News Roundup

Big Chains Hesitate in Returning to N.O.

City Business
By Jaime Guillet
November 20, 2006

NEW ORLEANS — If you’re waiting for a major drugstore or fast food outlet to reopen in your neck of the woods, chances are the big chain is waiting on a construction crew or a certain number of people to return before reopening.

The metro area is riddled with boarded-up remnants of McDonald’s, Walgreens, Rite Aid, Burger King and Wendy’s locations while their locally owned counterparts are open for business.

Why are national chains — with deep pockets to pull from — still closed 14-plus months after the storm?

“We’re evaluating each store by consumer need as different areas of the New Orleans are repopulated,” said Rite Aid Pharmacy spokeswoman Jodi Cook.

Rite Aid decided to wait for residents to return in neighborhoods such as eastern New Orleans before reopening the five stores it has there.

Walgreens also has five locations in limbo in eastern New Orleans.

“We don’t have any indication that there’s going to be a recovery in those areas to reopen those stores,” said Walgreens spokesman Michael Polzin.

Worker incentives

The fast food chains reopened in locations where demand exists but lack of skilled labor, too few construction crews and the housing shortage stuck some rebuilding in a grease trap of complications.

“Labor was intensely acute directly after the storm,” said Bill Garrett, McDonald’s regional vice president of operations. “We had to be creative.”

In addition to raising $3.5 million for employee housing, McDonald’s upped the ante for competitors by increasing hourly wages from $7 to $8 to $10. McDonald’s also offered signing bonuses ranging from an extra $50 a month to $100 a week and added medical and dental benefits and college accreditation.

The improved benefits and pay helped McDonald’s inspire loyalty among the staff, said Garrett.

Of an estimated 3,500 pre-Katrina employees, McDonald’s retained more than 1,200 or approximately 35 percent. The rest were new hires needed for most stores to fill out staffing.

Wendy’s paid employees for six weeks following Katrina. It lost more than 1,100, or 75 percent, of its estimated 1,530 New Orleans-area employees immediately following Katrina, said Mickey Moore, New Orleans division vice president. Fewer than 500 employees had returned by the end of June and Wendy’s now has about 720 employees or 53 percent of pre-Katrina levels, he said.

Fifteen Wendy’s outlets have been closed and nine were demolished.

“Part of our rebuilding will be our confidence for staffing,” said Moore. “We have progress every week but it is highly competitive. If you grow too fast, you put too much stress on existing staff.”

Builder holdup

Rebuilding means waiting on permits or for available construction crews.

Moore said Wendy’s continues to pay the leases for the eight locations owned by the corporation to “potentially reopen” them and is working with 43 storm-affected franchisees to provide advice and construction managers from its corporate engineering department.

McDonald’s has a network of construction crews but subcontractors have been an issue, said Garrett.

“Construction has been very challenging,” he said. “(The problem is) waiting on subcontractors (for work to start) and the cost of construction is escalating but that’s just the way it is.”

Many reopenings are in the works.

McDonald’s has reopened 42 of 52 area locations. The company said it tried to reinvest in its stores to serve customers better, said Garrett. Newer locations have double drive-through lanes, wireless Internet access and revamped exteriors and interiors. Of the remaining 10 closed locations, five are under construction and five are in the “to be decided” category.

Wendy’s has 15 stores still closed but plans to reopen six of them by second quarter 2007, said Moore.

Walgreens will eventually reopen 90 percent of its pre-Katrina locations, said Polzin.

Rite Aid will reopen four stores by summer 2007 and is “evaluating” five other locations, said Cook