The labor crisis: How can restaurants hire and retain staff?

Nancy Kruse:

It happened to me twice last week, Bret. Despite the opening hours posted on their websites, two new restaurants here in Atlanta were closed for lack of labor when I arrived. Both had taped notes to their front doors that apologized to me and other disappointed diners and asked us to return at a time when they anticipated being fully staffed. Based on the state of restaurant-industry employment, it’s surprising that unscheduled closures like these aren’t the norm.

I know that you’ve seen the dismal data: The Bureau of Labor Statistics indicated that job vacancies in the accommodations and food services sector in May increased to 1.25 million, the highest across all industries; what’s worse, the quit rate of workers leaving these jobs was 5.7%, more than twice the 2.5% average. These numbers have doubtless been buoyed by what management specialists call “turnover contagion,” the phenomenon that leads overworked and underappreciated employees to jump ship en masse. Its most extreme manifestation is the sign that popped up a few weeks back on the pylon of a Burger King in Lincoln, Neb.; it read simply “We all quit. Sorry for the inconvenience.”

Tons of ink toner have been devoted to the reasons for the current crisis. The dirty laundry list starts with stiff competition from other industries, notably retail grocery and ecommerce, and continues with the lack of child care, a precipitous drop in immigrant labor and seasonal work visas, notoriously inflexible and unpredictable scheduling practices and the hostile work environment that led farm-to-table independent restaurant Apt Cape Cod in Massachusetts to shut down for a “day of kindness” to give embattled employees a break from their seriously badly behaved patrons. The restaurant’s owner was quoted in The New York Times as saying “People are always rude to restaurant workers, but this far exceeds anything I’ve seen in my 20 years.”

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Another widely bruited culprit for the dearth of restaurant employees has been enhanced federal unemployment benefits, which were actually ended three months early in 25 states. Digital job-search firm Indeed reports, however, that there was little appreciable increase in restaurant job hunting activity after the plug was pulled.

To lure COVID-spooked workers back on the job, nine states and the District of Columbia have announced plans to gradually raise the minimum wage to $15 per hour, a step that has already been taken by numerous restaurant chains. That’s just the start: McDonald’s and its franchisees have been boosting benefits like childcare and education reimbursements; Taco Bell has expanded vacation time for company-store managers to four weeks per year; Papa John’s is offering referral and retention bonuses; Shake Shack just announced a $10 million investment in its workers; and Chipotle, which has been recruiting Gen Zers via TikTok, is promising employees a pathway to earning six-figures in less than four years.

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Despite these aggressive tactics, according to digital search platform Joblist, more than 50% of former hospitality workers who have moved on indicated that no amount of pay and perks could convince them to return. And by the way, Bret, all of this is happening at a time when the nation’s labor pool has shrunk for the very first time in our history.

It seems blindingly obvious to me that we’re at a real inflection point here, and it’s equally obvious that there’s no magic bullet or one-size-fits-all solution. In addition to all the feverish hiring-and-retention initiatives, I suspect that we’ll see action on lots of other fronts.

There will be speedier adaptation of automation, whether to facilitate order entry in the front of the house or food prep in the back. Worth watching in this regard is WalMart. The nation’s largest retailer recently announced that it is testing an all-self-checkout store in suburban Dallas. While shoppers approved the lack of checkout lines, they voiced concern that jobs were being eliminated. The corporation hastened to respond that former checkers will be redeployed, not unemployed. 

Price hikes to support pay hikes —and to offset myriad other cost jumps — are inevitable, and lots of operators are implementing them. Chipotle, for example, has bumped its menu prices by 4%. When smartly executed and adroitly communicated, such increases will be okay with consumers, I think. Their sheer exuberance at getting out to eat, coupled with the fact that many, though by no means all, of them are seeing their own wages rise, gives operators some needed room to maneuver.

Watch for a bump up in new limited-service and ghost-kitchen operations that offer entrepreneurs some relief from a tight labor market, and look for a more broadly based approach to recruitment. At this moment, teenagers are the sizzling hot labor commodity of the summer. Just over one-third of them had jobs in May, the highest percentage since 2008, and they’ll remain an important pool of hourly workers. In addition, more restaurant employers will follow in the footsteps of innovators like MOD Pizza, which has pioneered programs for the previously incarcerated and others who’ve faced barriers to employment.

Here's where I hand this off to you, Bret, with the observation that labor crises are not new to the industry. NRN reported on the subject decades ago, when “The Industry of Choice,” a comprehensive survey of turnover conducted in 1997, provided woeful statistics on employee churn in the restaurant industry at that time. So if turnover will always be with us, do you think one outcome of the COVID shutdown will be successful approaches to control and mitigate it?  

