Waffle House Economics
Imagine the good fortune of having a Waffle House within walking distance of home and the office. Yes, Waffle House number 1882 is one of the newest in the chain of over 1,600 stores. Strategically located within stumbling distance of Auburn's downtown college bars, it's attracted some of the most decorated wait staff in the chain.
On a sultry mid-morning trip to the restaurant, I noticed that my server's name tag was cluttered with gold pens and a red star. When asked what it takes to get a red star, Andrea said, "Oh, it just means I can train people." The gold pins? "I've been here a long time," she said, before turning to the shift manager, asking if they could please turn up the air. "Even the customers are complaining," she said in a low but authoritative tone.
The food chain is ubiquitous in the South. Its buildings are tiny, while its signs are tall and impossible to miss in bright yellow with black letters. The menu is as uncomplicated as the building. Likely the hash-browns capital of the world, there is nothing pretentious about the Waffle House. The restaurant welcomes a diverse clientele of, not only happy families and young lovers, but also the lonely, the deranged, and especially the intoxicated.
The 9 p.m. – 7 a.m. third shift does three quarters the business of the traditional first shift, which includes both the normal breakfast and lunch hours. In Waffle Street: The Confession & Rehabilitation of a Financier, James Adams writes,
At 2:30 A.M., the restaurant doors explode. Within fifteen minutes, sixty barflies and club hoppers occupy a diner with seating capacity for only forty-two persons. I and two other harried servers struggle to placate them as they drunkenly clamor for service. Plunging into the maelstrom, I ask myself which part of my job description contains the phrases "crowd control" and "hangover mitigation."
Adams was no veteran when given the third-shift opportunity. He had only been on the job at Waffle House for a few weeks. His Chartered Financial Analyst designation and MBA provided scant seasoning for the assignment. The five years as an investment analyst for a couple of life-insurance companies were no help. Neither was his most recent job of providing "verbal and written commentary on the performance of forty bond portfolios whose strategies covered nearly everything under the sun" for a company he refers to as "Alpha Managers."
One look at the book's cover featuring a plated waffle atop the financial pages makes a reader want to dive in. And the author doesn't disappoint. The author's Waffle House work experience is fun and interesting, but that's not all the book has to offer. Adams frequently digresses and teaches some sound economic principles.
Adams is a devotee of Jean-Baptiste Say. His reference list includes not only Say's Treatise on Political Economy but Murray Rothbard's Classical Economics: An Austrian Perspective on the History of Economic Thought, Ron Paul's End the Fed, Tom Woods's Meltdown, as well as titles by Henry Hazlitt and one of this year's featured ASC speakers, Steven Kates.
The author provides a good explanation of fractionalized banking and also examines the chain of debts within the shadow-banking system. The cause of the 2008 financial crack-up becomes very clear as Adams lays out layer upon layer of debt chasing inflated asset values, piled upon a miniscule amount of capital.
A short history of the Waffle House chain, started by Joe Rogers Sr. and Tom Forkner in Avondale Estates, Georgia, is provided. The company began franchising its restaurants in 1960, and Waffle House remains privately held, never succumbing to Wall Street's siren song of a public offering.
Annual sales figures are not public, but the company claims to serve two percent of all eggs used in the industry, and is the world's leading seller of T-bone steaks at over 10,000 per day. Waffle House servers earn around $15 per hour, with all but $2.13 paid by customer's tips.
Adams's story is as much about his mentor, master grill operator Edward Jarvis, as it is about him. Edward, like many of Adams's coworkers, is an ex-con, but "was leagues brighter than anyone else in the store," Adams explains, and, as a "relief manager," Edward was trusted to change out the cash drawers at the end of each shift.
Waffle House is not only the eatery of last resort after hours, but, for many coming out of prison, the restaurant chain is one employer that provides a second chance in life.
Edward's common sense and management style are quickly displayed.
"If you're so good at abstract thinkin'," Edward said, "Did you see the big crash coming?"
"I expected a slowdown, but not necessarily a crash."
"Is that a yes or a no?"
"No, I guess not, Edward."
He directed me to follow him to a booth that had recently been vacated.
"Can you see all these syrup stains?" he asked, pointing to the table.
"Outstanding. Even though you can't find anything else in the store, you're still more valuable in here than you were at your last job. Now grab a wet towel and get to it."
Anyone dining at Waffle House notices there are no computers to communicate orders to the cooks or calculate customer checks. Servers call their orders verbally in a specific manner from a specific spot on the floor. Servers first tell the grill operators to "PULL" the proper number of meat items to fill their order. Next, grill operators are told to "DROP" the hash brown orders, and lastly "MARK" indicates the particulars of each dish.
