CHRISTOPHER SEBES — Forbes, January 27, 2020 |
Labor shortages due to record low unemployment, rising wages and the gig economy: It’s a trifecta of challenges causing trouble for restaurateurs everywhere. How are restaurants responding? The short answer: with a well-rounded approach.
Labor Challenges Have Never Been Greater
Labor shortages have never been a more significant challenge for restaurants. We’ve seen the reports of record-low unemployment. In restaurant and hospitality, slightly fewer than 1 million staff positions are unfilled. While the federal minimum wage is just north of $7 per hour, over 20 states will raise their state-level minimum wages this year, with some of the highest around $13 to $14 per hour. Proponents have long set $15 as a standard. These figures are sobering enough for anyone in hospitality.
Add to these challenges the fact that customer expectations — especially for convenience — continue to increase. Consider the rampant demand for food delivery, for example. For all of its prominence and popularity, delivery cuts into restaurant profit margins, with third-party providers commanding a fee of 20% to 30% of the price of the order.
Meeting higher guest demands while operating short-staffed and facing thinning margins causes operators a lot of stress and business risk, to say the least.
What are some of the contributing factors? And what are operators doing to meet these challenges?
Labor Market Challenges
The outlook for labor availability looks pretty bleak. As cited in the CBS News article above, The National Restaurant Association expects 1.6 million new jobs in restaurants and hospitality to be created by 2028. Of 15.1 million people working in this industry, some 40% are between the ages of 16 and 24. This age group is expected to shrink by 1.3 million people by 2028.
Restaurants experience high turnover and low rates of loyalty, as many positions in this field tend to not be career choices, but rather interim jobs. Restaurant’s nonstandard shifts, physical demands and relatively low pay means that workers tend to be easily attracted to more lucrative opportunities in retail or other industries. And who can blame them for jumping at an opportunity for a better hourly rate or a range of incentives, perks and/or other benefits?
In addition to minimum wage laws, we’ve seen national and state laws that mandate health benefits for employees. Whether a company must comply can depend on various factors such as company size, number of hours worked and others. Where hours are the determining factor, some employers have responded by keeping workers below the threshold number of hours to avoid paying for benefits. This puts workers in a bind, because not only are their hours limited and benefits nonexistent, but they must find side hustles to round out their pay.
Finally, the gig economy as a labor trend deserves mention. We’ve heard about it for some time, and it’s been popularized by courier, food delivery and rideshare services that have become household names. Now, we’re starting to see expansion of “giggers” into other industries, including restaurants (more on that later).
Solutions To Today’s Staffing And Labor Cost Challenges
What are restaurateurs doing to alleviate some of today’s labor challenges?
- Some are taking creative approaches to recruit among a variety of demographics.
- Some are offering perks such as education and childcare reimbursement benefits. Chipotle, for example, which already had a range of benefits such as education benefits, parental leave and an employee stock purchase program, recently implemented a bonus program.
- Some are bumping up pay for skilled people with the hope of retaining them, thereby avoiding recruitment/onboarding costs.
- Some are keeping a close eye on labor cost and other numbers — and teaching front-line managers to do the same.
While many of these practices have long been standard in other industries, I’m seeing them applied more and more in restaurants, where many of them have not been common in the past.
What Role Can Technology Play?
As a restaurant technology entrepreneur, I’m always attuned to the application of technology to solve real business challenges.
These days, the range of possibilities for applying technology to help solve the labor challenge is huge: from SaaS restaurant software management solutions and voice-driven bar inventory on a mobile app to self-order kiosks and robotic fryer masters.
In the arena of recruitment, specifically, I’ve noticed interest in mobile-app-based staffing solutions. In much the same way as the Uber app matches passengers with drivers and food delivery apps match hungry guests with the cuisine they’re craving, hiring apps promise to match qualified workers with open shifts, broadening opportunities in today’s gig economy.
Turning The Gig Economy To An Advantage For Restaurants
Companies like Pared, Shiftgig, Hyr and ShiftPixy are extending the gig economy into the restaurant and other industries. These apps help restaurants and other businesses solve staffing shortages while also helping workers round out their work schedules and income. Employers can use the app to post a shift, and workers looking for hours can express interest. Some offer workers medical and retirement benefits.
These app-based staffing solutions also make a huge potential talent pool available and remove both risk and cost of constant turnover and recruitment/training. In fact, at least one manager who uses such an app considers it essential to his restaurant’s success.
The ShiftPixy solution for the gig economy also offers something else that restaurateurs need: a solution for food delivery. By helping restaurants keep delivery in-house, the ShiftPixy app for delivery avoids high third-party costs, gives the restaurant more control of quality and brand presentation, and uses employee downtime to solve the delivery puzzle.
The Path Forward
Restaurateurs are wisely choosing a well-rounded approach to today’s labor challenges. App-based staffing solutions may be a great fit for restaurateurs trying to fill open shifts or manage delivery in-house, mainly because they are so easy to use and have little to no inherent risk. As new technology-based solutions are released, wise restaurateurs will make the time to evaluate them for their benefits and value.