How to Survive the Restaurant Industry Labor Shortage

Learn about the causes of the current restaurant industry labor shortage, potential effects your restaurant might experience, and ways to find success in spite of it all.

In the restaurant industry today, good people are hard to find and harder to keep.

Recruitment and retention have long been major pain points for restaurant owners and operators, but nowadays the cards seem especially stacked against restaurateurs as the industry finds itself in the middle of a labor shortage.

Restaurant owners, operators, and managers are feeling the heat: According to Toast's annual Restaurant Success Report, 51% of respondents cite hiring, training, and retaining staff as their number one operational challenge in 2019.

At the core of a restaurant is great food and great service, but without great staff (or staff at all), nothing is possible. So how do you manage in a market with a labor shortage? Better yet, can you?

In this guide to navigating the restaurant industry labor shortage, we’ll cover:

  • Why there’s a restaurant industry labor shortage
  • How the labor shortage could affect your restaurant
  • Ways to overcome the labor shortage and find hiring success

First let’s dial it back and walk through the problem itself.

Why Is There a Restaurant Industry Labor Shortage?

The U.S. restaurant industry is in the midst of a staffing shortage, specifically chefs, line cooks, and other back-of-house mainstays.

What’s to blame? Too many kitchens and not enough cooks. The Bureau of Labor Statistics projects the demand for cooks to grow 6% over the next 10 years. “That means the U.S. restaurant industry will need a total of 1,377,200 cooks in 2026 compared to 1,231,900 cooks employed in 2016,” calculates Civil Eats.

The thing is, this hiring desert restaurants are finding themselves in at the moment isn’t solely affecting the back of house. It’s a buyer's market for restaurant staff; America has a surplus of restaurants with not nearly enough talent to go around.

Though the industry is healthy from a revenue perspective, it’s wildly oversaturated. According to the National Restaurant Association, there are over 660,000 restaurant businesses in the U.S. with more than 1,000,000 locations . Our industry’s growth shows no signs of slowing down: Leading hospitality market insights firm TDn2k reported in 2018 that the restaurant industry is currently growing at 2x the rate of the population. This hyper-growth is fueling lofty job growth projections for the industry: The Bureau of Labor Statistics projects a 14% growth in job opportunities for “food and beverage serving and related workers” during the next 10 years.

So if a member of your restaurant staff were to leave because they’re unhappy with one or more aspects of working in your restaurant, they have a ton of choice when deciding where to go next.

Recruiting new employees is a difficult task because the restaurant industry has earned a poor reputation for workplace quality. It's famous for high-stress shifts in hot kitchens, with few employee benefits and often low wages. These long-standing issues have had a significant impact on workplace satisfaction in both front and back of house. The restaurant industry’s steadily increasing annual employee turnover rate hit 75% this year, but the current U.S. unemployment rate is hovering around 3.5%. It’s sad to say, but these stats support the assertion that people just aren’t pursuing job opportunities in restaurants.

To add to it all, recent amendments to the U.S.’s immigration program and crackdowns on domestic undocumented workers have reduced the number of available workers for restaurant jobs, as undocumented workers have traditionally been a large, vibrant part of the restaurant staff community.

We’ll pause here so you can go scream in the walk in.

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How the Labor Shortage Could Affect Your Restaurant

The good news? Labor shortages aren’t impossible to navigate, but they do require some creative thinking, perseverance, patience, and a hearty scoop of time and energy. Restaurant owners and managers must be prepared to shift their thinking — and, to a degree, their businesses — to attract and hang on to quality employees. Though the effects of a labor shortage will differ depending on your markets and restaurant type, here are some ways the current restaurant industry labor shortage could affect your operations.

1. Guests might have to wait.

With fewer front-of-house staff available to serve guests and fewer back-of-house staff available to fulfill on- and off-premise orders, your guests’ dining experiences could suffer. Restaurant guests hate having to wait longer than anticipated, whether it’s for a table, for their meal, or for their check. Wait times are almost guaranteed to increase when you’re short staffed.

In front of house, fewer staff members means larger sections to work. With more responsibilities, your staff will be forced to budget more of their time to getting orders, entering them in the point of sale, running orders, and getting payment and less time connecting with guests over what’s on their plate or in their glass. You could lose that warm connection that guarantees a visit in the future.

