A regional Applebee’s boss thinks high inflation will lower the company’s labor costs by making people desperate enough to accept lower wages.
“Most of our employee base and potential employee base live paycheck to paycheck,” an American Finance Capital executive told his colleagues earlier this month in an email that has since leaked and gone viral.
“Any increase in gas prices cuts into their disposable income,” he continued. “As inflation continues to climb and gas prices continue to go up, that means more hours employees will need to work to maintain their current level of living.”
American Finance Capital is based in Kansas City, Missouri, according to the company’s LinkedIn page. Backed by Quilvest USA Private Equity, the firm operates 50 Applebee’s restaurants and 67 Taco Bells in the region.
The email went viral on Twitter and Reddit this week, prompting an employee walkout at an Applebee’s in Lawrence, Missouri. An AFC spokesman told The Kansas City Star that the message does not reflect the company’s hiring practices. Applebee’s said the same.
“This issue is being addressed internally by the franchisee who employs this individual and who owns and operates the restaurants in this market,” Kevin Carroll, chief operations officer at Applebee’s, said in a statement to HuffPost. “Our team members are the lifeblood of our restaurants, and our franchisees are always looking to reward and incentivize team members, new and current, to remain within the Applebee’s family.”
There are more than 1,500 Applebee’s restaurants across the country, most franchised to smaller companies that send 4% of their monthly gross sales to the publicly traded Dine Brands corporation, which also oversees some 1,700 IHOP restaurants, according to the company’s most recent disclosure to investors. The parent company delegates menu price and employee wage decisions to its franchisees and is so profitable that it has spent billions buying back shares of its own stock.
On a recent call to discuss the company’s performance last year, an Applebee’s executive said that despite “obvious ongoing labor challenges” the company received more than 58,000 job applications on a single “hiring day” in February, surpassing the total number of applications last year.
The leaked email, from AFC executive Wayne Pankratz, offered an unconventional view of how inflation works, since most economists would say higher prices are more likely to prompt workers to demand higher wages to keep up with their rising costs. A Dine Brands executive described inflation as “built-in to labor costs” in the last year, for instance, when talking about how the company raises prices in response to inflation. Restaurant wages rose faster last year than wages in most other industries.
But Dine Brands did tell investors that “incentive compensation” would be lower this year than last. The company said it had to pay millions more on salaries and recruitment last year at company-owned restaurants.
“You should definitely expect incentive comp to not repeat at the same level of ’21,” Chief Financial Officer Vance Chang said on the company’s recent earnings call.
Either way, the Pankratz email offers a candid glimpse into the gritty employment practices of the broader restaurant industry, which offers relatively low pay and sometimes tough work conditions. The federal minimum wage for tipped employees is only $2.13 per hour; food preparation and serving workers have shorter job tenures than workers in any other occupation.
Since the federal government is no longer sending out stimulus checks or extra unemployment benefits, Pankratz wrote, lack of money will force people back to work. And rising prices will put pressure on competitors, forcing them to lay people off.
“We all saw businesses hiring team members at $18-$20 an hour,” he wrote. “They will no longer be able to afford to do this.”
Aside from offering lower pay, Pankratz recommended that managers look out for struggling workers who may want more hours or a second job.
“Do things to make sure you are the employer of choice,” he wrote. “Get schedules completed early so they can plan their other job around yours. Most importantly, have the culture and environment that will attract people.”