P.F. Chang’s Tech Investment Boost Amid Labor Crunch
Damola Adamolekun, P.F. Chang’s CEO joins the Yahoo Finance Live panel to discuss P.F. Chang’s To Go concept and the impact of COVID on the restaurant industry.
BRIAN CHEUNG: We got data from the Bureau of Labor Statistics earlier this week showing that the quits rate in May dipped to 2.5%, raising questions about whether or not we may have bottomed out on the labor market churn. But if you look specifically at the hard-hit accommodation and food services space, the quits reaction actually remained elevated at 5.7%, which raises the question, how is all of this affecting restaurants that are trying to staff up to accommodate all those diners out and about this summer?
Well, Damola Adamolekun is PF Chang's CEO and Paulson & Co partner and joins us to talk about what he's seeing on his side of the industry. And I want to kick things off by asking, What is the labor market perspective that you're seeing? Is it difficult to staff up? How many vacancies is the company dealing with right now? And how is that affecting the business operations right now?
DAMOLA ADAMOLEKUN: Yeah, no. We've-- as we ramp up, we've ramped up operations throughout the country as regulations have allowed this. So our demand for labor has increased. And the supply in the market hasn't quite caught up to that.
So we're seeing some shortages. Some markets that are worse than others. But overall, we have about 2,000 openings that we're trying to fill. And what that's forced us to do is really kind of get creative around how we market ourselves as an employer.
Some of the things we can offer are folks who work for us and think holistically about what it means to work for PF Chang's and make that proposition as attractive as possible for people who are looking for jobs in the market.
AKIKO FUJITA: What specifically has been the pitch for you in terms of enticing workers to come on board? Is it about raising wages? Is it about increasing benefits? How have you tried to adjust the way you hire employees in such a tight labor market?
DAMOLA ADAMOLEKUN: Yeah, we've done a few things. Compensation obviously is a part of it. We've always been very competitive on wages. And we continue to do so, granted, the baseline has moved up. So being competitive means something different than that maybe last year or a couple of years ago.
But that's a piece of it. Besides that, though, people really care about culture. They care about being able to have some sort of work life benefit or balance, rather. And so we've been really thoughtful about making sure people who work for us can have days off. We gave people the 4th of July off to spend with their families and get some time to themselves.
So it's compensation. It's balance. It's culture. And we happened to have a great culture. So it's making sure people are aware of that. And so our marketing team has gotten involved on the recruiting side, putting ourselves out there on social media, et cetera, to let folks know about what we're doing and the exciting story that's going on here and how attractive it is to work for PF Chang's. Even in a tight labor market, there are people looking for work. And we want to get as many of those people as possible.
BRIAN CHEUNG: It's interesting because there's the COVID shock which forced a lot of businesses to rethink the way that they distribute specifically in the food services industry their meals, right? Now, when it comes to PF Chang's, how you adapted to that but also adapting to maybe what this is secondary shock of this labor market shortage when it comes to maybe automating some of the processes. How do you think about the way that your business is transformed in 2021 as we head into the latter part of this year?
DAMOLA ADAMOLEKUN: Yeah, you know, when we acquired PF Chang's, when I say we, you mentioned I worked at Paulson as well. So when we bought the business, we had a thesis around off premises being really important going forward and being a key part of our growth for the next and for the years to come.
So we've been focused on delivering our digital presence, our half, our website, packaging, et cetera, the year prior to COVID. So we'd really built up that infrastructure, which allowed us to transition people pretty seamlessly once COVID happened.
And so fortunately for us, it's been a focus. And so we were able to make that transition. We've seen digital delivery off premises all kind of step function increase during COVID. But it hasn't come back down. So dining has come back, but off premise remains elevated, which means that there's a more permanent shift in behavior than just kind of during COVID.
People are now used to delivery. They're now used to technology, QR codes, apps, et cetera. So that's going to be with us going forward. And again, fortunately, it's something that we've invested in and we believe was the future even prior to COVID.
AKIKO FUJITA: When you talk about digitization, automation, do you think that's going to be accelerated because of the labor crunch right now? I mean, that's always sort of been sort of where things have been headed. How are you looking at different parts of the business that you think can operate with more tech investments and not necessarily more human capital?
We're not close to automation. Now, granted, our food is a little more complicated to make. We're cooking in woks. The kitchen is more complex. No offense if you want to make burgers. We're not dipping burgers and friers. It's a lot more complicated in the kitchen.
So we're not close to automation. But what we can do is make things more efficient for people, right? So we're investing in technology to make, for example, our guest reservations technology to make it easier for the host to know who's coming in, make their jobs easier, payments at the table, order taking at the table, things in the kitchen, the KDS systems, et cetera.
So we're investing in tech to make our people more efficient to balance out the shortage in labor. And that's a focus for us, as well. It's something we've been working on through COVID. And it's let us do more with less effectively which is the situation that we're in just given the labor market.
BRIAN CHEUNG: I want to ask about commercial real estate. So obviously there was a lot of kind of moving around. Some malls just kind of died during the midst of the pandemic. Sometimes PF Chang's locations can be anchored to those mall tenants.
Did you restructure a lot of rents during that time? How are you thinking about expansion? Because PF Chang's has a very iconic kind of presence when it comes to the outside of the store, very much like Cheesecake Factory. Everyone knows those white horses when they walk up to the restaurant. So do you have a lot of mobility when it comes to your CRE strategy and your expansion?
DAMOLA ADAMOLEKUN: We're in malls, but we're typically not in the malls. We're kind of off to the side or standalone in a mall area. So our mall locations don't perform any different even during COVID to our nonmalls just because, again, we're an attraction and destination separate from the mall. And we do benefit if there's traffic. But we're not dependent on that. We're not in a food court, for example.
So just, that helps us. But your broader question on real estate is a good one. I mean, so, you know, during the pandemic, we had to have conversations with our landlords. Fortunately we have great relationships with all of them. Some of the largest landlords in the country we work with. And they understood the situation. We worked together. And we were able to kind of reach agreements that allowed us to continue to operate our business and allowed them to be made whole at some point.
So we reached those agreements. Now we kind of turned the page on that. And we're talking about growth. We're talking about expansion with new units. And that's a much more optimistic and fun conversation than the previous conversation.
So, you know, people are in a good place. They love the brand. They want PF Chang's in their malls. And we're looking to expand. So now, we kind of look forward and chart that path and figure out what comes next for us.
AKIKO FUJITA: And finally, we talk so much about wage growth and how that's likely to pressure your business. But what about food prices? And we've seen so much of that spike a lot of business owners who are saying that at some point, they're going to have to pass that on to their consumers. What's the thinking inside the company right now?
DAMOLA ADAMOLEKUN: We have seen food inflation. I think that's been consistent throughout the industry. In some categories more than others-- chicken, flank, oil-- has seen massive inflation. Now, we've seen some of that start to normalize. And we do think it's temporary because demand is ramped up faster than supply.
A lot of supply chains were kind of shut down during COVID and are starting to come back and catch up. So we think it's temporary. In terms of our reaction to it, we're kind of managing it on the cost side. We haven't taken price against it.
We want to kind of see how it plays out. If it comes back and normalizes like we think it should, then we don't want to be aggressive on price and drive away guests, kind of make a long-term problem to deal with what is a short-term cost issue.
So we've been cautious on price. We haven't taken price as a result. We've kind of managed it with our suppliers. And we're seeing it start to normalize. And we hope that that continues.
AKIKO FUJITA: Damola Adamolekun, PF Chang's CEO and Paulson & Co partner. It's good to talk to you today. I appreciate the time.