How to Stay Above Water During The Restaurant Industry Labor Shortage

By: Jessica Reimer

8 Minute Read

Jun 26, 2018

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In the restaurant industry, 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, 59% of respondents cite hiring, training, and retaining staff as their number one operational challenge in 2018.

At the core of a restaurant is great food and great service, but without great staff (or staff at all), neither of these are possible. So, how do you manage in a market with a labor shortage? Can you manage in a market with a labor shortage? 

America’s Restaurant Labor Shortage Explained

Before we dive into how to manage a restaurant in today’s restaurant industry labor shortage, let’s quickly dial it back a second and walk through the problem itself.

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

What’s to blame? Too many kitchens and not enough cooks. It’s a buyer's market for back-of-house employees at the moment; America has a surplus of restaurants with not nearly enough talent to go around. 

The Bureau of Labor Statistics projects the demand for cooks to grow six percent 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.

Recruiting new cooks is a difficult task, as the restaurant industry has earned a poor reputation for workplace quality. It's famous for high-stress shifts in a hot kitchen, with few benefits and often low wages. 

Recent amendments to America’s Visa program and crackdowns on domestic, undocumented workers have significantly impacted restaurants coast to coast, as undocumented workers have been a large, vibrant part of the restaurant staff community.

Back to our original question: Can you manage in a market with a labor shortage?

The good news? Yes.

The bad news? It'll take a hefty dose of perseverance with some creative, out of the box thinking.

Restaurant managers must be prepared to shift their thinking —and, to a degree, the way they do business—to attract and hang on to quality employees.

Today, few managers have the luxury of kicking back and watching resumes roll in; instead, they’re out actively sourcing from unlikely places and designing incentives and benefits programs that suggest restaurant work is not “just a job,” but rather a career (and a good one at that).

In this post we’re sharing five strategies to help you make the most of a shrinking labor pool. Before we do, though, let’s take a look at the numbers so you know what you’re up against.

Restaurant Industry Trends

Profit Margin Pressures

The average restaurant profit margin falls somewhere between three and five percent, but restaurateurs can expect this to take a further hit in the coming years.

As new minimum wage laws come into effect, some states are seeing wages more than double—a scary prospect for an industry that, for decades, has relied on low-cost labor. Add to that the already long list of operating costs (things like inventory, advertising, equipment repairs, and so on), and you’ll soon see why restaurateurs are more motivated than ever to control their spending. 

A Changing Labor Pool

According to the New York Times, there are fewer than half as many teenagers in the service industry than there were just a few short decades ago. They attribute this change to two things: a massive growth in the number of restaurants, and a decline in workforce participation. The rise of the "teenpreneur" means an increasing number of youth are looking outside “traditional teen jobs” for other, entrepreneurial opportunities.

Consider, too, the impacts of changing immigration laws: currently, foreign-born workers account for about 20 percent of the United States’ workforce, but as the labor pool shrinks, restaurateurs can expect added hardship trying to fill front- and back-of-house vacancies.

Work-life Balance

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.

For those who rely on the service industry as their primary or sole source of income, it can mean working stretches of long days and late nights only to barely bob above the poverty threshold –it's a big reason to always do the work to pay your staff on time and accurately, which you can make simpler by integrating your payroll software into your POS. 

Today’s employees want flexibility, autonomy, and opportunity – do what you can to provide all three.

High Employee Turnover

The average tenure of a restaurant employee isn’t great, either. 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.

The folks at CAP estimated that to replace an employee earning less than $30,000 a year will cost 16% of the annual salary, with no guarantee the new hire will stay on any longer than his or her predecessor. 

Streamlining your onboarding workflow with new tech, and improving your staff training plan are two ways to start reducing turnover at your restaurant. 

Strategies to Overcome a Labor Shortage

Coping with the struggles that a labor shortage brings isn't typically a pleasant experience, but at least it’s possible to navigate.

Here are five strategies to help ease the pain.

1. Check your ego at the door

Maybe there was a time when your restaurant was the “it” place to work, where people lined up outside your door vying for a shot to join your team.

If that’s not the case today, don’t take it personally—remember that while there are always ways to improve your business operations, there are bound to be market shifts that affect your business and are entirely out of your control – like an industry-wide labor shortage.

There is absolutely no shame in posting a restaurant job ad. In fact, it’s a great opportunity to showcase your restaurant culture and brand; you might even want to give one of these unique (and unconventional) job postings a try.

2. Teach your staff to think like owners

While it might sound cliche, plugging your staff into the business side of your business is proven to pay off.

Open-book management is popular among restaurateurs for a reason: 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.

Leave no stone unturned! Three things make open-book management possible and successful: education, transparency, and communication.

3. Take care of your team

Although the restaurant industry has been served some major blows recently, keep in mind that yours is not the only industry struggling to find skilled labor.

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

Benefits and incentives are a bit of a wild west at the moment, so choose what you feel will have the most meaningful impact on your restaurant staff. Profit sharing, conditional education programs, and the flexibility to pick up on-call shifts are just a few options to get the creative juices flowing.

4. Invest in smart tech

Streamlining the tedious aspects of your restaurants operations – payroll, schedules, and reporting come to mind – with robust restaurant technology solutions means you'll have more time and energy to focus on nurturing your restaurant culture.

Better yet, many automation solutions (payroll and labor management software, inventory management systems, etc.) actually improve job satisfaction by eliminating some of the manual, monotonous tasks that cause employees to question whether it’s time to seek out greener pastures.

5. Change the check

Though the future of tipping and minimum wage is uncertain, you can get a jump on the change to come by experimenting with new ways of doing business in your restaurant.

Some restaurants choose to automatically add a gratuity charge to checks, while others are doing away with tipping altogether.

Another route to consider is hospitality administration fees; this tactic—affectionately referred to by one downtown Boston restaurant as its “kitchen appreciation charge”—levels the playing field for back-of-house staff who lack the same access to tips as their front of house counterparts.

Keep Your Head Above Water

A labor shortage isn't easy for any business owner or operator to shoulder – 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 delight guests and thrive.

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