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Franchise Hirings Drop in March despite Strong Economy

Fast casual worker
Worker at a QSR (photo/bmm)

While small and private sector employment generally grew strongly in March, franchised establishments had a drop in hirings of 100 compared to the month before, according to ADP Research Institute.

The fall in hiring for the month of March 2018 was largely from foodservice franchises: namely, franchised restaurants and food retailers. Real estate franchises also saw weak job hiring with no gains. By comparison, in March of last year franchised establishments increased employment by 14,800 jobs.

One reason for the drop in hiring by franchised establishments may be the weather. Four huge nor'easters, cyclonic storms blowing from northeast to southwest, pummeled the densely populated eastern seaboard with heavy snow and whiteout conditions in March. Storms hit the West and Midwest as well.

John Gordon, principal of Pacific Management Consulting Group, explains that customers stay away from restaurants and food retailers when the weather is bad. “Restaurants adjust labor as closely as they can to weather,” said Gordon. When customer counts fall, restaurants hire less. 

Gordon thinks there is also something structural at work. The restaurant-unit economist points out that restaurants have grown for some time at an unsustainable employee turnover rate of 120 percent a year, which is a blended rate of the lower full service turnover and the somewhat higher turnover of limited service restaurants. He argues that such overheated hiring must give way to a rest. That rest may have manifested itself in March. “The growth in high employee turnover may have abated,” explains Gordon. He stresses that it is cheaper for restaurants to give more work to retained workers than to replace those no longer around.

Despite the hiring drop from franchised establishments, the hiring by other businesses has been good. There are jobs to be had.

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is rip-roaring. Monthly job growth remains firmly over 200,000, double the pace of labor force growth. The tight labor market continues to tighten.”

Small businesses of under 50 employees increased by 47,000 jobs in March. For the larger economy, private sector employment increased by a whopping 241,000 jobs, boosted largely by midsized employers, manufacturing and business services.

“We saw impressive momentum in the first quarter of 2018 with more jobs added per month on average than in 2017,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Midsized businesses added nearly half of all jobs this month, the best growth this segment has seen since the fall of 2014. The manufacturing industry also performed well, with its strongest increase in more than three years.”


 U.S. Lost -100 Franchise Jobs in March, According to ADP National Franchise Report

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Call him at +1 (270) 321-1268, tweet @bluemaumau or email don@bluemaumau.org.