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Restaurants brace for a future with fewer workers

More industry executives believe restaurants may never get all their workers back and should focus on improving overall productivity.
restaurants labor problems
The labor shortage many restaurants are feeling these days may never go away./Photo by Jonathan Maze

As restaurant operators increase pay, benefits and training so they can recruit and retain workers, yet still close early because they don’t have enough help, more of them are coming to a stark realization: Things may never get back to normal.  

Industry executives in recent weeks have seemed resigned to a future with fewer available workers and say they must take time to transform their restaurants and operations to prepare for that inevitability.

“We lost 1 million workers from the restaurant industry,” said Checkers CEO Frances Allen, for a future episode of the Restaurant Business podcast “A Deeper Dive. “Of those million workers, 30% found new office jobs. I don’t believe we’re necessarily going to get them back.”

Allen said that operators have to “plan for the worst, hope for the best.”

“We have to see how much easier we can make the jobs we have in restaurants,” she said. “How can we use technology not to reduce labor, but just to accept the reality that we aren’t going to have the luxury of hiring as many people as we need for the back-of-house going forward.”

The comments from the executives suggest the industry will need to take an even harder look at its business model in the coming years as it adapts to a world with fewer workers.

Restaurant employment is down about 8% since before the pandemic. The industry indeed lost about 1 million workers.

Yet the industry is struggling more than any other to get people employed. Signs outside of many fast food and casual dining restaurants beg for employees. In a Minneapolis suburb, for instance, a local Subway restaurant is offering $16-an-hour starting pay—60% higher than the state’s minimum wage. More than 10% of the industry’s jobs remain unfilled, while 6.8% of restaurant and hotel workers quit their jobs in August.

Much of the industry had hitched its saddle to the idea that applicants would come flowing in once excess unemployment benefits arrived. Weeks after the end of those benefits, labor remains a problem.  “I don’t think any of us have seen improvement in our ability to fully staff restaurants once increased benefits started to go away,” Allen said.

The labor challenges are having an impact on sales. Del Taco executives said on Thursday that a lack of workers in some restaurants lowered same-store sales by 1 percent. Domino’s executives also blamed labor in part for the first decline in same-store sales in more than 10 years.

Ritch Allison, Domino’s CEO, said two macro-economic factors are driving the labor shortage: Lower labor force participation and a lack of immigration.

The labor force participation rate remains about 1.6 percentage points lower than it was before the pandemic, according to federal data. Allison believes the labor market could return once people grow more comfortable joining the workforce after the pandemic subsides.

But he also said a lack of immigration is reducing the workforce. “In a country whose population is not growing, we in our industry need to see more immigration,” Allison said.

Operators say that technology could help over time, by making life easier for employees and giving them more reasons to stay while improving the efficiency inside restaurants. More companies are investing heavily into new types of technology to do just that—including ordering technology in drive-thrus and more advanced kitchen technology to make things more efficient.

“As an industry, we have to think about the jobs themselves,” Allison said. “How to make jobs easier and more appealing to team members.”

Kevin Bazner, the CEO of A&W Restaurants, noted that labor was challenging for many restaurants even before the pandemic. He noted that the industry was struggling with competition from warehouses and ride-sharing services. “There were already issues in the labor force for our industry prepandemic,” he said on the most recent episode of A Deeper Dive.

Thus, he agrees that the business needs to improve productivity and get more efficient. “There’s no question we need to continue to reduce the labor demands, increase pay and be able to do more with fewer, higher-paid team members,” he said.

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