Operations

A tough few years have been a boon to restaurant labor productivity

Operators have examined their kitchens and processes and added a lot more technology while focusing on takeout. The result has been a more efficient operation.
Automated flattop grills could increase productivity. | Illustration by Marty McCake

Two years ago, the fast-casual chain Pincho struggled to find workers, just like everybody else. “Where is everyone?” cofounder Otto Othman said. And so, the brand got to work.

It hired an engineering firm to do a motion study to find opportunities on labor. “We studied every single shift, every single peak hour to find efficiencies,” Othman said. With help from its private-equity investor Savory Fund, the company revamped its kitchens, replacing flattop grills with an automated version. And it added an AI-ordering system to handle phone orders.

“That did a world of wonders,” Othman said. “We did so much to-go business. Really, I almost needed a full-time person to answer the phone.”

Almost by force, the restaurant industry over the past four years has learned how to do more with less.

Operators had to find cashflow quickly when the pandemic forced widespread shutdowns in 2020. And then a shortage of available workers made brands rethink the way they run their restaurants. The result has been an industry that is more productive than it’s ever been.

Since 2019, according to calculations using federal data, restaurants have increased sales-per-worker by 38%.

“There has been some gradual improvement in restaurant productivity since before the pandemic,” said Hudson Riehle, SVP with the research and knowledge division at the National Restaurant Association. “The industry is definitely heading in a directionally correct manner regarding increasing productivity.”

Some of that 38% is related to menu price inflation. The food customers buy at restaurants is a lot more expensive than it was four years ago. It’s a lot easier to look more productive when the menu items you’re selling are costlier.

But inflation is only part of the answer. By comparison, grocers have increased sales per employee by 23%. Gas stations have increased productivity by 16%.

There are two other potential explanations. First, restaurants are fundamentally inefficient businesses from a labor standpoint. Restaurants generated $7,644 per worker in December. By contrast, grocers generated almost $23,000 per worker and gas stations $49,000. Those industries simply do not need as many workers.

As such, restaurants had a lot more room for improvement. “When technology is applied to a labor-intensive industry, it has disproportionately high productivity gains,” Riehle said.

Another explanation: A lot more of those sales are takeout. Nearly three-quarters of restaurant traffic is for off-premises uses. Drive-thru orders, delivery orders, mobile orders all tend to be larger on average than orders taken at the counter for dining in.

“There’s more of that third-party experience and less inside-the-four-walls experience,” Justin Rosenberg, founder and CEO of the fast-casual chain Honeygrow, said. “Things have changed.”

But investments in efficiency and technology have had a massive impact on industry productivity.

The technology can be simple, such as machines that make nugget ice above the workstation at a Starbucks café, so workers don’t have to carry a 25-pound bucket from the ice machine in the back dozens of times a day. El Pollo Loco is adding new salsa-processing equipment, which the company says is both easier to use and to clean.

It can also be more complex. Potbelly is working on a digital kitchen that will sort digital orders and send them to the backline based on the time it takes to make an order. “It’s worth about seven hours of labor a week to take that out,” CEO Bob Wright said at the ICR Conference.

Some of it is far more complex than that. There is an intense investment in artificial intelligence and robotics. Several brands are working on AI voice ordering at the drive-thru, which promises to take a key task away from workers. Some brands are working on robotic makelines. Sweetgreen is developing automated restaurants while Chipotle is testing an automated makeline.

A rapidly growing number of fast-food restaurants, such as Burger King, are joining McDonald’s and Taco Bell in adding kiosks to their restaurant lobbies. Mobile ordering, meanwhile, has become increasingly popular. Both take tasks away from employees.

That said, most of the labor investments are not necessarily cutting down on labor. The National Restaurant Association surveyed operators and asked whether that technology integration helped them cut back on labor. “Only about one out of 10 said their heavier reliance on technology has allowed them to eliminate positions,” Riehle said.

“That documents that the technology integration is still more augmenting rather than replacing human labor,” he added.

But many of these efforts are fundamental. Since Peak Rock Capital bought the Houston-based donut concept Shipley Do-Nuts in 2021, the brand has been focused on modernizing its labor processes. The company brought in an operator to improve efficiency.

“I’ll be honest, there were a lot of holdover behaviors from when it was a family run business,” CEO Flynn Dekker said. “We really weren’t reinventing the meal. It was a labor matrix, making sure we had the right model, the right positions, really defining those positions.”

And that included paying people. “Pay the people you have well, versus there was a lot of overtime,” Dekker said.

That said, the restaurant industry can only get so productive. It remains, fundamentally, a hospitality business. Brands can use technology to improve that experience, such as online waitlists or reservations, but the interaction between the worker and the customer remains crucial.

Honeygrow therefore has invested in its general managers, believing that a top restaurant GM helps with labor but also ensures that hospitality element remains. “I don’t want to be a restaurant that’s just automation,” Rosenberg said. “I want people to walk in and feel good. That’s why I’m in this business. I like hospitality.”

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Financing

Despite their complaints, customers keep flocking to Chipotle

The Bottom Line: The chain continued to be a juggernaut last quarter, with strong sales and traffic growth, despite frequent social media complaints about shrinkflation or other challenges.

Operations

Hitting resistance elsewhere, ghost kitchens and virtual concepts find a happy home in family dining

Reality Check: Old-guard chains are finding the alternative operations to be persistently effective side hustles.

Financing

The Tijuana Flats bankruptcy highlights the dangers of menu miscues

The Bottom Line: The fast-casual chain’s problems following new menu debuts in 2021 and 2022 show that adding new items isn’t always the right idea.

Trending

More from our partners