With the new year now underway, Morningstar senior analyst R.J. Hottovy has some numbers-based predictions—as well as a few gut guesses—as to what we can expect in the labor market for 2019 and beyond.
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Cutthroat competition continues
Brands shouldn’t count on the labor wars to let up any time soon. Wages will keep pushing upward while the employee pool remains small. Even with stronger retention, the restaurant industry will remain a high-turnover industry. “The labor pressures certainly aren’t going away,” Hottovy says. “Even over a decade, I don’t think you’re going to see [turnover] go from 30–35 percent to 20–25 percent. … It’s going to take time to move the needle.”
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Tech will be restaurants’ greatest ally
As Hottovy points out, the industry is in the middle of a tech boom that is disrupting—often for the better—how restaurants do business. From increased automation to more efficient back-of-house operations to smarter scheduling, technology will play a more prominent role in managing the workforce and staying in the black.
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Restaurants face a choice between experience and convenience
“Sometimes people talk about a convenient experience, but that’s kind of an oxymoron,” Hottovy says. “You can have elements of both, but you have to have a priority.”
Traditionally, limited service has leaned toward convenience over experience, but the path depends largely on the individual brands. Hottovy offers Chicago-based Wow Bao and Washington, D.C.–based Cava as examples: The former has begun using cubbies and kiosks to cut the number of employees per shift. Conversely, Cava has found that trimming labor not only disrupts the make line, but it also hurts sales.
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Finding the right COO is more crucial than ever.
Traditionally a jack of all trades, the COO position has experienced increased turnover in recent years. The reason? Technology advances have disrupted how restaurants operate their stores and manage employees. “It’s very hard to find a chief operating officer who not only understands traditional restaurants and how they run, but also knows how to marry that to all the new technology advancements,” Hottovy says.
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The market will cull the surplus of restaurants
Workforce isn’t the only area where restaurants are facing a shortage; they’re also grappling with a narrow customer base. The proliferation of fast casuals has ballooned to an untenable level. Hottovy says restaurants—particularly independents and smaller chains—should prepare for shrinkage. “We’re going to see a shakeout of the restaurant industry,” he says.