The stories of restaurants struggling to find labor aren’t subsiding. Texas Roadhouse CEO Jerry Morgan said last week, as year-over-year sales skyrocketed 126.7 percent in April, “challenges continue to exist in this environment, the biggest being staffing.”
The steakhouse chain is getting plenty of applicants, “but not everybody is really motivated to get a job,” Morgan said.
There’s been an unusual uptick in no-shows. Turnover is actually lower than historic levels, but employees simply aren’t turning up for interviews.
“And maybe that’s because of the payments that they have,” he said, referencing the $300 weekly unemployment boost extended through the beginning of September in President Joe Biden’s $1.9 trillion American Rescue Plan.
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“The money is coming to them a little easy, just my opinion, but that’s where our concern is,” Morgan said.
This is the pulse of today’s labor debate for restaurants, which has surged to the forefront of the industry’s COVID-19 recovery story.
Industry tracker Black Box Intelligence hosted a State of the Industry webinar in late April with 360-plus operators in attendance.
It presented two questions: What recruiting sources for hourly employees have given you the best results in 2021 so far? And, what do you think is the main driver behind the industry’s labor shortage?
Starting with the first:
- Walk-ins: 5 percent
- Company website/job bards: 32 percent
- Employee referrals: 49 percent
- Social media: 11 percent
- Other: 3 percent
Operators offered some commentary as well. Socially distanced job fairs have been a hit. Employee referrals with referral bonuses seem to have a positive motivation.
A lot of restaurants are using all available levers—sign-on bonuses, postings, social media, and employee referrals.
Another operator said they’re sourcing passive candidates through resume searches. One is inviting restaurant employees from other concepts to apply. Or essentially poaching talent.
Some are hosting mass hiring events, going right from the interview through processing. Taco Bell, famously, hosted hiring parties where some managers interviewed employees from their car, drive-thru style.
KFC Wednesday announced it’s looking to fill 20,000 positions nationwide. Mellow Mushroom declared May its “National Month of Hiring,” as it seeks 2,000 new employees.
There’s no shortage of hiring messaging out there.
In regards to Black Box’s second question, it appears Morgan’s sentiment has company.
- Higher pay in another industry: 14 percent
- Higher pay through unemployment 57 percent
- Better quality of life in another industry: 20 percent
- Health or customer management concerns due to the pandemic: 4 percent
- Other: 5 percent
Where restaurants’ mindset is on this labor topic is crystal. The $300 UI expansion is countering recovery efforts from a staffing perspective. The demand is there, but operators are struggling to satisfy it.
Restaurants told Black Box enhanced unemployment, tax refunds, and stimulus checks are gathering as the perfect storm.
One Fair Wage released a report Wednesday, along with the UC Berkeley Food Labor Research Center, that claimed low wages and tips were, by far, the most popular reason for leaving the restaurant industry, more than 20 percentage points higher than the second most popular reason—COVID health risks. The vast majority (78 percent) of respondents said having a full, stable, livable wage would make them consider staying at their job.
According to a Census poll in March, nearly 40 percent of restaurant companies said they’re having trouble finding servers, cooks, and other workers. For comparison, the figure was just 5 percent for finance and insurance businesses—fields packed with remote work opportunities.
It’s also important to consider how much more ground restaurants have to make up compared to other sectors, and what employees might have been doing during those furlough stretches.
Restaurants shed close to 6 million jobs during the first weeks of the pandemic alone. Restaurants accounted for one in four of the 10 million jobs lost in the overall economy at one point.
According to Q1 data from Joblist, nearly 30 percent of hospitality workers said they were interested in switching industries, with office jobs being the most popular target at 45 percent. Retail was next at 29 percent.
According to the company’s survey, one-third of restaurant, bar, and hotel workers had their hours significantly reduced during the pandemic, and 30 percent of restaurant and bar employees worked for businesses that closed temporarily. While a smaller percentage of hospitality workers worked for a business that closed permanently, those who did have faced long-term consequences—more than 50 percent of hospitality workers who worked for a business that shuttered for good during the pandemic said they have been unemployed for more than six months.
Naturally, this sent a lot of workers seeking alternative employment in different sectors. And unlike pre-COVID, this now included a bevy of remote options.
