Navigating the Restaurant Labor Shortage Requires a NextGen Approach
October 17, 2022
By Danny Klein
Black Bear Diner is staffing up with a more mindful approach than ever.
Editor’s note: In April, FSR magazine announced its first NextGen Casual Council, a group of 11 industry leaders who will help illuminate the trends and topics central to the future of full-service dining’s most exciting segment. Throughout the year, they’ll gather to discuss best practices and actionable ideas for peers to follow. And we’ll let you in.
This is the second article, and the first of a two-part piece, on labor best practices and how to handle some of the tech changes rattling the dynamic. The first NextGen Council dive, on hospitality, culture, and bringing customers back to dining rooms, can be found here.
According to Bureau Labor of Statistics numbers released in early October, food services and drinking establishments added 60,000 jobs in September. The hospitality sector now employs 11.8 million people, or about 500,000 jobs shy of pre-COVID levels.
Anita Adams, the CEO of Black Bear Diner, echoes a lot of what’s been shared from the front-lines in recent weeks as the conversation matures—the chain is essentially staffed back to the levels it was pre-pandemic. However, filling those jobs from the vacuum that was March 2020, where restaurants shed north of a million jobs in ensuing weeks, hasn’t always been as simple as plugging in and getting back to work.
Turnover at the hourly level, she says, remains as volatile as it’s been (this number has reached as high as 200 percent for some brands). But managers sit on the opposite side. “We were very aggressive in protecting our managers and had a lot of financial incentives, stay bonuses, and just a lot going on as we were working through the last couple of years,” she says. “We’re sitting actually at the lowest turnover we’ve ever had in our history on the management side. That component we feel good about.”
While September’s upward movement was a welcomed sign, there’s still a lot of ground to make up. The economy added 263,000 jobs last month and the overall unemployment rate sat at 3.5 percent. Also, restaurant industry wage growth climbed 0.3 percent versus August and is 8 percent higher over the past year.
What this paints is a labor pool where there are fewer workers to pull from and the cost to recruit and retain has skyrocketed. In many cases, it’s lowered the number of workers per unit as brands try to balance costs. Also, it’s a key trigger for why prices at full-service menu are up 8.8 percent for the year (this was 9 percent in August) and limited service 7.1 percent higher. Food away from the home, in general, increased 8.5 percent, year-over-year, in September and food at home continued to outpace at 13 percent.
At Smokey Bones, CEO James O’Reilly says, the challenge splits into parts: wage inflation and population. Beyond employees losing their restaurant jobs at COVID peaks, job surfing has accelerated. “We see, at least in our company, the back of the house, you can say the starting wage is $14 and they’ll leave us for $14.50. We’ll offer them $14.75 and they might come back.”
It’s a supply and demand dynamic unfolding across the country right now, where the leverage is now in the employees’ grasp.
In July, 4.2 million Americans (2.7 percent of the workforce) quit their jobs. According to a survey from Joblist, more than a third of employed job seekers (36 percent) reported they were planning on quitting their jobs in the next six months. It’s well below where it once was—the figure had climbed as high as 73 percent in August 2021—and illustrates how job searching behavior has changed dramatically in the last year, Joblist says. Whereas the majority of employed job seekers were planning to quit imminently last August amid a strong job market, most now seem to be browsing opportunistically.
Yet hospitality continues to face pressure. Hospitality and retail workers were the most likely to say they were looking for a higher-paying job (56 percent) in the survey. Hospitality workers were also the most likely to claim they were considering switching industries (36 percent) or working more hours to offset costs (25 percent) as inflation blares.
O’Reilly says the fact the industry, years into COVID’s recovery, remains 500,000 roles below 2019 marks (a climate that wasn’t easy to hire in, either), has, naturally, driven wage inflation to unseen levels. You have to pay more to staff up, and turnover is spiking, to Adams’ point, for like-minded reasons. Meaning the cycle keeps repeating and the dollar signs keep mounting. Employees have options to browse and, for restaurants, it’s a reaction to quickly filling roles and trying to navigate the fresh realities of what it takes to run an operation with off-premises in the fold.
