Dive Brief:
- Sbarro has partnered with DailyPay to give its employees access to wages on-demand.
- The company, citing its own commissioned research, claims more than 90% of users say DailyPay helps them pay their bills. Four in five users no longer have to take out payday loans or pay overdraft fees with on-demand payment, according to DailyPay.
- Sbarro is hopeful DailyPay will bolster its recruitment and retention efforts, according to the press release. The restaurant industry has experienced significant labor pressure since the start of the pandemic. Last year, about 40% of restaurants said they were understaffed, and the quit rate in foodservice is roughly twice that of the overall economy.
Dive Insight:
On-demand pay isn't new to the restaurant industry. Several companies, including Checkers, Bloomin' Brands, Church's Chicken and Pizza Hut, began exploring the option in 2019 as an incentive to retain employees as turnover rates were costly for operators even when the labor market was relatively stable, according to Center for Hospitality Research at Cornell University.
Since the pandemic pushed foodservice quits to historic highs, some Wendy's have begun offering same-day pay, while Jimmy John's, Torchy's Tacos, Manna Inc. and Piada Italian Street Food have also recently added DailyPay.
DailyPay isn't the only firm providing this service to brands. Some Taco Bell, McDonald's and Applebee's locations have adopted Branch, for instance, while others have added Instant Financial. Toast has added a new product, PayOut, to give restaurant employees instant access to a portion of their earnings after every shift.
A recent study from Ceridian conducted by The Harris Poll finds that 80% of workers prefer to have their pay automatically deposited into their bank accounts as they earn it, while 78% said free access to on-demand pay would increase their loyalty to an employer.
Free access is a key factor for this perk, and disentangles employees from the need to tap into costly payday loan companies to cover their bills. In Texas, for instance, the typical APR for a payday loan is over 600%, according to CNBC. Further, the average overdraft fee is now over $33.50 — a record high.
In a statement, Sbarro Chief Administrative Officer Rohan Shearer said the partnership "supports the financial health of our teams by rewarding them with earlier, on-demand access to their earned wages."
Operators have offered anecdotal evidence that same-day pay improves retention. A McDonald's franchisee in Florida found that its turnover rate decreased by nearly 10% year-over-year after adopting Instant Financial, for instance.
On-demand pay is just one of several perks operators are offering to navigate the labor market. Chains have raised wages, offered bonuses, added childcare benefits, given away iPhones and provided educational and vacation reimbursements, among other benefits.