In back of house, less cooks on the line means longer wait times for orders to be fulfilled. This will affect table turn times in front of house, making you unable to accommodate the same amount of checks in a night as before, ultimately costing you money.

2. Profit margins could shrink.

With fewer staff members and a slower pace, you’ll decrease the number of checks you do in a night. With less revenue flowing into your restaurant, you’re left with a shrinking operational budget that will substantially affect your purchasing decisions.

The average restaurant profit margin falls somewhere around 5%. With an expected increase to labor overhead as a result of the new $15/hr minimum wage in seven states and counting, restaurateurs can expect their profits to take a bigger hit in the coming years.

Though a labor shortage could initially mean less spend on labor costs, as you lose employees and need to pay fewer employees to work longer hours, overtime laws will come into effect. Make sure you stay compliant and protect your business.

3. The available workforce will continue changing.

In New York City specifically, approximately 70% of cooks and food prep workers were born in another country, reports The New Food Economy.

“Immigrants, including Salvadorans and other Central Americans, make up more than half of the staff at my restaurants, and we simply could not run our businesses without them,” said celebrity chef, philanthropist, and immigrants-rights advocate José Andres in an op-ed for the Washington Post. “With national unemployment at 4 percent, there aren't enough U.S.-born workers to take their places — or cover the employment needs of a growing economy.”

The changes made to America’s green card program, DACA program, and the list of countries of origin granted temporary protected status (also known as TPS) in the past four years have significantly dented a traditionally reliable labor force to fill open jobs in both front and back of house.

During the 2016 presidential race, the late Anthony Bourdain famously slammed then-candidate Donald Trump’s promises to deport Latin American undocumented workers and build a wall on the southern border. “If Mr. Trump deports 11 million people or whatever he’s talking about right now, every restaurant in America would shut down,” said Bourdain.

Restaurants that rely heavily on foreign labor to fulfill seasonal positions have struggled to find willing workers after a cap was placed on the number of HB-2 visas approved in 2017. “It causes longer lines, definitely slower service, all the things you might expect,” said Cape Cod, MA restaurant owner Perry Sparrow in an interview for Public Radio International.

Here’s another thing. Though The National Restaurant Association asserts teen involvement in the restaurant labor force has reached pre-2008 financial crash levels, The U.S Bureau of Labor Statistics projects the number of teens in the labor force to drop by 660,000 over the next 10 years as the number of teens choosing to pursue  entrepreneurial opportunities, as well as experience – like volunteer opportunities and community service gigs – that look good on college applications. 

Baby Boomers returning to the workforce present restaurants with an attractive labor pool – the number of Americans 55 and over working in restaurants grew 70% between 2007 and 2018, reports CNBC – yet their participation won't be enough to offset the deficit created by Gen Z foregoing shift work in their teens.

It’s no wonder restaurants are looking to technological advances and automation to make up for the lack of warm bodies on staff.

4. Staff could leave for something better.

For those who rely on the service industry as their primary or sole source of income, it’s unfortunately normal to work long days and late nights only to barely reach the poverty threshold. Excluding tips, the average annual wage of a restaurant employee hovers between $11,000 and $27,000, with servers at the lower end of the scale and chefs at the top.

The average tenure of a restaurant employee isn’t great. Servers, bussers, cooks, hosts, and dishwashers tend to turnover within two months of their first day, and chefs typically stick around for about three months before they decide it’s time to move on.

Today’s restaurant staff are motivated to pursue opportunities that offer competitive compensation, meaningful employee benefits, work perks, and a safe, supportive working environment. If your restaurant offers front-of-house staff standard minimum wage plus tips and your back of house slightly above minimum wage, staff might not think working at your restaurant will provide them with a paycheck that covers the bills.

To combat the current labor shortage, restaurants are getting more competitive with offering employee benefits and new compensation models. If your restaurant doesn’t meet the workforce’s expectations, it’s easy for staff to leave and immediately find a better option.

How to Overcome the Labor Shortage and Protect Your Restaurant

Today, few restaurant managers have the luxury of kicking back and watching resumes roll in; instead, they’re actively sourcing from unlikely places and designing incentives and benefit programs to prove restaurant work isn’t “just a job” but a career (and a good one at that). Here are some tactics to help you stay above water in the face of a labor shortage.

