For two years, Dunkin’ franchisees have had to operate under unprecedented regulatory conditions due to the pandemic – from mandatory store shutdowns to proof-of-vaccination orders. But could the regulatory nightmare finally be coming to an end? It sure looks like it, based on political and coronavirus-immunity trends of late. Still, there will be no shortage of other challenges facing Dunkin’ franchisees in 2022—and we take a look at some of those in this edition of What’s Brewing.

Spring hopes: Pandemic regulations are finally coming to an end

It is hard to imagine, but we have been living with this pandemic for two years now, marked by then-President Trump’s March 13, 2020 declaration of a national emergency and his stay-at-home pronouncement, signaling the nation was girding for battle against the coronavirus in 2020. To say the least, it’s been a long two years, especially for Dunkin’ franchisees, who have dealt with mandatory shutdowns, occupancy limits, strict social-distancing and hygiene rules, mask mandates and proof-of-vaccination requirements.

And those are just the regulatory challenges caused by the pandemic. Restaurant and other business operators have had to face acute labor shortages, supply-chain disruptions and inflationary pressures caused, directly or indirectly, by the pandemic.

But it’s now pretty clear we’re quickly approaching the end of the emergency regulatory era of this pandemic, with the omicron surge having wound down—and that’s great news for Dunkin’ franchisees. Barring the emergence of a nasty new variant, it looks like most states will drop the vast majority of their strict rules designed to combat the spread of COVID-19. In February, states such as California, Massachusetts, New Jersey, New York and Oregon announced they were dropping their mask mandates.

Some of this is the result of simple pandemic fatigue. People are tired of the various curbs, whether they were initially needed or not, and polls now show that an overwhelming majority of Americans think it’s time to start treating the coronavirus as something akin to the flu. Bottom line: they’re prepared to live with COVID-19 on a non-emergency basis.

But it’s not just the average American (or the average world citizen) who feels this way. The director of the World Health Organization (WHO) recently pronounced that the end of the pandemic was near, at least in Europe and other developed nations.

The reason for WHO’s “ceasefire” declaration: Despite its lethal impact, the omicron variant has nevertheless provided a natural immunity for those who caught and survived the variant in recent months. Combined with those who developed immunity via vaccinations, some populations have reached, or are close to reaching, the so-called “herd immunity” level where the virus can no longer spread with impunity.

And it’s ultimately why you see more states, particularly Democratic-controlled states, loosening or eliminating their regulatory requirements, as the New York Times reports.

For struggling business owners, the end of the regulatory era of the pandemic is most welcome, and the easing of the pandemic and its rules should lead to higher sales this year, according to projections from the National Restaurant Association. Quick-service operators and other restaurateurs still face major challenges ahead in 2022, but most Dunkin’ franchisees will soon get a much-needed respite from at least some of the more egregious regulatory challenges they’ve faced over the past 24 months

The problems that won’t go away this spring

Even as people begin to respond to COVID-19 as a less concerning, flu-like epidemic requiring less intrusive public-health measures, its impact beyond public health becomes clearer. Economic woes brought on by the pandemic include: inflation, supply chain disruptions and the great labor shortage.

Inflationary pressures – which are at the highest level in 40 years – have prompted operators at quick-service chains and fast-casual restaurants to hike menu prices to the highest point in decades.

Dunkin’ franchisees are only too aware of the discontent that higher menu prices cause among cost-conscious customers. They’re also aware that inflation will probably eat into their profits this year, even if sales increase, as the National Restaurant Association (NRA) has warned. NRA believes it will be another year, at least, before conditions normalize.

Inflation has gotten so high, and seeped into so many nooks and crannies of the economy, that some believe it may take higher interest rates and a recession to break the back of the current inflationary cycle. Let’s hope the doomsayers are wrong.

But it seems supply-chain problems, which have been a major contributor to recent inflation, aren’t going away soon. Chains large and small have faced shortages of cups, lids and even trays for carry-out, as more people have opted to take their coffee and snacks to go. Shortages are also blamed on “clogged ports, freak storms and unfilled paper-mill jobs,” as the WSJ puts it. (Read how the NDCP is battling supply chain issues on page 10)

And speaking of unfilled jobs, the current labor shortage has been another major contributor to inflationary pressures, with Dunkin’ franchisees and other quick-service eateries paying significantly higher wages these days.

