It’s been a while since we’ve climbed into the ring for our usual 10-rounder on some issue of importance to restaurants. After this give-and-take, any other issue might seem as trivial as the correct pronunciation of tomato. This time around, I’m arguing that the industry will suffer a devastating correction if it doesn’t completely trash and rebuild its labor model, and in double time at that.
The why’s are as evident as the Help Wanted signs choking out the We’re Open! notices on restaurant storefronts. The business has been struggling since the mid-1980s to recruit enough workers to sustain its growth, but never has the shortage matched its current proportions. The typical U.S. restaurant has shortened its business week by 6.4 hours since 2019 because it can’t staff all shifts, according to Datassential. That’s a full night of lost sales.
Chains on a growth tear say they’ve had to temper their site-selection and opening strategies because not enough potential hires are available in a choice market to handle the expected volume of guests.
The talent or effort required to produce a possible menu addition is getting as much consideration today as the product’s sales prospects. How can you sell something that you can’t produce, or at least not at a reasonable labor cost? No wonder menu shrinkage is carrying over so strongly from the pandemic, even with normal market conditions returning.
Meanwhile, restaurant workers are quitting at a volume and velocity the business world has never seen.
Most alarming of all, youngsters are showing outright disdain for restaurant work, a veritable rite of passage back in the teenage days of Baby Boomers and many members of the alphabet generations. The industry wouldn’t be the size it is today if it weren’t for the pools of high school and college students who needed jobs and were too green to find them anywhere but in foodservice. That social dynamic appears to be gone for good, courtesy of Uber and Amazon.
I could go on and on, but I’d better get in the queue for a table if I want to dine out. Seating abounds, but much of it is closed off because there aren’t enough staff members available to take orders.
At least I can watch the industry grapple with its reorientation while I wait. The industry’s ever-pressing challenge used to be drawing enough customers to make payroll. Now the essential mission is landing enough employees to take a shot at decent sales.
Yet much of the industry is pulling a Nero, fiddling away while the old restaurant model falters and smokes. The mindset seems to be that the business can ride it out until normalcy returns, helped along by labor-saving technology.
I’m convinced, given the public’s unprecedented disdain for the industry’s employment practices and standards, that normal is already here. It just looks a whole lot more discouraging.
Plenty of operators are trying to change the perceptions of restaurant work, but they’re not willing to address the core issues of pay and working conditions. Unless restaurants can change the belief among young people that foodservice jobs are barely more lucrative than running a lemonade stand, they’ll only want to work as servers or bartenders, if they consider the business at all.
The old rule of thumb was that labor costs should total around 30% of a restaurant’s sales. Until that rough guideline jumps closer to 50%, the industry will remain an employment option of last resort.
Sacrificing that much margin certainly won’t be pleasant, or easy. Less daunting should be the task of improving working conditions.
That doesn’t mean providing nicer break rooms or less ridiculous uniforms. The unionization drive that’s found traction during the last year or so has revealed two great truths about what would change the picture for potential hires. Sure, young people don’t want to put up with extreme temperatures, nasty bosses and an incessant grind. Those issues should be resolved pronto, even if it means significant investment.
But, as Starbucks and other organized coffee operations are learning, workers want their input on the business’ strategic direction to be at least heard and considered. And they also want the additional control over their own lives that comes with long-range scheduling. One of the demands posed by unionized employees to the Burgerville regional fast-casual chain was knowing what hours and pay they could expect two months hence. How else can they budget their time and income?
I don’t know of an off-the-shelf labor model that would be a perfect replacement for the current broken system. But I’d suggest the industry start looking at the setups that are used elsewhere in the world. Those approaches are unlikely to be a perfect solution, but investigating alternatives is a heck of a lot smarter than waiting for yesterday to come 'round again.
But what do you think?
What I think, Peter, is that readers hoping to see some pugilistic fireworks will be sorely disappointed. You can unlace your boxing gloves and go back to your corner, because you won’t get a fight from me on this one. What you will get instead is an unhappy nod of agreement.