To put it simply, as job opportunities and sales rebound for restaurants, many workers have already moved on, or are in the process of doing so. Or to Morgan and other restaurateur’s concern, they’re not willing to commit just yet as expanded unemployment benefits allow them to continue searching.
QSR chatted with Neema Ardebili, vice president of Global Franchise & Strategic Partnerships at ADP, a company that specializes in online payroll and HR solutions, to discuss the “why” behind some of the restaurant industry’s biggest labor concerns.
Let’s talk about the overarching issue at hand. Is the restaurant industry facing a labor crisis right now?
I wouldn’t call it a “crisis” per se; however, the industry is facing a strong abrupt need to adapt. According to the National Restaurant Association, there are about 12.5 million restaurant employees through the end of 2020, down 3.1 million from expected levels. Regardless of how one perceives the severity of the situation, the industry is challenged with significant pressure to attract stable talent as restaurants return to full occupancy. From both internal and external data we’re seeing, the industry is ultimately looking optimistic as businesses increase capacity from easing government restrictions, which vary regionally, and revenue levels rise accordingly along with tailwinds of pent-up demand. Plus, with a new emphasis on better working conditions that, if executed properly, will help increase employee satisfaction and retention the industry will see workers return.
Often, experts credit expanded unemployment benefits for people not wanting to work. AKA, they can make more at home than in a restaurant. Is this something you’re seeing as well?
Yes, and this is not isolated to just restaurants. This industry hires a majority of employees at minimum-to-low wages that are less than the amount of unemployment benefits one could receive. Based on first-hand accounts courtesy of our Franchise Advisory Board, there are numerous workers (including those outside of the restaurant space) choosing to not work and collecting unemployment benefits. This is unsurprising as it’s natural human behavior to choose receiving more money while staying home than working a highly demanding job for less.
But what are some other issues, perhaps some getting overlooked? Do restaurants need to take a status check when it comes to work-life environments, benefits, and what people really want from employers today?
Owners definitely need to reevaluate. We initially thought restaurant workers and those in similar jobs simply don’t want to work in closed, high-engagement environments. However, what we’re seeing is candidates are more selective in where they want to work due to the cushion of receiving unemployment and alternative industries offering better work-life environments and attractive benefits. Recommended by some of our third-party partners, to meet this increased selectiveness, owners more than ever need to have fuller (and more creative) job descriptions, not only to attract talent but to also define clear, measurable goals to which to hold staff accountable, which is directly tied to the business’ culture. I’m pleased to see many of our small business clients ask us how to construct effective job descriptions with the tools and resources we provide because effective business culture is a growing key to employee satisfaction and retention.
Additionally, restaurants are finding more creative ways to offer benefits to applicants as a way attract talent. Some businesses are providing incentives for showing up for the interview and then offering larger than normal referral bonuses to employees who recommended an applicant who is hired, onboarded and stays employed for a period of time. Moreover, the benefits that employers are providing to retain employees are becoming more lucrative. We have partners that facilitate employers helping employees with paying down student loan debt. Others are offering perks that were traditionally available only to larger companies and others are even offering tuition reimbursement.
Talk about the competition of virtual jobs now. Or remote work in general. How big of an issue is this potentially for restaurants?
This is an issue that seems to have no direct solution since there is no way to serve dine-in patrons virtually. The pandemic is creating more opportunity for virtual jobs, and workers now have more alternative and competitive options than just traditional in-person jobs, like restaurants. However, we do not feel this is a big issue; the data we’re seeing is that pent-up demand for restaurants is very high and as just discussed workers will return as owners revamp their operations properly.
We have seen however that certain technology is allowing some restaurants to take drive-thru orders and call ahead orders with remote employees. This requires additional training, software and management skills that are entirely new to this sector. For the restaurant that can take advantage of this technology, they may be able to see reduced labor expenses because they can staff only for peak times.
Elaborate on what you’re seeing in terms of health-safety risks, and how that’s factoring in. Are workers gravitating toward “safer” industries, like delivery service? And if so, how can restaurants combat this?
Yes, now with the aforementioned new job options available, workers have a much larger variety of lower-contact jobs to apply for and therefore can be more selective. It’s really a job seeker’s market right now. Humans are generally risk-adverse, and we are seeing restaurants having to get creative to counter the new stigma of “risky” environments. Restaurant owners should stay updated and compliant on regulatory requirements (i.e., PPE, temperature checks, etc.) and include those proactive measures in job descriptions. They can also establish or expand delivery and curb-side pickup services, so employees feel more comfortable in these lower-contact areas.
