In an industry known for thin margins, a coalescence of economic factors, new legislation, resource scarcity, and consumer preferences have put restaurants in a proverbial pressure cooker. The way in which people work is also shifting, thanks to digital disruption and the rise of the gig economy. Add to all of that historically low unemployment rates (3.7 percent in September, according to the Bureau of Labor Statistics), and restaurants have a recipe for a workforce disaster.
The future may be a moving target, but there is strength in numbers—not size, but rather data. Understanding the complex forces that are driving costs up and draining the pool of potential employees can help operators navigate the new landscape and even get ahead of some changes.
Here’s a snapshot at where we stand with labor in 2019. It’s not a crystal ball, but it’s a good starting point.
Talk About Turnover
In terms of labor challenges, turnover is a constant for the restaurant industry like many other retail sectors. The scale is especially pronounced in limited service, which, according to TDn2K, has reached record highs. In 2017, quick service witnessed 132 percent turnover in hourly employees and 50 percent turnover in managers. That rate has mostly plateaued for hourly employees, but it’s still on an uptick for managers. With unemployment so low, competition over workers—particularly skilled and experienced ones—is fiercer than ever.
The repercussions of this revolving door syndrome are steep, costing restaurants thousands of dollars per employee.
The Young and the Retention-less
When it comes to young people, the restaurant industry has reason for hope.
According to the Bureau of Labor Statistics, 55 percent of 16–24-year-olds were employed as of July 2018. Hospitality (including foodservice) amassed the largest portion of teen and young adult workers at 26 percent—well ahead of perennial competitor retail, which only claimed 18 percent.
These numbers are all the more impressive when recalling the rocky economic conditions that came to a head just after the Great Recession. In 2005, 59.3 percent of 16–24-year-olds were employed; by 2011, fewer than half (48.8 percent) had jobs.
In 2016, teenagers ages 16–19 comprised 17.4 percent of restaurant employees, the highest level in seven years.
While these figures are heartening, restaurants can no longer take a revolving door of younger workers for granted. For one, the industry is especially saturated with more restaurants vying for market share—and workers. Also, the gig economy has imbued many with an entrepreneurial spirit. From starting their own online shops to building a new app, these teens and young adults are choosier than their forebears. Restaurants that want to attract this group had better be offering them something a startup cannot (hint: benefits, steady work, and camaraderie).
our Employee, Your Brand
Youth springs eternal in consumerism. Less than a decade ago, brands zeroed in on millennials and have since expanded their focus to include the up-and-coming Gen Z. To win these groups as loyal customers, restaurants needn’t look farther than their own back (or front) of house.
Take a peek at these insights from research and consulting firm Y-Pulse, which surveyed 1,400 restaurant workers aged 18–34. One key takeaway? Solicit feedback, welcome new ideas, and involve younger staff in the business.
“Our Greatest Asset”
Even with teens and young adults making a big return to foodservice, another key demographic for the industry remains precarious at best. Under President Donald Trump, the U.S. has cracked down on immigration, with attempts to push legislation that would repeal Deferred Action for Childhood Arrivals (DACA) and significantly limit legal immigration from developing countries.
Immigrants, including those with green cards and work visas as well as those who are undocumented, are a critical part of the restaurant workforce. In April, the National Restaurant Association released an op-ed penned by former executive vice president of public affairs Cicley Simpson in support of DACA.
“Our restaurants’ DACA-eligible employees are hard-working young people early in their careers, paying their way through school or pursuing a career in the restaurant industry. Their coworkers and customers depend on them to provide delicious meals and an excellent dining experience. That teamwork defies distinctions based on immigration status or political perspective and is the engine that keeps the restaurant industry moving forward. As an industry, we understand that these people are our greatest asset,” Simpson wrote in the op-ed.
While larger chains aren’t immune to workforce shifts, smaller, independent operators are oftentimes more immediately impacted. Payroll services and human resources provider Paychex pulled data from 350,000 businesses with fewer than 50 employees to break down job growth by industry and region.
Overall, the rate at which small businesses in the U.S. added new jobs slowed 0.75 percent between September 2017 and 2018. Compared with most other sectors, leisure and hospitality fared poorly, witnessing a 1.28 percent slowdown; trade, transportation, and utilities, for example, saw their growth dip by only 0.13 percent.
This notable deceleration can be attributed to myriad factors, like market oversaturation, workforce shortage, uncertainty over immigration legislation, rising labor costs, and the ongoing trade wars. In the immediate future, tariffs could put money back in restaurants’ pockets, as growers cannot afford to sell overseas and will have to slash their prices. Long-term, the financial pressure felt by farmers will reach foodservice, too.
McDonald’s: A Soft Touch
With some 850,000 Americans working at McDonald’s, the fast-food leader has a unique opportunity—some may even say responsibility—to take a proactive stance in building the pipeline of young employees. Nearly 60 percent of its workers are 16–24 years old, the youngest of which belong to Gen Z. These teens and young adults are just beginning to enter the workforce and remain something of an enigma to marketers and employers alike, but a recent survey conducted by McDonald’s sheds light on the up-and-coming generation. Released last summer, the Workforce Preparedness Study revealed a disconnect between the demand for employees with soft skills and the actual pool of viable candidates.
“Gen Z, our youngest workforce generation and the first born as digital natives, recognizes they lack the soft skills that are most critical to helping them grow early in their careers. Most importantly, Gen Zs acknowledge they need help getting these skills as they find themselves struggling to enter the workforce—and we can no longer continue to ignore the gap,” says Melissa Kersey, chief people officer for McDonald’s USA, via email. “For employers like McDonald’s, this is our chance to help these young people develop the skills they need in the future.”
To that end, the company has launched the Youth Opportunity program with the goal to help 2 million young people build soft skills and overcome the barriers to employment by 2025. McDonald’s is taking both a hyper-local and global approach. For example, in its hometown of Chicago, the brand is donating $1 million in grants to career training organizations, while in Europe its franchisees are working to offer 42,000 apprenticeships over the next six years.
McDonald’s has long positioned itself as a great first job, and Youth Opportunity takes that mantra a step further.
“Employers, especially those often providing someone with their first work experience, play a critical role in training and preparing young people for a successful future,” Kersey says. “Employers must think beyond just their company needs and focus on being a good corporate citizen. … Not only is this the right thing to do, [but also,] younger generations expect it.”
If recent developments are any indication, the Youth Opportunity program and its accompanying initiatives will continue to expand. In late October, McDonald’s kicked off the Where You Want to Be campaign, which introduces employees to the professional tools available on the company’s Archways to Opportunity education and career advising program.
“By offering restaurant employees more opportunities to further their education and pursue their career aspirations, we are helping them find their full potential, whether that’s at McDonald’s or elsewhere,” Kersey says.