Bret Thorn responds:

Thank you, Nancy, for pointing out that this labor crisis is not new. Labor has been the main challenge for the restaurant industry pretty much for as long as I can remember, except for in the aftermath of the 2008 financial crisis when the main concern was getting customers to go out again, and of course in the early months of the pandemic when the main concern was “Holy hell, what do we do?”

This time, however, it’s not just the restaurant industry that’s witnessing a labor shortage. Pretty much everyone is, from healthcare to shipping to food manufacturers.

I’m not completely convinced that the enhanced unemployment benefits aren’t part of the issue. Indeed might not have seen an increase in job searches in markets with reduced benefits, but others have. Lyle Margolis, director for U.S. Corporates at credit rating agency Fitch Ratings, told me he has seen some loosening of the labor pool in markets where benefits were reduced.

But so what? If you’re competing with the limited and temporary largesse of the U.S. government to find workers then you’re doing it wrong.

As Margolis pointed out, the pandemic has caused what he calls “friction” in the labor force, which is to say that people who lost their restaurant jobs in March of 2020 have found other things to do. Sure, some have left the cities, moved in with their parents in the suburbs and have been watching “Friends” reruns for the past year-and-a-half while cashing their unemployment checks, but others — most others, I bet — have found jobs in sectors that have boomed during the pandemic, like supermarkets, most of which are unionized and pay their staff better than restaurants do.

Meanwhile, restaurant work, which was always difficult, has become harder. As you point out, many restaurant-goers seem to have become meaner. Maybe it’s because they don’t like that some menu items have been removed as restaurants have cut costs, or that supply-chain issues result in their favorite food and drinks not always being available. Or maybe it’s because they don’t like wearing masks. But I think it’s because the past 17 months have flat-out sucked. Whether we each realize it or not, the pandemic has driven everyone a little bit (or a lot) crazy. They’re out of patience and they want someone against whom to vent their frustrations. Restaurant workers fit the bill.

Those restaurant workers who have come back to work often find that their jobs are different from the ones they were laid off from in the spring of 2020. They have fewer colleagues, because most restaurants are short-staffed, and thus have more work to do with fewer resources. They also have to be mask police in some jurisdictions, and the number of those jurisdictions will certainly increase as local governments respond to the even more contagious Delta variant of COVID.

On top of that, the restaurant workers aren’t the same people that they were in early 2020. Being human, they, too, have gone crazy, and a lot of them have also had time to do some soul-searching.

I bet that many of them have decided that they don’t want to work for bosses who don’t value them — something that became abundantly clear to many of them when they were handed pink slips as the stay-at-home orders were issued.

Leaders in the restaurant industry like to call it “The Industry of Choice,” but for many workers it’s the industry of least resistance (because pretty much anyone can find a job in it) or, I’m sorry to say, the industry of last resort.

We don’t like to say this much, but it has long been the practice of many restaurants to hire staff as inexpensively as possible and provide them with the fewest benefits that they can, often by restricting their hours so they don’t qualify as full-time employees. We all know this.

I guess that can be a good business plan when the labor pool is deep, which it’s not now and I doubt will be for the foreseeable future, but it’s also cruel, and a growing number of people who have worked in restaurants now see that they can do better, and that they deserve better.

Of course not all restaurant jobs are bad and stories abound of dishwashers and burger flippers who became corporate executives with six-figure and seven-figure salaries. It can be a career of great upward mobility.

And some restaurants are facing less severe labor shortages than others, such as those belonging to Bloomin’ Brands — Outback Steakhouse, Carrabba’s, Bonefish Grill and others — which didn’t lay off any staff during the pandemic, and that has helped mitigate the labor problems suffered by many of their competitors.

Others report little to no staffing problems because they treat their employees well.

Chris Schultz, CEO of Voodoo Doughnut, the funky little chain based in Portland, Ore., said he was able to hire back 90% of the staff that was furloughed — and all eight locations are now fully staffed — because that staff is paid well above minimum wage and gets health insurance, as well as a fun environment.

Obviously the money and benefits are important, and so is the time-and-a-half that Voodoo Doughnut pays employees who work during the company’s 12 paid holidays, but so is the fact that those employees get to be themselves and take some ownership in operations, such as picking the music that’s played during each shift.

As you point out, restaurants are getting smarter about streamlining operations and reducing the need for labor, but they’re always going to need some staff, and the way to hire them and keep them is to treat them with the respect that they deserve.

Nancy Kruse, president of the Kruse Company, is a menu trends analyst based in Atlanta and a regular contributor to Nation’s Restaurant News.

Contact her at [email protected]

Contact Bret Thorn at [email protected] 

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