“We’re still running over 100 basis points higher than we want to be on labor right now and it’s not really self-inflicted,” O’Reilly says. “It’s mostly market inflicted.”
Liz Moskow, a food futurist and principal at consultancy Bread & Circus, isn’t caught off guard by any of this. She’s seen it as much as a consumer as she has from the vantage point of someone with a Culinary Institute of America pedigree who has over two decades of brand, culinary, hospitality, and CPG experience.
Throughout the summer, Moskow observed more employees in restaurants, just as Adams highlighted. Those vacant, skeleton-crew operations of the past year appear a bygone thing. But the re-staffed crews seem apathetic, she says. “To me, it’s causing more distresses to the consumer when you see a poorly trained employees because it’s high turnover and they’re there for a short period of time. They’re standing around not having that hospitality hustle,” Moskow says. “And so, you see 10 people behind the make line and two of them are talking to each other and one is very slowing replenishing something and then the other one is maybe going over to a table to check on something. You see more messy tables in someone else’s section.”
From the consumer’s view, she adds, it can be more frustrating to witness employees not doing their job than to cut an understaffed restaurant slack. Not to mention, they’re paying more. And the same sentiment rings true for guests who feel second-fiddled to off-premises guests. Say those who walk into the lobby and wait around for service while bags of food get packed in front of them. Or somebody who steps inside a quick-serve and cedes their spot in the make-line to a delivery driver.
“You had this empathy in the restaurants,” Moskow says of the landscape a few months ago, when everybody was understaffed. “You need people to think they’re doing the best they can. That script has quickly flipped. Well, you have bodies and now I’m angrier because they’re here and they’re all being paid.”
She feels operators would be better served to pay star employees more to take on additional tasks. And to worry less about hitting a specific number of workers versus getting the right kind of employees in the proper jobs, and rewarding them.
“How do you get those star employees to say? Maybe it’s pay them double and you need less. But the last thing you need is 10 college-aged kids who are trying out hospitality just because they’re making $17 an hour and they just don’t care,” she says.
If customers are paying more, it’s a safe bet their expectations in full service will be higher, too.
A handheld revolution
Rom Krupp, founder and CEO of dining and hospitality platform OneDine, says tech innovation might be headed for a slowdown in the coming months. COVID unleashed a torrent of solutions and technologies over the past couple of years, he says. But instead of more flooding in, it’s likelier it’s going to take three to five years to unpack what’s been introduced.
“I’ll tell you this,” he says. “We’re still 95 percent inbound sales. People are trying to still catch up to COVID. I think the next wave [of innovation] might be further our, like five years out.”
However, there is one technology that’s begun to proliferate full service as operators work to balance labor challenges while still delivering sit-down experience.
“The hottest thing we do is handhelds,” Krupp says. “People are just dying for labor optimization, table turn optimization, order to table, pay-to-table technology. … The next five years, I think it will become a standard in the U.S. There won’t be a restaurant, except maybe the fine, fine dining, where you’re not going to get your order taken next to the table and paid right there.”
Broadly, it’s a sentiment plenty of industry pundits share. In an interview with QSR, Meredith Sandland, CEO of Empower Delivery and the co-author of Axiom 2022 Business Book Award Winner, “Delivering the Digital Restaurant,” noted restaurant technology has begun to zero in on near-term solutions versus some of the flashy, long-term angles you saw last year. “As we’ve seen in cars, electrification and smart augmentation of human operators are pre-conditions to automation,” she says. “I think we will see increased adoption of electric cooking equipment, smart ovens, and software that increases human productivity in the restaurant.”
This mindset has been clear at Chili’s under new CEO Kevin Hochman, a former KFC U.S. president. Earlier in the year, Chili’s suspended its test of “Rita the Robot”—a self-functioning machine that could play host, waiter, and busser. Now, the company plans to accelerate what it calls “Kitchen of the Future 3,” or equipment that improves speed of service and table turns. Chili’s is also testing technology that can enable guests to seat, order, and pay on their own, and it’s working to enhance its mobile site interface for off-premises customers.