The cook marks the plates using a proprietary system wherein condiment packets represent meat and eggs. Mayonnaise indicates bacon or sausage, depending on its position; ketchup signifies a cheesesteak; a butter cup indicates a T-bone, and so forth. The arrangement of packets indicates the temperature of the meat and how the eggs are cooked. Any egg or meat plate not marked for hashbrowns is assumed to be receiving grits. Waffles are always called last.
Sitting at one of the four low bar seats on my recent visit, I was able to watch all of this drama unfold between the bar and the grill. Servers and grill operators move in a sort of coordinated, chaotic dance that produces customer orders in rapid succession. No one working at Waffle House ever just stands around. There are always dishes to wash, side work to do, and cleanup.
The highly decorated Andrea had her cheap $5 calculator positioned, precariously to my thinking, next to a tray of syrup bottles. She is enough of a veteran to know that, just as sand gets into everything at the beach, syrup seems to finds its way to unwanted places behind the counter at Waffle House.
When Adams is frustrated that someone's calculator keyboard had been compromised by wayward syrup, he proudly brings in his Hewlett Packard 12c financial calculator, figuring no one would take it if he left it by the cash register. Doing average arithmetic on a 12c requires less-than-intuitive key punching. Besides, none of his coworkers had worked in the finance industry. He never saw his cherished 12c again after he forgot to take it home at the end of his shift.
A colorful cast of characters provides regular entertainment and occasional annoyance for Adams. There are the Repo Man, the Spy, the Linebacker, and the eccentric Kathy, who only missed her trips to sip coffee at Waffle House on days she was undergoing electric-shock treatment.
Adams waits on plenty of college kids, drunk and sober. He would sober three enrolled in the MBA program at a nearby university when he let them know he used to work for the dean of their school at "Alpha Managers" (per his severance agreement, Adam's can't name the firm). The three future masters of the universe can't believe a guy could go from working at a big-time investment firm to waiting tables at Waffle House.
"A stellar resume or an MBA degree from a leading institution does not ensure finding a job in a tumultuous economy," Adams tells the hot shots, using an ominous tone. "Take a long, hard look at it," he says, leaning into one of the students, framing his name tag between his thumb and forefinger. "In a few more months, it could have your name on it."
More than once Adams loses his cool with obnoxious customers. An intoxicated coed came close to "going algreen on" him. The derivation of this term comes from an incident when Al Green's girlfriend hurled a pot of hot grits on the soul singer's bare back. The resulting third-degree burns caused Green to give up R&B for the ministry. Waffle House customers are not in the habit of throwing their grits, but instead consume over three million pounds each year.
Edward was always the calming voice of reason during these dust-ups. The grill master's prison experience taught him not to taunt people, and besides it wouldn't be acceptable to management if both he and Jimmy were shot, requiring them to close the store for three or four hours. "They really hate to close the sto' on account of anything," Edward tells Adams after an altercation.
But Adams does scrap with John Maynard Keynes in the pages of Waffle Street, lamenting, "How far we've fallen" in the area of economics education. Pointing out that Say's Treatise was once the top economics textbook in America, he explains that now, "Instead of learning sound doctrine, today's undergraduates are inundated with principles that will not bear the scrutiny of common sense and experience."
Although the author is generally for free markets, he is sympathetic to the bailouts and spends entirely too much time beating himself up for working in the bond industry that fell apart, losing money for investors. A reading of Rothbard's A History of Money and Banking in the United States: The Colonial Era to World War II would benefit the author, who frets about a shrinking money supply and misinterprets the Jacksonian and Great Depression eras.
But he is spectacularly right that "World War II has the distinction of generating the greatest man made decline in living standards in human history," and notes the irony that Andrew Jackson, "the man who despised fractional reserving and central banks now had his mug on a paper note issued by a central bank."
Adams learns plenty on the job. In a rare reflective moment, Edward tells his protégé why he went to prison; after telling Jimmy about a robbery and the resulting accidental death, Edward says, "The main thing I learned in prison was that if you want anything in this world, you got to work for it in the first place. Greed will never take you anywhere good."
The owners of Waffle House make their money the way their employees do. Hard work. No financial alchemy from the Wall Street wizards. Just plain old serving the customer what they will trade their dollars for, watching costs, and growing with retained earnings.
Wall Street layoff announcements are prevalent this summer. Those laid off should know: Waffle House is always hiring.