At one time, omicron was known by most people as a Greek letter. The word literally means “little O.” But today, the word has followed the virus it is named for as a phenomenon that swept the planet. In many ways, governments and business have responded the way they did nearly two years ago, when Covid became a word we all knew. If there is any good news to share it is that omicron appears to be wreaking havoc in a slightly less destructive way than previous virus variants. What does all this mean for Dunkin’ franchisees in 2022? Well, let’s dive into some of the issues that will remain top of mind in this New Year.
Riding the latest wave
A massive wave of new medical cases tied to the omicron variant is raising new fears and driving many businesses and governments to take renewed action to try to stem the tide— including indoor mask mandates and advisories in many Northeast states.
For Dunkin’ franchisees who own stores near office districts, this is most definitely bad news. Many major employers that had planned for some workers to return to their offices are now saying “stay home.” Pandemic slowdowns may also be impacting franchisees near college campuses, since many schools chose to pivot to remote learning after the Christmas break.
In what became a worrying sign, restaurants closed during the busy holiday season not only to demonstrate caution, but also because their workers were sick with Covid.
Government response to the latest wave has been a hodge-podge of state to state, county to county and municipality to municipality reactions. Throw darts against a map and you’ll probably get a different omicron policy every time.
Not surprisingly, California has been leading the charge on new rules, requiring residents to once again wear masks in indoor public settings. On the east coast, not surprisingly, New York City has expanded its mask and proof-of-vaccination mandates – even for private sector workers – while closing Broadway shows and limiting the size of the crowd for New Year’s celebrations in Times Square.
At the same time, five states: Arkansas, Florida, Iowa, Kansas and Tennessee, are extending unemployment benefits to workers who were fired for refusing to be vaccinated. According to the Washington Post, the states “carved out exceptions for those who won’t submit to the multi-shot coronavirus vaccine regimens that many companies now require,” while other GOP-led states are considering similar benefit programs.
Amid the chaos and confusion, there has been virtually no serious talk of imposing statewide, or nationwide, economic lockdowns. That consistent tone is in line with the official White House position vehemently insisting that forced shutdowns are not in the offing.
But omicron’s rapid spread did prompt two Harvard researchers to send a memo to CDC Director Dr. Rochelle Walensky proposing the use of “circuit breakers,” which are temporary, local restrictions on high-risk activities like indoor dining, performances, or non-essential work outside of homes in order to “thwart the risk of hospitals not being able to provide life-saving care in an emergency situation,” the Boston Globe reported.
Such action is exactly what restaurant owners dread, as a recent article in Insider.com indicated: “At least 10% of US restaurants, around 100,000 businesses or more by most estimates, closed since the onset of the pandemic,” the publication wrote.
Those that are remaining in the fight are responding the best they can to the growing demand in takeout orders. As people work their way through pandemic fatigue, they are continuing to visit QSR drive-thrus and order takeout from restaurants. The boom in takeout and drive-thru business comes as many franchisees continue to struggle filling shifts, due to what has been called the Great Resignation, and competition from other businesses. Once omicron hit, many business owners began feeling as if they had been hit with the old double whammy.
Inflation: It’s not just about coffee prices
2022 unfolds with an ongoing pandemic, labor and supply shortages and what may be turning into sustained inflation. Something for Dunkin’ franchisees to consider is that coffee prices have surged 80 percent so far this year due largely to severe drought and unusual frost conditions in Brazil, the world’s largest supplier of coffee beans. Historically, Dunkin’ has ridden out waves of coffee price fluctuations because the National DCP purchases beans well in advance, but as the past couple of years have shown us, anything can happen.
Inflation has struck across-the-board, putting price pressure on all types of food products, energy, transportation services and the list goes on and on. Presently there are few signs that inflation will soon ease. Bloomberg News featured a story in December about how the Federal Reserve Bank now views inflation as a longer-term problem, and the Fed’s willingness to start raising interest rates in 2022 to combat higher prices reinforces that concern.
If there is any good news, it is that major U.S. ports have cleared much of the supply chain backlog and are now reporting fewer carrier ships waiting to unload containers crammed with backordered items.
Shortly before Christmas, the National Restaurant Association sent a letter to the White House urging more aggressive action to unclog the nation’s key ports and relieve supply shortages that have plagued nearly 95% of all restaurants, the letter stated.
Inflationary pressures caused virtually every restaurant to hike prices for its food and beverages last year. The U.S. Bureau of Labor Statistics cited record increases from October 2020 to October 2021. As the thinking goes, mom & pop coffee shops can get away with raising prices to offset inflationary pressures more easily than chains like Dunkin’ because of the perception that independent shop operators are more fragile than franchisees.
That belief was underscored by Kate Jaspon, the CFO of Inspire Brands, who spoke at the annual Restaurant Finance and Development Conference in November. She said that even though prices that franchisees pay for their supplies are skyrocketing, customers would “not be as open to [a higher] price from chains or corporations as they are to independent mom and pop shops,” adding, a franchisee can’t post the same sign explaining the inflation situation or, “It would blow up on social media.”
Of unions and walkouts
Labor unions are expected to ramp up their activity in 2022, given the gains they made organizing fast-food restaurants and coffee shops last year.
Perhaps the most robust activity is being orchestrated by Local 32BJ of the Service Employees International Union, which represents over 175,000 service workers in New York and New England. Even though labor shortages have prompted wage increases for fast food workers, employees at the largest restaurant chains are willing to walk out and speak up for better working conditions.
Local 32BJ has been targeting Chipotle locations in New York, in part because its stores are company owned and are therefore easier to influence—as opposed to franchised locations where the corporation does not control wages. The unions are feeling the momentum, but it doesn’t mean Dunkin’ and other QSRs will all be flying the union flag anytime soon, as Independent Joe reports in the pages of this issue.
Uncertain, but optimistic
Many business and restaurant experts are forecasting a bounce back year in 2022, despite the uncertainty that continues hanging like a fog. Lizzy Freier, director of Menu Research & Insights for the foodservice research firm Technomic, presented the situation this way in a recent article in Restaurant Business magazine: “How do operators manage with less labor, emphasize flexibility with menus (given still-existing supply chain issues) and enact key changes to the guest experience? These strategies, in many ways, show just how nimble operators need to be right now.”
Experts are predicting the industry will leapfrog its 2019 sales level—fueled by digital ordering, delivery and takeout services, though full-service restaurants may lag because of the continued pandemic fallout on the business travel sector. Of course, New Year’s predictions can quickly look stale as the days and weeks unfold, but Dunkin’ owners should feel confident that their loyal customers will continue lining the drive-thrus for a beverage and snack. As 2022 moves on, Independent Joe will continue keeping an eye on the business, labor and regulatory developments that can impact your business.