“We’re going to stop some of those projects that we just didn’t have a line of sight to a return on the business, but we’re going to double down and accelerate the ones that we think will have a more meaningful impact on restaurant margins and a quicker impact on our business,” Hochman said.
Black Bear is currently testing handhelds and Adams says servers are buying in. “One of the things that we had an ‘aha’ about is because of the turnover [we’re seeing], what it’s forcing is when you take the order on the handheld, it prompts you through our menu,” she says.
So if a guest picks a certain breakfast dish, for instance, it will direct the server to ask about potato choice. “In some ways, it’s helping because now as a server, I don’t necessarily have to thoroughly learn that menu to recite it to the guest. A handheld is walking them through that, which was a bit of an unintended consequence. So we’re starting to feel like technology like that makes it easier for the workforce and we can get them engaged and walking through the steps.”
Black Bear also deploys QR code pay-at-the table to further ease its front-of-the-house tasks and allow employees to focus on hospitality.
It’s a conversation that’s progressed of late. “We pride ourselves as this hospitable, engaging environment,” Adams says. “And I was always resistant to that kind of technology because we want that one-on-one experience with the guest. But I think things are just evolving.”
Black Bear Diner CEO Anita Adams says handhelds have been a hit with servers at test locations.
Alongside server handhelds, Black Bear introduced beverage runners. Drinks are getting to the table before the server is even done taking the order. “To me, that’s a key component of the high guest experience,” Adams says. “So though we’ve had a harder time measuring some of the speed of service elements, there’s these kinds of things that are cropping up that are bigger wins.”
Smokey Bones, O’Reilly notes, is in the process of essentially launching a mobile POS platform. Before, the chain followed a blueprint all too familiar in this industry—server walks up to the table with an order pad, writes it down, and walks back to a POS station, which Smokey Bones has six or seven of in each location. Then, they manually enter the order into the POS. “Obviously, you can picture the time that takes to do, and also, it’s a failure point in the process when the server has to write the order down and then reenter it. That can create a failure point,” he says.
O’Reilly believes the platform will be a total “win-win” in regard to the point Moskow made earlier of leading with your best, most-engaged people. Orders are taken at the table on a small mobile tablet that emulates the POS they already know. “So the training is very easy,” O’Reilly says. “But the number of tables that a server can take with that technology is also greater than they can take without it. It’s so much faster. And if a server has more tables [O’Reilly estimated this as being able to go from eight to 10 or so], they get more tips, and they make more money. We’re not paying that, right? They’re making more tips from the guests and so they become more productive.”
What Smokey Bones has found as well, he adds, is the servers who have fully embraced the system (roughly 80 percent) happen to be the most engaged. It makes the apathy Moskow mentioned clear to managers.
Adding two tables isn’t a huge number, but it’s a sizable lift from a productivity standpoint. “More engaged, they make more money, the guest, on average, gets a better experience because they’re dealing with our most engaged people,” O’Reilly says. “And it’s faster. We have more throughput, especially during peak because the order goes directly from the table right to the kitchen without the extra steps.”
Adams echoes O’Reilly’s observation. “I think the reality of it,” she adds, “is [handhelds] take the burden off of them as well. We’re finding that our servers, even though they have more tables, they can engage because getting beverage is a time suck for us, and it’s coffee and organic juice and water, and so on. So we think it’s actually enhancing that relationship with the table.”
“If you’re a server and you’ve got that pad of paper in your back pocket and you’re walking back to the terminal, and another table is upset because they didn’t get their fork, and then another table before you even get to the station wants a drink refill, it just kills your speed of service,” O’Reilly continues. “We want our servers to have more time to engage.”
Adams jokes there’d be a “mutiny” if Black Bear tried to pull handhelds at this point. The best servers realize it works.
O’Reilly reiterates tips are higher and that’s going to only aid the labor line. Smokey Bones has tracked guest experience each day the handhelds have been on the floor as well. Thus far, data showed the experience rated at least the same, if not slightly better, among guests simply because they’re getting food quicker.
