Restaurant franchises showed strong hiring in May

The International Franchise Expo kicked off in New York last week. On the occasion, ADP (ADP) and Moody’s Analytics (MCO) published a report on franchise hiring for the first time. Among the findings: Franchises created just over 19,000 jobs in May, with about 14,000 of those positions coming in the restaurant industry. (To put the number in context, ADP found that companies added a total of 135,000 jobs in May, fewer than economists forecast, while the U.S. Labor Department found that private employers added 175,000 jobs in May, more than was forecast.)

Why did food service account for three out of four new franchise jobs in ADP’s report? One reason is simply that restaurants make up a big part of the franchise job market, employing about half of America’s 8 million franchise workers. (That’s according to the report, which includes historical data going back through April 2011.)

Another possibility: Obamacare. In a research note published on June 7, SouthBay Research economist Andrew Zatlin speculated that the Affordable Care Act could be driving job growth in the leisure and hospitality sector as businesses seek to avoid new health-care costs.

That may sound counterintuitive to those who predict that the health reform bill will curtail growth because companies will seek to keep staff sizes below 50 full-time workers to avoid having to offer health coverage or pay penalties. But the ACA also lets businesses off the hook from having to provide insurance if their average employee works less than 30 hours a week.

“It’s all conjecture,” says Zatlin over the telephone. “Spending on dining is slowing down, but leisure hiring is strong. It’s really easy to bring in another bartender or waiter and instead of one guy, have two guys working half as much.”

Zatlin, who based the idea on U.S. Bureau of Labor Statistics data, not the ADP franchise report released today, isn’t the first person to suggest that restaurants could adopt a part-time strategy to avoid ACA requirements. Reports surfaced as far back as January that franchises were cutting staff hours to skirt the law.

Mark Zandi, chief economist at Moody’s Analytics, doesn’t rule out the hypothesis, but prefers to direct his conjecture at franchise hiring in the business services sector, which includes such personal care services as spas, health clubs, and funeral homes. “It’s being driven by demand from baby boomers,” who are trying to live better, he says, jokingly. “Some fail and end up in the funeral home.”