3 answers to restaurants' most vexing labor problems

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Let’s start with the bad news. In the next year, restaurant operators will not feel much relief when it comes to labor, says Victor Fernandez, executive director of insights and knowledge for research firm TDn2K, the creator of People Report. But don’t hang up the "Closed" sign just yet—Fernandez says restaurants of all shapes and sizes can still win in this labor climate.

Citing new research from TDn2K, Fernandez addressed the labor questions that are likely on restaurateurs' minds, a preview of what he'll delve into more deeply during next month’s Restaurant Trends & Directions conference in Chicago.

Further insights will come from executives of the 2017 Emerging Chains of the Year during the conference, as well as other leaders of emerging brands.

Here’s how Fernandez sees plummeting unemployment rates and high turnover shaping the industry—and what restaurants can do in response.

Q: Where are restaurant workers going?

A: Chances are restaurants’ new hires are coming from within the industry. Restaurants are competing with each other for talent, and it goes beyond restaurants that look like your restaurant. People don’t get up in the morning and say, “I’m going to look for job in a QSR restaurant.” Around 56% of restaurants say their primary competition for hourly employees comes from within the segment, and 37% say it's restaurants across all segments.

Q: Why are workers leaving?

A: When we asked restaurants why people are leaving a couple years ago, compensation didn’t even break the top five reasons. Now, you’re seeing people leaving because they got a better wage offer, a promotion or a richer benefits plan. Compensation benefits are starting to become more important, because the options are out there and people are going for them. That’s not changing any time soon. Restaurants need to have a compelling proposition. You need to be on point with your compensation, benefits, flexibility in scheduling, training and development, and some attractive perks.

We’re also seeing shorter tenures for millennial employees. They stay for about half as long as older generations. Some of that is the stage of life they are in. But another component is that nowadays younger people will look at an option and very quickly realize if it aligns with what they want to do. If not, they’ll move on, given that there’s all those choices out there. This complication is compounded by the fact that participation continues to decline. About 35% of people 16 to 21 years old have a job or want a job. That’s down about 10% in the last decade. So, we’re seeing less and less of that critical demographic.

Q: What can restaurateurs do to succeed in this tight labor market?

A: The brands with the best sales records span all segments, with no clear pattern. To us, that means regardless of what space you are operating in within the industry, restaurants can get it right when it comes to consumers and employees. One of the biggest drivers of that in terms of profit and sentiment is service, according to our White Box Social Intelligence Data. Regardless of what you do from a culinary, marketing or ambiance standpoint, it’s that people component that makes or breaks you. If you’re willing to pay a little more in wages, it makes a difference. But also, a lot of that is driven by development and engagement: asking employees, “Are you happy? What else can we do?” and then following up on those results. Those brands that train more seem to be getting better results in their retention, sales and profits. Even though things are tough, the data shows that if you deliver on some basics, you’re going to see results.

The Restaurant Trends & Directions conference brings the top executives from successful emerging chains together for three days of menu development, performance discussions and, most importantly, peer-to-peer networking.

Armed with Technomic research, attendees of Restaurant Trends & Directions are better prepared to tackle challenges, leverage relationships and refine marketing plans.


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