Relations Board rewrote Obama-era rules for determining whether McDonald’s and other big franchisors should be considered “joint employers” alongside local franchise owners when it comes to issues of pay and working conditions. The upshot is that it has become much harder to prove a franchisor should be considered a “joint employer,” making it tougher for unions to organize quick-service workers. An NLRB ruling that a franchisor was effectively a joint employer could lay the foundation for a union to organize workers across the chain were it to occur.
For union organizers, that means having to form separate bargaining units at the franchise level instead of forming one huge labor organization representing workers at all the chain’s restaurants. Of all the items on Biden’s to-do list, this may be one of the easiest to accomplish, for it does not require approval by Congress. Rather, Biden will fill a vacancy on the five-member NLRB board, giving Democrats a majority and he may also be able to replace the board’s general counsel when his term expires in August, according to Law 360. However, other changes may not be so easy for President-elect Biden to make, mainly since they will require approval by federal lawmakers.
Biden has been a big supporter of the PRO Act, which would write into federal law a more “worker-friendly” joint-employer test, according to QSR magazine. The proposal would also push back against state right-to-work laws, currently the law of the land in 28 states across the nation, while also banning the use, in arbitration agreements, of class-action waivers, the magazine reports.
A $900 Billion Sigh of Relief
But debates over labor regulations will likely take a backseat, at least for the next few months, to efforts to stabilize the economy and finally defeat the coronavirus pandemic. Restaurant industry leaders were anxiously awaiting the passage of the $900 billion relief package, signed into law by President Trump late last month after a week of 11th-hour drama. The hundreds of billions in aid for small businesses, including restaurants, will make the difference between staying afloat and sinking, said Tom Bené, president and CEO of the National Restaurant Association, in a press release.
“The action taken by Congress today will keep tens of thousands of restaurants from closing in the coming months,” Bené said. “A second round of PPP, combined with unique enhancements for the restaurant sector, will provide critical access to capital.”
Under the newly passed legislation, small businesses will get $325 billion, the majority of it coming through the Paycheck Protection Program. And consumers, upon whom quick-service restaurants depend, will also get a shot in the arm, with $166 billion in $600 checks to individuals – and $1,200 for couples – and $120 billion in additional funding for jobless benefits.
The bill also includes a number of tweaks that will also help buoy the struggling restaurant industry. The legislation lowered the cap on how much restaurants can borrow to $2.5 million, down from $10 million previously. But for the smaller franchises and restaurants that still qualify, the bill provides significantly more generous terms, boosting the amount restaurants can borrow to 3.5 times their monthly payroll, up from 2.5 times before.
Restaurants also notched an important win on another PPP loan eligibility requirement, which has been narrowed to focus on smaller businesses of fewer than 300 employees. Restaurants can apply individually for the loans, based on the performance of that particular location, rather than as part of a larger chain or franchise. And as restaurants spend big money on everything from reconfiguring their interiors to adding drive-thru lanes in response to Covid-19, they will have more flexibility on what they can spend their PPP money on. Among the additional allowed uses are reconfigurations of their physical plant or facilities to meet new safety guidelines, as well as purchasing PPE and sanitizer.
Big Apple Passes ‘Just Cause’ Legislation
Quick-service restaurant employees in New York City will now enjoy some union-like job protections. The New York City Council recently passed a bill that would end at-will employment at quick-service restaurants across the city. Under the “just cause” legislation passed by city councilors, employers would only be able to fire workers for either failing to do their job or misconduct, according to Restaurant Dive. And employers – in this case franchise owners – can’t resort to firing without having first disciplined the worker, and must also now provide a written explanation. And that’s not all.
The New York City Council passed a separate bill that will force quick-service restaurants to defer to seniority when deciding on which employees to let go. What happens in New York, in turn, is not likely just to stay in New York, “and could set a template for other cities and states,” The New York Times reports.
“No one should get fired on a whim, but for years this has been the norm for fast-food workers,” Brad Lander, a Democratic city councilman from Brooklyn, who sponsored the bill, told the Times. But Councilman Eric Ulrich, a Republican from Brooklyn, offered a very different take, warning the new bills will “deal a devastating blow” to the city’s quick-service restaurants.
“We should be lifting barriers and red tape at a time like this because it’s such a pivotal moment when it comes to New York City’s economic recovery,” Ulrich told the paper.
Quick-Service Restaurants Lead Recovery
Yes, the restaurant industry is in a deep, but hopefully temporary slump as the battle against the coronavirus enters its final innings. And while business is definitely down, the quick-service sector appears poised to lead the industry’s recovery, a new survey shows.
The decline in customer transactions narrowed in November, shrinking to a negative 8 percent compared to the same month a year ago, compared to a negative 9 percent in October, according to market research firm NPD.
Transaction declines for quick-service restaurants were lower than the industry average, weighing in at a negative 7 percent in November, compared to the same month last year.
“This improvement was aided by major quick service restaurant chains’ proficiency in offering off-premises services, like carry-out, drive-thru, and delivery,” NPD noted in a press release.
A big increase in drive-thru transactions helped lead the way, rising 24 percent in November and accounting for 43 percent of all quick-service sales. Delivery posted a phenomenal 125 percent gain in November over a year ago, and now accounts for 11 percent of all transactions, according to NPD’s foodservice market research.
“Major quick service restaurant chains have learned to expand their already high capacity for off-premises volumes,” David Portalatin, NPD food industry advisor and author of “Eating Patterns in America,” said in a press release. “We should continue to expect drive-thru and delivery to be performance drivers for the best performing restaurant operators as consumers continue to shift meal occasions to the home.”
As you are reading this magazine, a new president is taking center stage. Joe Biden has a new approach on a range of issues that may lead to the reversal of key, employer-friendly policies enacted by the Trump administration. This year – even as minimum wages are rising in some states – we will be keeping a close eye on how Democratic-party politics will influence the National Labor Relations Board, and how a new Congress will work with a president who spent so much of his career on Capitol Hill. Depending on how the spread of Covid-19 slows as more Americans get vaccinated, small businesses may again lobby Congress for more financial relief. We will have to see how that plays out. If one thing is for sure, many bottom-line issues critical to the operation of a Dunkin’ shop will remain top-of-mind as 2021 rolls out.