Among others, Starbucks and McDonald’s have recently cut store hours due to the labor shortage, while Shake Shack is delaying the opening of new restaurants due to the one-two punch of higher construction costs and a lack of workers. So when will this perfect storm of inflation, supply-chain disruptions and labor shortages really end? No one can possibly know for sure, but one clue may be found under the Golden Arches.

McDonald’s CFO Kevin Ozan suggested economic uncertainty and turmoil will likely last at least through 2022, with sales increasing due to the easing of pandemic restrictions, but with costs for raw materials doubling over the course of this year. It’s safe to say that Dunkin’ franchisees will likely see the same trends.

The positive side of the pandemic: innovations and automation

Are there positive points we can take from the pandemic? Actually, yes. The past two years have brought about accelerated innovation and automation, such as more efficient take-out and drive-thru services, digital ordering, delivery and payment systems, bulk purchasing procedures, and more. Dunkin’ not only proved it was way ahead of the curve with digital ordering, the brand’s new owners also capitalized on the desire for contactless transactions by opening automated stores in Boston. The automated model helps reduce labor costs while increasing capacity and efficiency.

David Portalatin, food industry adviser at the NPD Group and author of Eating Patterns in America, is among those who believe the foodservice industry as a whole will be in better shape once COVID recedes. As he told QSR Magazine, “We’ve really just fast-forwarded years into the future in a very short period of time,”

Still on the innovation/automation front, Inspire Brands is set to debut the latest in restaurant robotics that’s coming soon to the quick-service world: Flippy 1 and 2. According to CNBC, Miso Robotics’ burger-making bots cost about $3,000 per month and are not just a response to the current labor crunch.

“Our strategy and our vision for automation at Inspire is really not about the labor shortage, it is all about how we increase our capacity. The automation that we are looking at will allow us to unlock that and provide faster food to our guests,” Stephanie Sentell, senior vice president of restaurant operations and innovation at Inspire Brands told CNBC.

Flippy is also headed to White Castle. The burger chain announced a deal to deploy Flippy 2 at more than 100 of its locations this year alone.

Unions on a roll

Without question, union organizing within the fast-food service industry is one of the major negative outcomes for franchisees resulting from the pandemic—and efforts to spread union representation throughout the industry will most likely continue even after the pandemic is in the rear-view mirror.

As Time Magazine wrote about Starbucks in February, “More than 60 (the numbers keep changing daily) company-owned stores across the country, from Massachusetts to California, have filed for union elections,” citing the NLRB. (Read how one Dunkin’ franchisee thwarted union advances on page 12)

Meanwhile, unions scored a victory in the nation’s capital earlier this winter when the Biden Administration’s Department of Labor rescinded a Trump-era union financial disclosure rule that was intended to increase financial transparency at unions. Labor unions hated the rule and got what they wanted from Biden’s DOL.

AB5 challenge dismissed

In January, a district court judge in southern California dismissed the lawsuit challenging the validity of California’s new AB5 law. Led by the International Franchise Association (IFA) along with DDIFO, Asian American Hotel Owners Association (AAHOA) and the Supercuts Franchisee Association, the challenge was dismissed without prejudice on the grounds that the plaintiffs had not sufficiently proved they would suffer injury from the law.

Some believe the California law could lead to a determination that a franchisee is an employee of the franchisor­—and that, among other things, could make it easier for unions to organize workers one day.

So, organized labor hit somewhat of a trifecta this winter – with new organizing victories, the overturning of the federal union-transparency rule, and the AB5 court ruling – the result of which could harm franchisees.

For Dunkin’ franchisees, this is all somewhat unnerving stuff. But we still think the current unionization trend will be limited in scope within the franchise world because the current labor shortage will ease – sooner or later – and that should strip away much of the bargaining power workers now have across the country. It’s also hard to organize employees across a large geographic area one franchised location at a time. Developments are worth following, but industry experts are not hitting the panic alarm…yet.