Restaurants added 61,000 employees in March, according to the Bureau of Labor Statistics, but still fall well short of pre-pandemic numbers.
During the month, food services and drinking places employed roughly 11.54 million workers, which is about 750,000 shy of February 2020. Employment in leisure and hospitality overall is down by 1.5 million, or 8.7 percent, since pre-COVID.
In February, 863,000 quit their jobs in leisure and hospitality, representing about 21 percent of the private sector. It was the most since November, when 881,000 quit their jobs. There were also 1.7 million job openings in February, which is more than October, November, and January, but fewer than the 1.97 million openings in December.
Restaurants' staffing levels were hit hard when Omicron accelerated throughout December and January.
For instance, El Pollo Loco's corporate Q4 same-store sales were impacted 5 to 6 percentage points by labor challenges, leading to an increase of just 0.3 percent on a two-year basis. But conditions have greatly improved since then; CEO Larry Roberts said in mid-March that Omicron's impact has become negligible. He also noted that application flow is increasing, turnover is decreasing, and only a small portion of stores have reduced operating hours.
Pollo Tropical's restaurant-level adjusted EBITDA margin was 14.3 percent in 2021, compared to 21.8 percent 2020 and 19.2 percent in 2019. CFO Dick Montgomery attributed the decline to hourly wage increases, short-term hiring incentives, and additional overtime and training ahead of planned pricing action.
A number of brands have turned to operational innovation as a way to mitigate labor challenges. Chipotle recently revealed it's testing a robot that can make tortilla chips, similar to the fry-cooking machine deployed in several White Castle kitchens. In the pizza world, Papa Johns is growing Papa Call, a center that takes care of phone calls for in-restaurant workers, Marco's Pizza is testing a voice-to-text ordering system in 50 restaurants, and Domino's is ridding itself of unnecessary tasks to improve productivity, like pre-folding boxes.
Zhong Xu, co-founder and CEO of online ordering integration company Deliverect, says, even if restaurants approach pre-pandemic marks, high levels of turnover will continue to challenge operations and efficiency. Hence, why automation is gaining momentum.
“The digitization of restaurants, accelerated as a result of lockdown, continues to grow,” he says. “If restaurateurs want to succeed in a competitive environment, they must evaluate their operations and embrace tools and technologies to help them become future proof.”
"Tech allows the sector to expand its reach and it provides a flowing stream of revenue," Xu adds. "With an ever-changing external landscape, business owners need to strategize a solutions-based approach to help their restaurants digitize, streamline and manage their sales processes in order to thrive in the online space and to help effectively manage and grow business."
Xu calls food automation "one of the biggest trends we've seen this year."
"The restaurant industry is looking at an innovative future with the use of emerging technology to manage labor costs and it will only continue to help operators cut costs and improve work-life balance for restaurant workers," he says. "In addition, by automating the online order process, restaurants can eliminate human error and free up staff’s time, so they can focus on improving the customer experience."
Other restaurants are rolling out streamlined prototypes that lean heavily into digital, like Popeyes' upgraded unit on Canal Street in New Orleans. The store features self-order kiosks, order-ready boards, and dedicated areas for digital-order pickup.
"Those are going to be the future in terms of how we deliver Popeyes to our guests. It’s not going to be all digital formats. It’s not going to be all ghost kitchens. It’s going to be a balance of everything," brand president Sami Siddiqui told QSR.
Increased labor costs, along with commodity pressures, have forced brands to repeatedly raise menu prices. The food away from home index rose 6.8 percent in February year-over-year, which was the largest 12-month increase since December 1981. Limited-service meals rose 8 percent year-over-year. "Restaurants should look to where they can cut on costs, whether it is optimizing menu items or automating tasks where they can, in order to ensure the bottom line stays afloat," Xu says. "The ultimate goal is to save money without sacrificing a high standard of service."
"Restaurants must lean into technology to make their workforce more efficient," he continues. "Staff shouldn’t be bogged down with monotonous tasks like manually copying online orders and sending them to the kitchen, but instead focus on stellar customer service."
The U.S. unemployment rate declined 0.2 percentage point to 3.6 percent in March. The number of unemployed persons decreased 318,000 to 6 million.