Ted Kergan, CEO of Kergan Brothers Sonic, along with the company’s President, Gary Wilkerson, joined Discover Lafayette to talk about the current difficulties the service industry is having in employing an adequate work staff as we emerge from the COVID shutdown in 2021. Business is up 50% for Kergan Bros. Sonic over last year’s numbers and meeting the workforce demand is their current #1 challenge.
As Ted Kergan says, “It is a perfect storm. It’s hard to find people whose financial interests are best served by going to work. After the first of the year in most years, people get their income tax refunds so they have some free money. In this case, the government released stimulus checks which turned out to be $1,400.00 per person in each household…..one of our employees came in and said his family had $10,000 in the bank. Once people got that big amount of money, they didn’t want to go to work but they did want to go out and spend. It’s not just our business that has been impacted, it’s every single business.” Wilkerson further explained, “This started last year, with the stimulus checks. Over a year, you could stay home and make $40,000 not to work. It has snowballed at this point.”
The industry’s supply chain has also been heavily impacted worldwide, compounding their ability to offer basic items people expect when food is ordered. Kergan explained, “As an example, we’ve had a heck of a problem finding straws. Specifically, our straws come from China and they’re in a container ship in Long Beach CA. We literally can not get our straws out of the container ship because, in Long Beach, every longshoreman went on vacation when they received their stimulus checks. Literally every one of them!!”
With over 60 Sonic Locations across Central and South Louisiana, Kergan Bros. is one of Sonic’s most successful franchisees in the U. S and they focus on four main markets: Lafayette, Baton Rouge, New Orleans, and Alexandria. With a workforce in place of about 2,000 people on any given day, Kergan Bros. Sonic actually has about 3,000 active employees, just as they have in past years, and offers a fun and quirky place to work where the employees are treated as family.
“We think our employees will never treat our customers better than we treat our employees. We look at our team members as our customers. Our challenge every day is to find a way to treat them with love, as we are all children of God and deserve to be treated that way. We treat each team member with love and respect. They mirror that with our customers out on the job.”
The issue at hand is that as the stimulus dollars hit the market, people have more money in their pockets and they are running out to spend the money. There is a great pent-up demand. Everyone’s sales have gone through the roof. As Ted Kergan said, “We have the same number of employees we had last year. But business exploded so quickly in each segment that everyone needed more employees to handle the additional business.” This increased workforce need is the issue Kergan Bros. Sonic is struggling to meet. (As an aside, we spoke with Jimmy Guidry, owner of Hub City Diner in Lafayette, who shared that he is experiencing more business right now than he ever has….in the history of his restaurant.)
When asked to give his thoughts on raising the minimum wage and its impact on the labor force, Kergan said, “Because of the tight labor market, the market is driving the minimum wage higher, faster than legislation is. So in states like AZ and CA, where they’ve enacted the minimum wage, that’s a stairstep procedure over several years. The reality is, because of the tight labor market, we have always gone into a market and looked at our competitors’ wages and paid more. We’re not interested in the minimum or the average employee, we’re interested in the best people. Years ago, a banker in Ville Platte said to me, ‘The people you pay a lot of money to, they don’t cause you problems. It’s the lower-paid people that will cause you problems. You’ll spend 80% of your time on 20% of your business and that’s where your problems are.’ Once we adopted that philosophy, we just wanted good people and we didn’t care what we had to pay them, so a lot of our problems went away. Our people have drive and they hustle.”
Sonic is very entrepreneurial and its managers are equity partners. The franchise finances equity partnerships and gives the managers a great deal of autonomy to run their restaurant according to the needs of the local business climate. 78% of Sonic’s managing partners started out as hourly employees. When Sonic hires, they look at how to move each employee forward in their career path. Managers can earn well into the six-figure range of yearly income. As Ted said, “When we bring someone in, we want to train them to be winners and we want them to make more money. It’s worked for over 42 years for us. We’re going to stick with this!”
The fast food industry’s COVID challenges have struck in ways many of us may not realize and they have evolved as time has gone by. As an example, early on in the shutdown in 2020, Sonic and other vendors couldn’t get hamburger meat. While Wendy’s said they just couldn’t get access to meat, Kergan Bros. Sonic went directly to Louisiana farmers and started buying cows, “meat on the hoof,” as they said, and they paid to process the meat. The individual franchisees got involved and 350,000 hamburger patties were purchased. Kergan Bros. Sonic figured out logistical issues and distributed the hamburgers while also helping local farmers.
Globally, prices in the supply chain have skyrocketed, from the processing plants because they don’t have the help they need, to the issues caused by stimulus monies. Kergan shared that prices have gone up but will probably not come back down as people can now pay these prices. At Kergan Bros. Sonic, the menu is redone twice a year, and while prices are looked at, they are typically lower-priced than their competitors and they have taken efforts to remain affordable to their customers. Their godsend is that they do business in high quantities, and as people realized that they could “quarantine in their car,” they came out and remained loyal to Sonic. As people wanted to emerge from their seclusion last year, a trip to Sonic provided a welcome break from being stuck at home.
In closing, it is comforting to hear Gary Wilkerson affirm that “Good days are ahead. We’re going to be fine. I’m very excited about what the future holds.” Which, we must say, we are also glad to hear! And which Ted Kergan affirmed.
For more information on Kergan Bros. Sonic, please visit http://sonic-blast.com.
We thank Ted Kergan and Gary Wilkerson for their support of Discover Lafayette. For those of you would like more information on Ted Kergan’s story and his entrepreneurial success, please hear our first interview with him here.