Related to this is that consumers have become more aware of food safety and are now accustomed to enhanced safety protocol. Additionally, the convenience of curbside pickup and expanded delivery through third party delivery providers has changed consumer expectations. So what was began as COVID safety compliance, we think will evolve to a new normal. As a result, employers will need to ensure they have policies and safety training will be come standard to services the new expectation of diners.
Where are restaurant workers going (supermarkets, e-retailers, etc.)? And why do you think that is?
Restaurants workers are migrating towards larger businesses, like supermarkets, e-retailers and fulfillment warehouses, in part because of attractive wage hikes these businesses can afford to offer. Aside from simple wages hikes, some restaurants and businesses in general are even offering one-time “thank you” bonuses. Seven out of 10 restaurants are single-unit operators and nine out of 10 have a staff size under 50. Many restaurants, both large and small, cannot afford to pay, let’s say, $15 an hour or provide bonuses to all workers as those increased payroll expenses will severely impact their margins, especially in light of revenue pressure.
Given all of this, have you seen a cycle inside restaurants where staff are getting burned out from multiple jobs and surging demand?
As more of the population gets vaccinated and the weather improves and now with things like #revengetravel, demand will surge. I don’t think that outdoor dining will go away, and as capacity for indoor dining resumes, the shortage of labor will be even more noticed, especially in the kitchens, which have not been expanded.
Yes, we’re seeing an unfortunate cycle occur where owners can’t find more help as occupancy expands with both indoor and outdoor dining and therefore have to pay more overtime and risk staff burnout and turnover, causing even more pressure for remaining staff and impacting the overall business culture. Often these workers have multiple jobs and placing more demand on those employees forces them to quit as they cannot balance several work schedules. Nevertheless, as revenue increases, we’re confident working conditions will stabilize.
Thinking ahead, is there a chance this current state actually leads to better business habits and new attention to workers’ needs?
The silver lining is the restaurant industry is seeing a paradigm shift and many owners are doing an admirable job adapting to the new environment as things progress. Based on what we’re seeing, I am optimistic and see the current state as a temporary transitional period that is giving birth to good business habits and new attention to workers’ needs. In fact, some restaurant establishments are thriving and new owners are building their foundations knowing they need to be mindful towards workers and remain flexible on customer interaction, employee benefits and workforce management (i.e., being concerned over staff burnout, creating shorter hours, etc.). The more people we speak to, the more we’re hearing as more revenue returns to the industry, the more owners will allocate and reinvest that capital towards better working conditions and benefits.
Also, the needs for training is going to increase. Expanding and evolving restaurants will need to ensure that staff is properly trained on safety, customer service and the new technologies that are evolving to meet the new demands. This evolution will also create new career paths for individuals who are more innovative. For brands that are franchised, corporate offices are using this time to enhance operations processes to meet the growing consumer demands. The brands and owner/operators who leverage this seismic shift will emerge much more successful.
What do you think we’ll see on the other side, or need to see? More empathy, flexibility, and so forth?
Empathy is a tremendous word to describe what needs to be done. According to Business Solver, 92 percent of employees said they would be more likely to stay with their job if their leaders would show more empathy. This all is rooted in culture, and businesses focusing on revamping their own culture are looking for answers to HR and compliance questions that deeply effect staffing and turnover. For example, we’ve seen a greater spike in clients asking us for the latest local resources and legislation available, which gives them insight on how to compliantly create more flexibility on hours within their state and/or municipality. This is reassuring because these owners are helping meet candidates’ higher expectations of what companies have done to adapt to the new normal and what they are willing to do for their employees moving forward.
Should we expect to see higher prices in the future, or how do you think the economics shake out?
We’re actually seeing higher prices now and I’d remain unsurprised if we even see a bit more of an increase. Everyone is having to compromise, both businesses and patrons, with increased food prices due to higher expenses from supply chain pressure and increased labor costs, which results in higher menu prices. However, eventually the economics will catch up and reach equilibrium through competition-driven pricing and wages for those establishments that survive.
