Restaurant Consulting

Why Is There a Restaurant Labor Shortage?

By Daniel Kezner

The restaurant labor shortage has emerged as a critical challenge for the industry, fundamentally altering operational dynamics and profitability for restaurant operators across the nation. This ongoing issue, exacerbated by the COVID-19 pandemic and subsequent economic shifts, has left many businesses scrambling to fill positions. With an imbalance in the labor market characterized by a surplus of job openings and a deficit of available workers, the sector faces unprecedented strain.

The urgency to address this shortage cannot be overstated. For restaurant owners and operators, the ability to adapt and innovate in recruitment and retention strategies is not just beneficial – it’s essential for survival. The shortage impacts not only the efficiency and service quality of establishments but also their ability to scale and embrace new opportunities in a competitive market. As we delve deeper into the facets of this issue, it’s crucial for stakeholders to understand the underlying causes, immediate impacts, and potential solutions to navigate through these challenging times effectively.

Understanding the Labor Shortage

The restaurant labor shortage has complex roots, spanning both recent disruptions and longstanding challenges within the industry.

The impact of COVID-19 and the Great Resignation significantly altered the landscape. As the pandemic shuttered businesses and reduced operations, many restaurant workers were left without jobs.

Great Resignation prompted many individuals to reconsider their career paths, leading to a mismatch in the labor market with about 10 million job openings nationwide, but only 5 million unemployed workers available to fill them. This situation has exacerbated operational disruptions and heightened competition for labor in the restaurant sector.

Pre-existing issues such as long hours, low pay, and lack of benefits, which have historically driven high turnover rates in the industry. Restaurant jobs often involve working late nights and weekends under stressful conditions, with compensation that does not always reflect the intensity of the work.

The absence of significant benefits like health insurance and paid time off further discourages long-term commitment from employees, leading many to leave the industry in search of better opportunities and more stable environments.

These factors necessitate urgent and effective strategies by restaurant operators to stabilize their workforce and ensure the sustainability of their businesses in a competitive market. A thorough business plan really helps restaurants in moments like these, but the business plan must be proactive in strategizing for bumps in the road.

Current Impact on the Industry

The restaurant labor shortage significantly affects daily operations across several fronts, leading to increased operational costs and challenges in maintaining service quality and customer experience. The immediate and perhaps most tangible impact is the rise in labor costs. As competition for qualified staff intensifies, restaurants find themselves offering higher wages to attract and retain employees. According to the National Restaurant Association, the average wage rates in the industry have seen an uptick as employers respond to the tight labor market. This increase in wages directly inflates payroll expenses, impacting the overall financial health of establishments. These increases in labor cost requires restaurants to increase the cost of food to compensate for the higher overhead, which lands on the consumer overall.

Beyond financial strains, the labor shortages profoundly impact service quality and the overall customer experience. Short-staffed restaurants often face longer wait times, inconsistencies in food quality, and limited menu options, all of which can deter repeat business. In a sector where customer satisfaction is closely tied to success, any compromise in service standards can lead to significant losses in revenue and reputation.

To illustrate the scale of the issue, statistics from the National Restaurant Association indicate that despite some recovery, the industry still faces a shortfall of workers. Their 2023 report highlights that job openings in the restaurant sector continue to outnumber the pool of available workers, exacerbating the challenge of meeting operational demands. This ongoing imbalance not only stresses existing staff but also compels restaurant operators to find innovative solutions to manage and optimize workflows without compromising service quality.

Increased Labor Costs

  • The average hourly wages in the restaurant business have increased by 29% between November 2020 and November 2023. These trends in the restaurant business reflect the industry’s response to the tight labor market as employers are forced to raise wages to attract and retain workers​ (NRA)​.
  • The National Restaurant Association reports that 98% of operators are experiencing higher labor costs, significantly affecting their operations and profitability​ (NRA)​.

Challenges in Maintaining Service Quality and Customer Experience

  • Many restaurants have had to reduce their operating hours due to the restaurant staffing shortage, with a significant reduction of about 7.5 fewer hours per week​ (Restaurant US)​.
  • The service quality is also impacted by the shortage, with a decrease in customer satisfaction due to longer wait times and reduced service efficiency​ (Restaurant US)​.

Job Openings vs. Available Workers

  • As of early 2023, the restaurant industry staffing levels were 3.6% below pre-pandemic levels, translating to about 450,000 job openings that remain unfilled. This shortfall is despite the industry adding significant numbers of jobs over the past years​ (Restaurant US)​.
  • The National Restaurant Association highlights that while the industry is projected to add 200,000 jobs by the end of 2024, 45% of operators still need more employees to meet customer demand​ (NRA)​.

Technological Solutions to Mitigate Staffing Issues

The integration of technology in the restaurant industry has been pivotal in addressing the challenges posed by labor shortages. Here’s a closer look at how different technologies are being deployed:

QR Codes and Touchless Technology

QR codes have streamlined many aspects of the dining experience, providing a contactless alternative to traditional menus and payment processes. This technology gained significant traction during the pandemic as restaurants sought ways to minimize physical contact to enhance safety. The adoption of QR codes reduces the need for direct staff-customer interaction, enabling a more efficient service flow and potentially reducing the number of staff required.

