How Labor Shortages Are Impacting the Restaurant Industry

The restaurant industry is one of the most important industries in an economy, and seeing it fall with no one filling in work slots has been surprising for everyone. Over the years, businesses in the restaurant industry have been adapting and growing to challenges they have been facing. However, it seems that they may have encountered one of the most significant dilemmas yet.

Two main questions stand out in these times. Why is there a labor shortage in the restaurant industry? And how has the issue affected the businesses within it?

The labor shortage has been a growing issue in the restaurant industry. However, it was further intensified due to several factors, including the restrictions brought by the COVID-19 pandemic. With that, restaurant owners must face the dilemma of staying in business amidst a shortage in personnel.

The uncertain circumstances have caused stressful situations and anxiety to arise within the industry. To keep their businesses running, many restaurant owners had to come up with innovative and resourceful solutions to combat the issues at hand. Staying in business despite the lack of personnel is already a predicament, but finding new employees to fill positions is another difficult hurdle that they must overcome.

This article will show the impact of labor shortages on the restaurant industry, including how it was heightened during the COVID-19 pandemic and its overall effects on the industry throughout the years. Read on to know more about the topic.

The Restaurant Industry During COVID-19

The pandemic has been rough on everyone. This includes the working force, those who are hands-on in business establishments, and owners who have to deal with unfortunate and sudden circumstances. The pandemic is a large factor that enabled the growth of labor shortage in the restaurant industry.

During the height of the pandemic, governments imposed numerous restrictions on dining establishments. These restrictions included capacity limits, reduced operating hours, and social distancing protocols. Due to these unforeseen circumstances, restaurants were forced to adapt and operate in different ways.

As commonly seen in the news, some were successful in handling their restaurant during the pandemic while others failed. According to estimates from food industry research firm Datassential, a very unfortunate statistic shows that one in ten restaurants permanently closed due to the COVID-19 pandemic.

As mentioned earlier, the COVID-19 pandemic resulted in the government imposing numerous restrictions. Due to these pandemic-related restrictions, restaurant owners had to find a way to work around them and cut their restaurant expenses. Some of these businesses resorted to employee turnover. These businesses reduced the compensation for their employees, which included their hourly wages and benefits. In addition, these establishments also reduced their overhead costs to remain sustainable.

Some restaurants began operating differently. A few resorted to a “ghost kitchen” or a virtual restaurant. Ghost kitchens do not need as much manpower to serve customers, as customers can order for themselves. A lot of people found this very effective and efficient since health protocols were being followed and restaurants spent less on employees.

Before 2022, the restaurant industry already had a high staff turnover rate but the peak of the pandemic accelerated these numbers. Most restaurant owners in the industry eliminated workers to minimize their labor costs. The workers who were left saw their hourly rates get smaller and smaller while their work shifts got longer.

It also doesn’t help that they were demanded to work even harder to maintain profitability. Many restaurant workers looked for a secondary source of income to compensate for their decreased wages. This meant that there was a huge possibility of them acquiring work outside of the restaurant industry since job openings at this time were very scarce.

One survey from the Rosen College of Hospitality Management shows that 30% of the 1,000 people who were surveyed had to quit or were looking for different career paths. It’s no wonder that a lot of workers began to develop reservations about working in the restaurant industry. The COVID-19 pandemic truly heightened the scale of labor shortage in the industry due to the challenges it introduced.

The benefits and wages that restaurant employees had in these times were seemingly not enough to compensate for the long hours they spent at work. Some of them felt that they were working towards a dead end. They didn’t feel valued and, instead, felt burnt out.

The Impact of Labor Shortage on the Restaurant Industry

The labor shortage has continuously brought forth new challenges to the restaurant industry. As the situation progressed swiftly during the COVID-19 pandemic, business owners are in need of efficient solutions now more than ever.

The restaurant industry is functioning in a high-demand, lower-labor environment right now and is also suffering from an all-time high quit rate. Based on reports displayed by Statista, employment in the restaurant industry reached its peak between 2010 and 2021 when the number of employed individuals reached 14.7 million in 2016. However, that number has only been going down moving forward. The number of employed workers lingered at around 13 million between 2017 and 2019 but dropped significantly to 11 million in 2020 and 2021.

According to the National Restaurant Association, 78% of restaurant owners across the U.S. report that they don’t have enough employees to support their current customer demand. This is because many employees have begun working in different industries. Many restaurant workers looked for a secondary source of income to compensate for their decreased wages.

Employee turnover has caused businesses in the restaurant industry to lose a significant amount of profit, given its large scale. Gallup reports that finding new employees can cost as much as 50% to 200% of an employee’s salary to accommodate their replacement. Hiring a new employee can also be time-consuming, may entail additional costs for training, or even reduce the quality of work being done within the establishment.

Business owners have had to shell out additional funding to accommodate new hires. Some small businesses simply do not have the financial means to hire new employees, so they have decided to close early or reduce their business hours instead to reduce the strain on their current workforce. The high turnover rate could also take a toll on the customer experience.

Once a customer notices a lack of quality in a restaurant’s service or products, then it’s possible that they may feel offended or as if they are not being valued. Diners may not feel inclined to visit a second time or recommend the restaurant to others if they have an unsatisfying experience.

Overall, staying in business amidst the labor shortage has been a great challenge for business owners. With millions of employees losing their jobs or quitting to find different career paths, the restaurant industry is gradually adapting to the consequences.

Ways To Combat the Issue

There is still a way to combat labor shortages in the restaurant industry. Here are some ways that restaurants can combat the issue.

  •  Improve Compensation, Benefits, and Incentives – Restaurant owners should start treating their employees even better. They can start offering higher wages, extra vacation time, incentives, and benefits to stand out from the competition.
  • Focus on Employee Recruitment – Restaurants in the industry need their menu items, promos, and discounts, to stand out from their competitors. This can be applied to the way that they look for employees. Employee recruitment can be optimized with different advertising strategies and also with the use of different platforms such as advertising on social media. Long-time workers can also refer people who they know and can be offered incentives.
  • Focus on Employee Retainment – Just as recruitment is important, retainment should also be given importance. Once you start to hire the best people out there, it is important to keep them and make them feel that they belong. Offering them training, communicating effectively, and giving them an active role in the mission and vision of the business are just some of the few ways one would feel that they are in a good working environment.
  •  Investing in the Latest Technology – If all else fails and finding employees still doesn’t work, investing in the latest technology can help get you through that. Technology has helped a lot of restaurants in their operations over the years. Customers can order for themselves which helps reduce the amount needed to spend on staff. As mentioned earlier, some businesses resorted to a “ghost kitchen” or a virtual restaurant. They function in a way that they don’t need manpower to serve customers as customers can order for themselves.

Final Thoughts

Restaurant owners are continuously adapting to the challenges brought by the labor shortage in the industry. It goes to show that valuing your employees and looking for effective ways to get around difficult situations can help establishments. It’s worth noting that employee satisfaction is a key factor behind ensuring the quality of a business and keeping customers happy. We should always remember to value those who are with us as they are an important asset to our success.