THE LABOR CRISIS – HELP IS ON THE WAY!
By Roger Lipton
The labor crisis is more than obvious. The contributing factors are open to debate. Is it the fear of Covid (from working indoors and/or being in close contact with customers and other employees), the need to stay home with the kids who are not back in school full time, or the lack of urgency (thanks to government assistance) to earn the dollars that will balance the family budget.
Here’s a data point for you. Call it “anecdotal”, not statistically relevant, but FWIW: On the conference call of an Indiana based restaurant chain, the CEO reported:
“…the labor shortage is real, but the causes grossly misrepresented….”
“…the hourly workforce in restaurants is and always has been in large part transitory and part time. A significant percentage of these part time folks work for extra household income, extra spending money, for income while they’re attending college or for any other reasons.
However, when you flood the economy with stimulus checks, monthly unemployment bonuses, extra food assistance debit cards, IRS refunds and the elimination of rent eviction, a lot of incentive to work part time for extra cash is eliminated.”
Here’s the data point:
“Indiana had opted out of the additional government unemployment bonus payments, which resulted in an immediate resurgence of applications at our restaurants, but this was quickly squashed when the court challenges reversed that decision.”
The following conclusion is the hope for the industry.
“With the federal program set to expire in September, we’re hoping that the labor market revives some after Labor Day”.
Call it anecdotal, just one CEO’s opinion. You can recoup the higher wage rates, as you must, with higher menu prices, but you can’t get that far without a kitchen and service crew. Sounds like relief from that standpoint is not far away.
About the Author:
Roger Lipton is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .
He also invested in gold mining stocks and studied the work of Harry Browne, the world famous author and economist, who predicted the 2000% move in the price of gold in the 1970s. In this regard, Roger has republished the world famous first book of Harry Browne, and offers it free with each subscription to this website.
In the late 1970s, Roger left Wall Street to build and operate a chain of 15 Arthur Treacher’s Fish & Chips stores in Canada. In 1980 he returned to New York, and for the next 13 years worked at Ladenburg, Thalmann & Co., Inc. where he managed the Lipton Research Division, specializing (naturally) in the restaurant industry. While at Ladenburg he sponsored an annual Restaurant Conference for investment professionals, featuring as keynote speakers friends such as Norman Brinker (the “Babe Ruth” of casual dining) , Dave Thomas (Wendy’s) , Jim Collins (Sizzler & KFC), Jim Patterson (Long John Silver’s), Allan Karp (KarpReilly) and Ted Levitt (legendary Harvard Business School marketing professor, and author). Roger formed his own firm, Lipton Financial Services, Inc. in 1993, to invest in restaurant and retail companies, as well as provide investment banking services. Within the restaurant industry he currently serves on the Board(s) of Directors of both publicly held, as well as a private equity backed casual dining chains. He also serves on the Board of a charitable foundation affiliated with Israel’s Technion Institute.
The Bottom Line: Roger Lipton is uniquely equipped as an investor, investment banker, board member and advisor, especially related to the restaurant, franchising, and retail industries. He has advised institutional investors, underwritten public offerings, counseled on merger transactions, served on Board(s) of Directors, public and private, been retained as an expert witness, conducted valuation studies and personally managed a successful investment partnership, all specializing in restaurants/retail. He has studied great success stories over the last 40 years, from McDonalds to Shake Shack. Even more important he has watched scores of companies stumble and sometimes fail. It is this insight that Roger brings to this website. His post, dated 9/30/15, called “VISIT THE GRAVEYARD…..” lists a long list (though only a sample) of companies that have come and gone over the length of Roger’s investment career. This platform is his way of maintaining a dialogue with other professionals in the field, improving his own investment results, and remaining well informed on industry issues.
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