As you note, the labor issue has been a decades-long struggle, one that executives from the most innovative restaurant brands in the country have failed to address; I fear that now we are seeing the chickens finally coming home to roost.
The chickens in this case refer not to yet another onslaught of poultry sandwiches, but rather to the perfect storm of employment challenges that have beset the business over the recent past. I got a scary sense of the magnitude of the crisis at the onset of the COVID shutdown, when my neighborhood McDonald’s hoisted a sign at the drive-thru offering $10 an hour to start, while across the street the local Publix supermarket had set up a table to recruit labor at $15 an hour plus a nice benefits package.
Back in the day, as you point out, there was a virtually inexhaustible supply of teenage labor for whom the minimum wage wasn’t seen as exploitative. On the contrary, it was a handy way to earn pocket money to put gas in the car, or to buy the car to put that gas into, or to have a fun date night.
In the rush to build their businesses and set up their operating systems, it apparently escaped the attention of emerging-chain execs that the seemingly inexhaustible pool of teenage workers was, in fact, exhaustible—soon to be depleted by demographic, social and attitudinal changes.
By that time, the expectation of an endless availability of cheap labor became foundational to industry expansion; worse still, it was baked into growth plans of nascent national chains turning to the equities markets for necessary capital.
The resulting hiring-and-retention problems were recognized all the way back in the 1990s and gave rise to a comprehensive study called The Industry of Choice. Among the culprits fingered for employee dissatisfaction at that time were pay, scheduling and, most dispiritingly, acceptance of worker churn as the cost of doing business.
While it’s even more dispiriting to find how these issues have prevailed up to the present, I don’t think that we should lay the blame entirely on publicly-traded chains or the wolves of Wall Street. We should also acknowledge the important role played by others, notably our duly elected congressional stalwarts, who can be counted on to turn issues like immigration and minimum wage, both crucial to our industry, into political footballs that are punted away for a future resolution that never comes.
So, let’s cut to the chase here. You and I concur that the industry is at a tipping point, but I don’t entirely agree that unionization or a 50% labor cost are inevitable or viable long-term resolutions. Nor do I think we have to look abroad for answers, because some lie much closer to home.
And by closer I mean the West Coast, where regional powerhouse In-N-Out Burger has appeared on digital job site Glassdoor’s 50 Best Places to Work survey on the basis of an environment that is upbeat, enthusiastic, customer-centric and that, yes, pays above the national average and offers flexible scheduling.
You might argue that smaller brands like this one can be more flexible in competing with the bigger burger guys. But this September, White Castle, the Columbus, Ohio-based granddaddy of burger chains, was named to Fortune’s Best Workplaces in Retail 2022, the sole restaurant company among the 20 large employers who made the list. An extraordinary 80% of its 10,000 employees find it a great place to work based, they say, on the respect and recognition shown them. Proof of the power of this corporate commitment is the brand’s 25-Year Club, which has inducted 2,206 members who’ve hit that employment milestone with the brand over the years.
And now, Peter, we reach the part in our exchange in which we turn inevitably to Chick-fil-A, the contemporary chain juggernaut that seems to delight in subverting the status quo at every turn.
In this case, subversion comes courtesy of a franchisee in Miami, who boasts a 100% retention rate and receives truckloads of job applications. The reason: three-day workweeks of 13- to 14-hour days followed by four days off.
But wait, there’s more: Each worker is guaranteed an employee-pleasing seven consecutive days off per month. As a quick reminder, this is the chain that does north of $6 million in average unit volumes, is open only six days a week and is widely considered to be one of the very best operators in the history of the industry.
You’re right, of course, that there’s no off-the-shelf remedy for the labor crunch, but I do think there are restaurant examples that prove that these problems are not intractable. However, they took decades to develop and will require extraordinary will and creativity to remedy.
I may be a cock-eyed optimist, but I truly believe that there’s no challenge that can’t be solved with a steady application of foodservice operator innovation and foresight.
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