1. Double down on staff retention.

Your existing restaurant staff are never more valuable than when you’re in the middle of a labor shortage. Replacing hourly employees is already costly, and when there are fewer job seekers in the market for new opportunities, the time spent, money spent, and revenue lost from hiring adds up.

Before you start recruiting new staff, look inward and focus on what it was about your restaurant that caused your employee to leave. Employee exit interviews – a discussion with a departing employee about their experience working for your business – are one of the best tools available to improve culture and workplace satisfaction. You get it right from the horse’s mouth: the good, the bad, the ugly, and hopefully tips on what you can do better. Our guide to reducing restaurant employee turnover includes an exercise that will help you understand why your employees are leaving through honest employee interviews.

Besides exiting employees, your existing staff each have their own opinions on what’s great and not-so-great about working in your restaurant. Ask them for their feedback and come up with an action plan based on common things you hear mentioned. Employee loyalty is earned through transparency, honesty, appreciation, and respect.

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2. Spread the word about open roles.

Because we’re in the middle of a labor shortage, you can’t just rely on your usual hiring tactics. Here are some outside-the-box hiring tactics to try:

  • From hospitality job boards to ads on social media, cast a wide net to ensure you’re getting a larger pool of candidates to choose from. Many job sites and social media sites allow you to target your ads to people within a certain geographical area; this could help you get in front of job seekers who would have manageable commutes to your restaurant.
  • Create an employee referral program that motivates your staff with rewards for successfully referring their friends, family, and greater networks to open positions on staff. You could also consider opening this to the public: Put a small print out in check books, on tables, and in takeout orders offering a reward – like a free meal – for any referred candidates you successfully hire.
  • Host a hospitality networking night where you invite front- and back-of-house staff from restaurants in the area to meet. By tying your brand to an event centered around community building and career growth opportunities, you’re bound to get a resume or two.
  • Start a management internship program at your restaurant where  college students studying culinary arts or hospitality management can come to your restaurant a few days a week and shadow a GM, DM, bar manager, kitchen manager, or chef in exchange for college credit. Many interns seek full-time opportunities at the businesses where they interned.

3. Shake up your business model.

From gratuity-free and restaurant co-ops to open-book management and profit-sharing, there are a number of non-traditional employment models available to restaurateurs who are finding their existing staff management model isn’t attractive for potential employees.

Open-book management, for example, is popular among restaurateurs and staff because it engenders a culture of ownership and empowers your employees by showing them exactly how the restaurant is doing and how their work impacts results.

But does it work? Henry Patterson, CEO and founder of ReThink Restaurants, trains restaurants in implementing an open-book management and profit sharing model through hands-on, financial literacy training. While the average restaurant profit margin falls around 5%, ReThink Restaurants considers 10% basic health, with the majority of their clients actually hovering somewhere in the mid 20's. A business model that increases profitability, employee retention, and workplace satisfaction? Sign me up.

4. Take care of your team.

Take a hard look at your restaurant employee benefits and ask yourself: Are these benefits enough to make my restaurant a top choice to prospective employees? 

Though it might seem like just another operational expense, employee benefits are worth their weight in gold for the substantial impact they have on employee retention and recruitment. With the cost of replacing one hourly restaurant employee surpassing $5,000, finding room in the budget for benefits seems like a no-brainer.

Profit sharing, on-the-job hospitality skills training, the flexibility to pick up on-call shifts, year end bonuses, and free-shift meals are just a few ideas worth considering. If you’re unsure about whether an employee benefits package is worth the investment or if potential and existing staff will think it meaningful, try out a performance-based incentive first, like accruing PTO based on the number of hours worked or setting up health-care benefits that kick in once a staff member has reached their one-year anniversary.

Labor Shortage? You got this.

A labor shortage isn't easy for any business owner or operator to fight – especially in an industry like ours, where 26% of new restaurants fail within the first year, 19% fail within the second year, and 14% fail within the first three years.

Recruiting and retaining quality employees is tough to do, but with some time, attention, and the above tips in your back pocket, your restaurant will continue to thrive.

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