The pandemic disrupted virtually every business in dramatic ways. A year and a half ago, many businesses were wondering if they would survive at all. As some were forced to shut down due to lock downs, others (like Zoom) were experiencing unexpected opportunities for growth.
Restaurants were devastated. According to the National Restaurant Association more than 110,000 restaurants were forced to close wiping out 2.5 million jobs.
As the economy has recovered, so has the restaurant industry albeit at a significantly slower pace. What few expected though, was how much a rebound in business might be challenged by labor shortages.
What has developed is a mismatch between available jobs, and skilled workers wanting to work those jobs. The pandemic made many reflect on their work-life balance and inspired large numbers of people to move, change careers, or at least look for work in other fields.
Earlier this year:
… a ZipRecruiter survey found 70% of job seekers who last worked in the leisure and hospitality industry say they are now looking for work in a different industry. In addition, 55% of job applicants want remote jobs. An April survey of U.S. workers who lost jobs in the pandemic, conducted by the Federal Reserve Bank of Dallas, found that 30.9% didn’t want to return to their old jobs, up from from 19.8% last July. *
Low-wage earners and gig workers are now looking for something more. With much of restaurant industry wages at or below the poverty level, many workers end up putting in long hours under stressful conditions, then have the added stress of barely paying their bills. So yes wages play an important part of their calculus, but many workers are looking to work under better conditions, with more flexibility and benefits.
A New Path Forward
The New York Times recently had a look at some innovators in the industry who have come up with new business models that might offer some hope.
Ruby’s West End is a cafe in Portland Maine that recently opened with a new approach to wages. By saving money on reservation and scheduling software, the owners contributed that to paying all of their team the state’s minimum wage: $12.15 per hour. They also added a mandatory 20% service charge for all checks which is split equally between all the employees.
This new wage scheme has attracted a high level of talent, some from jobs in more prestigious restaurants and locations. Instead of worrying about only making the minimum $2.13 per hour typical of other restaurants, Ruby’s workers are guaranteed their $12.15 minimum plus tips which can mean $27 per hour on good days.
Higher wages along with signing bonuses have been widely used to attract talent. Some restaurants are trying to address other issues like pay inequity. Chefs typically make more per hour than servers, but don’t get any tips so don’t reap the reward for a busy shift. Servers get tips but may be subject to harassment by customers. Some owners are also trying to address the work-life balance in and industry where it is not uncommon to work 80 hours a week.
At Lula Cafe in Chicago, the pandemic provided time to rethink and reinvent the business model. Now employees make between 18-24 dollars per hour by the addition of a 20% surcharge. Additional tips are pooled for all employees. Lula Cafe also offers traditional benefits like health benefits, paid vacation and a 401k plan.
Many restaurants have found cost savings by offering a more limited menu which can dramatically lower food costs as well as reduce the number of people it takes to prepare each dish.
At Knead Hospitality in Washington D.C., the restaurant group now offers mangers a four day workweek.
For the Restaurant Industry as a whole, many of the new changes will make profitability challenging in the near term, but better retention and being able to attract better talent will help along with other cost savings measures. What seems sure is that the industry has been indelibly changed by the pandemic and that the previous business models will have to be tweaked, if not entirely revolutionized. Restaurant Industry 2.0 is already here.
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