Why Denny’s Is Focused On Its Labor Force During The Coronavirus Crisis

A number of fast food brands, McDonald’s MCD and Taco Bell among them, have gone on massive hiring sprees in the past month or so, filling tens of thousands of positions across their systems nationwide. This may seem like a big, fat disconnect as the restaurant industry is on track to lose a staggering $240 billion from the crisis by the end of this year. 

But those chains have drive-thrus and a significant off-premise business in general–table stakes in this lingering stay-at-home environment. Such a model has relatively insulated fast food players from the full brunt of this crisis. 

It also makes Denny DENN ’s pledge to go on its own hiring spree even more intriguing. Denny’s very squarely falls within the full-service restaurant category, a category absolutely ravaged by the COVID-19 pandemic. 

The chain recently announced plans to hire 10,000 restaurant-level employees at both company and franchise-operated restaurants by the end of this year. CEO John Miller said this decision was made as state and local restrictions began to lift on indoor dining in early June. At that time, Denny’s had about 1,200 restaurants open in some capacity. 

“With restrictions lifting, we’re seeing a surge in demand from guests, both for dine-in and delivery and takeout options,” Miller said. “To meet that demand and ensure our franchisees have the support they need, we are hiring managers, cooks, servers, hosts and more across the country.” 

Of course, things were much different in early June than they are now, as a number of states re-close or restrict indoor dining again in response to a stunning rise in coronavirus cases. Such decisions throw quite a sizable wrench in any plan to say the least, let alone plans that pertain to labor planning and costs.  

Still, Miller said Denny’s anticipated the wrench. 

“The restaurant industry at large is dealing with a lot of unknowns, but dining restrictions being re-enforced has always been built into our contingency plans,” he said. 

Labor costs are typically the highest costs for restaurant operators, so it’s not an easy contingency plan to create–particularly when sales are down by nearly 80%, as they were at Denny’s during the peak of the crisis in April. (Those trends improved to negative 40% by mid-June) The company saved cash in a few ways, including executive salary cuts and furloughs. It simultaneously helped franchisees by offering remodel and royalty deferrals, as well as rent relief. Miller said this hiring initiative is also in the best interests of the franchisees.

“Even with [re-closings] in mind, we and our franchisees are in a place where hiring 10,000 employees is in the best interest of our franchisees, guests and communities,” he said. “We pride ourselves on delivering the best dining experience. We can’t do that without making additional hires to accommodate growing demand as restrictions ease.”

Even as restaurant chains brace for a potentially crippling fall and shift to cash hoarding mode, it still makes sense to invest in labor, according to Dave Bagley, a managing director with Carl Marks Advisors.

“Keeping your your long-term employees and managers close to you is important so you’re not having to rebuild your whole organization,” Bagley said during a recent interview. “The restaurant industry is full of transitional people. Turnover is high and expensive. It’s important to keep your key people in place, the ones who run the business on a day-to-day basis. It’s worth spending the money to keep the right people. If your cash runs out doing that, then make a different decision on where to cut. Labor is what you have to spend your money on.”

In addition to delivering on better guest experiences and maintaining consistency within the organization, Denny’s has another incentive to invest in labor–new channels and positions. A number of full-service chains have shifted operations to curbside, delivery and even makeshift drive-thru formats to make up for the loss in dine-in traffic. Some Denny’s restaurants have also added essential grocery sales.

To support this shift, some of the chain’s new hires will be dedicated to off-premise. 

“Our delivery platform, Denny’s on Demand, has seen tremendous growth throughout the pandemic and we are staffing up to meet that demand,” Miller said. 

Also as part of that labor infusion, each restaurant will now include a dedicated sanitation specialist, tasked with disinfecting surfaces following each guest visit and notifying new guests which areas have been cleaned. 

Denny’s isn’t alone in creating a role entirely to the purpose of keeping the place safe and clean. Cava’s new cleaning concierge is responsible for disinfecting and cleaning dining areas and all high-touch surfaces every hour and after every use, for example. Some independents, like El Arroyo in Texas, have also dedicated an employee to sanitation. 

If you’re wondering how strong the ROI is on such a position, consider most diners surveyed by Dataessential report that safety will take precedent over every other restaurant attribute once restrictions are fully lifted. Further, Miller said the demand Denny’s is experiencing is driven in part by the chain’s “rigorous safety and sanitation initiatives we have in place, including the sanitation specialist position we’ve created.”

“Our guests feel comfortable having a meal in our dining rooms because they know that their safety, and that of our team members, is our top priority. In that way, the sanitation specialist serves both the brand and the customer,” he added. 

In addition to regularly sanitizing all high-touch and non-contact surfaces, Denny’s has also launched a digital menu available via scannable QR code and eliminated other high-touch items including table caddies. As all in-restaurant positions are required to complete a suite of COVID-19 trainings, the sanitation specialists are also trained on proper cleaning and sanitizing procedures, and how to clean using the proper tools and approved disinfectants. 

How the sanitation specialist is staffed varies from restaurant to restaurant. The position is a mix of new hires and current employees transitioning into the role. And, the opportunity seems to be here to stay–at least for now. 

“I think that this type of role will become more common, at least in the near future,” Miller said. “Right now, in the restaurant industry, safety is the number one priority. Providing the safest dining experience possible is both the right thing to do and the best way to grow your business. It’s a win-win for brands and consumers.”