Kiosk Ordering Systems

Self-service kiosks represent another significant technological shift in the restaurant industry. These systems allow customers to place their orders through a digital interface, reducing the need for waiter interactions and minimizing ordering errors. Kiosks have been particularly beneficial in fast-casual settings, improving order accuracy and speeding up the service process, which in turn can increase customer throughput and satisfaction.

Mobile Pay Options

Mobile payment options facilitate a quicker and more seamless checkout process. By integrating mobile pay systems, restaurants can accelerate the payment process, reduce the time customers spend waiting to settle their bills, and enhance overall customer experience. This efficiency can lead to faster table turnover and increased revenue, particularly during peak dining times.

Potential of Robotics

Robotics technology is gradually making its way into the restaurant sector, handling repetitive tasks such as food preparation and cooking. While the adoption of robotics is still at a nascent stage, it offers the potential to significantly reduce labor needs in the kitchen, allowing human staff to focus on customer service and other critical tasks that require a human touch.

Strategies for Employee Retention and Recruitment

To combat the ongoing restaurant labor shortages, effective recruitment and retention strategies are essential. Here are key approaches:

Competitive Wages and Employee Benefits

  • Offer competitive wages to attract and retain restaurant workers.
  • Provide comprehensive employee benefits, including health insurance and paid time off, which are highly valued by potential and current employees.
  • Consider profit sharing schemes to further incentivize staff commitment and align their goals with the success of the restaurant.

Effective Training Programs

  • Implement training programs that ensure restaurant employees are well-equipped to meet their job demands.
  • Focus on continuous learning opportunities to aid in career development, which can enhance employee retention.
  • Tailor training to meet the specific needs of different roles within the restaurant, such as kitchen staff or front-of-house teams.

Creating a Positive Workplace Culture

  • Foster a workplace culture that values openness and respect, encouraging restaurant staff to stay longer.
  • Develop initiatives that boost morale, such as employee recognition programs and team-building activities.
  • Create clear career pathways within the restaurant, which can be attractive to employees looking for long-term opportunities and growth.

Future of Restaurant Staffing

As the restaurant industry continues to evolve, grasping the future of restaurant staffing is vital for fostering growth and navigating emerging challenges. This involves analyzing forthcoming employment trends, exploring adaptive strategies for restaurant owners, and observing the broader hospitality industry’s influence on labor practices. For hospitality sectors, proactively understanding these trends and testing innovative solutions are essential steps for future success.

Predictions for Employment Trends within the Restaurant Industry

The restaurant industry is expected to continue its recovery and growth trajectory, with employment potentially surpassing pre-pandemic levels. The National Restaurant Association predicts that the industry will add a significant number of jobs, reflecting an ongoing adaptation to the new norms and innovations spurred by recent challenges. Technology will play a pivotal role in shaping these roles, with increased automation and tech-driven service options influencing the types of jobs available.

How Restaurant Owners Can Adapt to the Evolving Labor Market Restaurant

Owners need to stay flexible and proactive to thrive in the changing labor market. Adapting may involve embracing new technologies that reduce labor needs while enhancing service efficiency, such as advanced POS systems or AI-driven customer service tools. Additionally, owners should focus on enhancing employee value propositions through better wages, benefits, and career development opportunities to attract and retain talent. Aside from technology, some business are turning to other opportunities to reduce labor needs, such as ghost kitchens, to avoid the increase in overhead. Engaging with broader industry trends and forecasts can also guide strategic staffing decisions.

Role of the Hospitality Industry in Shaping Future Labor Practices

The hospitality industry, as a whole, has a significant influence on labor practices, particularly through its response to global trends and economic shifts. By advocating for fair labor practices, promoting diversity and inclusion, and investing in employee well-being, the industry can set standards that may become benchmarks across other sectors. Furthermore, as the industry is known for its dynamic work environment, it can lead innovation in flexible working arrangements and work-life balance initiatives, which are increasingly important to the modern workforce.

Labor Shortages are Solvable, Let Us Help

Addressing the restaurant labor shortage effectively involves a multifaceted approach. Ensuring competitive wages, enhancing employee benefits, implementing effective training programs, and fostering a positive workplace culture are essential strategies. Additionally, adopting technologies such as QR codes, kiosk systems, and robotics can streamline operations and alleviate labor demands.

For restaurant operators facing these challenges, partnering with Kezner Consulting Group can provide valuable expertise and tailored solutions. We are committed to helping you rethink your staffing strategies and implement innovative solutions, ensuring your business thrives in a competitive market.

Meet The Author

Daniel Kezner

CEO / Owner
From training staff to designing kitchens to refining brands, we’ve done it all during our 25+ years in the industry. And we can help you get it done too. We’ve developed the strategies to make it work....and that’s what makes us the consultants who can help you get where you want to be.
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