How to Survive the Restaurant Industry Labor Shortage

In the culinary world, where gastronomy meets hospitality, the twin pillars of great food and excellent service stand as the bedrock of success. Yet, in today’s tumultuous times, the restaurant industry finds itself navigating treacherous waters characterized by a chronic labor shortage, exacerbated by persistent food inflation and economic uncertainties. The challenge of finding and, even more dauntingly, retaining skilled employees in both the front and back of house has become a Herculean task.

A Deeper Look into the Labor Shortage Crisis

As of January 2023, the restaurant labor force still lags behind pre-pandemic levels by over 450,000 jobs, marking the most significant employment deficit across all U.S. industries, as reported by the Bureau of Labor Statistics. Furthermore, a November 2022 study by the National Restaurant Association revealed that 63% of full-service restaurants and 61% of limited-service establishments are operating with fewer employees than necessary to meet guest demand.

This lingering shortfall in talent, coupled with the substantial costs associated with hiring new staff, makes employee retention a pivotal metric for ensuring the resilience of the restaurant labor force. However, several factors contribute to the attrition problem:

1. Inadequate Wages as a Key Driver of Churn

Our research underscores that nearly a quarter of restaurant employees cite low pay as a top reason for leaving their previous restaurant jobs. Determining equitable wages in the face of rising food costs poses a significant challenge for operators and managers. It’s imperative to offer competitive wages that attract skilled and dependable candidates, despite the squeeze on profit margins.

Minimum wage hikes have been a prominent driver in wage discussions, with 23 states and Washington D.C. raising their minimum wage as of January 1, 2023. Additionally, it’s essential to consider the varying needs of different categories of workers:

• Lifers: Those who intend to build their entire careers in the restaurant industry.
• Mid-termers: Individuals planning to remain in the industry for a few years.
• Short-termers: Those looking for short-term employment, such as seasonal workers.

Our research indicates that meeting wage expectations is particularly crucial for mid- and short-term restaurant employees. For instance, 28% of mid-termers and 27% of short-termers cited inadequate pay as their reason for leaving their last restaurant position.

This highlights the transient nature of the restaurant labor pool, where short-term employees seek to maximize earnings during their tenure, often taking on additional shifts. Additionally, front-of-house employees place a higher emphasis on pay, with 34% citing it as a reason for attrition, compared to 23% among back-of-house staff. For the latter, career advancement takes precedence, motivating 31% to leave their positions.

This divergence can be attributed to the traditional wage structure in which back-of-house staff often earn more than their front-of-house counterparts, as their income includes tips.

2. The Impact of Managerial Relationships

Effective management plays a pivotal role in employee retention. Our research underscores that 13% of restaurant employees left their previous jobs due to poor relationships with their managers. A skilled manager can foster positive working relationships and alleviate friction within the team, making their role invaluable.

For long-term employees, manager relationships assume even greater importance, with 24% of restaurant lifers citing their managers as the reason for leaving their last position. Once a restaurant secures a competent manager, the focus must shift towards retaining them.

It’s worth noting that 62% of managers find it relatively easy to secure new positions, highlighting the competitive job market within the restaurant industry. Therefore, retaining competent managers becomes an essential part of the puzzle.

3. The Role of Restaurant Technology in Mitigating Labor Shortages

In this evolving landscape, restaurants need to harness technology and innovative strategies to mitigate the impacts of the labor shortage. Here are some ways in which technology can play a pivotal role:

• Efficiency-Boosting Technologies: Labor shortages often lead to longer wait times for guests. Proper technology adoption can help alleviate these challenges. For instance, Toast’s “New Steps of Service” enhances front-of-house efficiency, reducing wait times by allowing guests to order and pay at their convenience, without relying on server interaction.Research from Popmenu found that 71% of diners believe restaurant technology improves their dining experiences.
• Menu Optimization and Cost Control: With fewer staff, there’s a risk of decreased revenue. Menu optimization and cost control mechanisms can offset this shortfall. Menu engineering helps balance menu items between popularity and profitability. Additionally, efficient invoice automation can aid in tracking ingredient pricing data, optimizing costs, and maintaining a robust general ledger.
• Transparency in Management and Compensation Models: Exploring non-traditional employment models, such as open-book management and profit-sharing, can make your restaurant more attractive to potential employees. Open-book management fosters a culture of ownership, empowers employees by showing them the restaurant’s financial health, and can lead to higher profitability and job satisfaction.
• Employee Benefits: Robust employee benefits packages, such as health insurance, profit-sharing, skills training, and flexible scheduling, can significantly impact retention and recruitment efforts. The cost of replacing an hourly restaurant employee is approximately $2,000, making investments in employee benefits a sound financial decision.
• Innovative Hiring Practices: In the face of labor shortages, restaurants must explore unconventional hiring practices. These may include reaching out to the local community, creating employee referral programs, hosting hospitality networking events, and leveraging digital job boards and social media platforms for targeted recruitment.

In conclusion, while the restaurant industry grapples with a persistent labor shortage, it is by no means insurmountable. By valuing and compensating employees appropriately, adopting innovative technologies, and embracing alternative employment models, restaurants can navigate these turbulent times and build a resilient workforce that ensures success in the future. The key lies in making your team feel valued, well-compensated, and well-cared for, and with time, attention, and the strategies outlined above, your restaurant can not only survive but thrive in this challenging environment.