A Florida restaurant chain says boosting pay and offering better benefits helped it end its labor shortage

·3 min read
chef cooking in a restaurant kitchen and wearing a mask
Restaurants across the US are struggling to find staff amid the current labor shortage as workers leave the industry over its low pay, poor benefits, and lack of flexible working hours. Westend61/Getty Images
  • Florida chain Pollo Tropical says boosting pay and benefits helped it get to normal staffing levels in the labor shortage.

  • The Caribbean-food chain is raising prices by up to 6% in December to fund higher labor costs.

  • Sales were considerably higher in its restaurants that were well-staffed, its CEO said.

Pollo Tropical, a Caribbean-food chain with 169 restaurants in Florida, says it's almost back to normal staffing levels after boosting pay, improving benefits, and giving sign-on bonuses to new staff.

This is despite the huge labor shortage affecting the industry: Restaurants across the US are struggling to find staff amid the current labor shortage as workers leave the industry citing low pay, poor benefits, and lack of flexible working hours.

Richard Stockinger, CEO at Fiesta Restaurant Group, Pollo Tropical's parent company, said at its earnings call Thursday that the company had increased wages to "at least market benchmarks," without giving specifics.

Stockinger said Pollo Tropical had also offered hiring incentives and improved its benefits package by adding childcare leave, company-paid educational programs, and more affordable medical plans. These measures would help its restaurants "remain competitive in these challenging market conditions," he said.

The company had achieved "adequate staffing levels at a total company level" by September, Stockinger said.

Miami Dade is Pollo Tropical's only major market still suffering from low staffing levels, he said. The company was offering extra perks there, including higher wages, incentives for staff who work weekends, and bigger sign-on and referral bonuses, he added.

CFO Dirk Montgomery said restaurant wages made up 28% of Pollo Tropical's cost of sales in the third quarter, up from 23.3% during the same quarter last year. He said the increase was primarily driven by higher wages and overtime pay "due in part to labor shortages."

Restaurants across the US have raised menu prices to offset their growing labor costs. Pollo Tropical put its prices up by 3.7% in August, and Montgomery said it planned on increasing them in December by between 4% and 6%.

Like other restaurant chains, Pollo Tropical reduced operating hours at some of its restaurants during the third quarter due to understaffing.

The company said sales were considerably higher in its restaurants that were well-staffed. Comparable third-quarter restaurant sales across all restaurants were up 0.9% compared to the same quarter in 2019, rising to a 4.3% increase across restaurants that had adequate staffing, Stockinger said.

Pollo Tropical defined adequate staffing as being at at least 80% of optimal head count, Montgomery said. In October, its restaurants were at around 85% of optimal head count, up from around 70% in the company's second quarter, he said.

"We are very encouraged by the strong momentum we are seeing in markets that are more fully staffed," Montgomery said. "As we continue to improve staffing levels, we are optimistic that our sales momentum will accelerate."

The company's phased approach to price increases was trailing its wage increases, which had reduced its margins in the short-term, Stockinger said. But he added that the company expected margins to recover in the first half of 2022 because of price increases and more staffing efficiency.

Got a story about the labor shortage? Email this reporter at gdean@insider.com.

Expanded Coverage Module: what-is-the-labor-shortage-and-how-long-will-it-last

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