Black Bear recently rolled an eLearning platform with Wisetail to help employees build community.
Tech as the fuel
O’Reilly’s comment on taking the POS from stationary to mobile is one Krupp continues to work on. In general, he doesn’t believe restaurants need a brick-and-mortar tech stack anymore. As an example, OneDine recently tackled a project where it completed a baseball stadium—23 concession stands, eight kiosks, 12 handhelds for VIP suites, 7,000 QR codes, and 180 pickup cubbies. And OneDine activated it without installing a single piece of software in the building. Everything ran on secure browsers.
Krupp touts a solution where the commerce cloud is the lone engine that drives 100 percent of transactions for restaurants; where the POS is no longer an endpoint but a floating, integrative hub. Additionally, a world where one identity for a consumer can translate across channels and enable full-service brands to better recommend and understand guests.
An example Krupp gives is of a customer who walks into The Cheesecake Factory. What if the moment they sat down they could know what they want to eat in 30 seconds, despite the encyclopedia-thick menu? “The restaurant just gained 7, 8, 9-minute table turn times without even introducing and self-ordering or self-payment,” Krupp says. “They did it just be making it easier to decide what to eat.”
Mostly today, because consumer data is distributed, you can have 100 customers of the same POS companies or online ordering platforms, and 100 profiles. Or 100 times a restaurant needs to set preferences and 100 different systems to conduct machine learning.
Krupp feels that could change, and it will all cascade to labor productivity.
Moskow has another idea as well. Could restaurants leverage either their hostess or food runner to play a concierge, backup role to the technology? This way, when somebody places an order, there’s an employee to check in. Did they order and no silverware showed up? Were they trying to find an answer to a question on allergies or protein replacement? “To me, I feel like we shouldn’t discount these technologies [order and checkout at the table, etc.] … They’re helpful for the server and also the customer. But we have to make sure we’re not missing the touchpoints as less employees are multitasking different roles.”
In terms of the workforce itself, O’Reilly says Smokey Bones has diverted younger employees toward positions like greeters and off-premises takeout. Many came over from fast food where they were comfortable expediting orders to drivers and to-go customers. “It’s not as complex a position and they’re OK with lower pay, $13 an hour, $12 an hour. They can come in and greet people, assign tables, things like that,” he says.
The most successful servers, O’Reilly adds, tend to be a bit older and have experience hustling in hospitality.
So how do you foster engagement? Black Bear recently rolled an e-learning platform with Wisetail. The company boosts experience with social, communication, gamification, and engagement features “geared to build a community of service savvy employees.” It’s used by Cheesecake Factory and quick-service Noodles & Company, among others. Brands can deploy training company-wide, standardize practices and promote cross-training, and improve oversight. But what Adams has watched lately is the community element. The platform allows employees to share stories with social, contribution, and profile features, or “create a family of teammates.”
“It houses not only training, but it’s also our communications vehicle,” she says. “There’s this whole element of engagement where our hourly team members are on this as well as our managers, and we have the ability to manage who can see what. We have this whole group of younger, I would say, 30 [years old] somethings or less, who they talk to each other through this platform and they’re the ones who always comment and love that we’re doing this.”
It’s developed a core group that, at any point in time, Adams can log in and see how many people are engaging. “I find it fascinating,” she says, “because, to me, it’s just more and more technology on that social side and there’s people who are engaged in that. It’s formed relationships across some of our diners.”
Placing a divide between off-premises and dine-in, for customers, has been an important evolution in recent months.
Offering a bridge for workers to connect has only become more vital, O’Reilly adds. A good example is taking place today at quick-serve Portillo’s, where an internal survey returned that 70 percent of employees said they had a best friend at work, which drilled home the company’s values. As of Q1 2022, Portillo’s hourly turnover rate was 20–30 percentage points below the industry average and the chain boasted an internal promotion clip of 80 percent.
In the last year or so, O’Reilly says, it’s become evident a lot of people left the restaurant industry because the COVID experience for hospitality workers was “very, very hard.”
“And a lot of people just said, I’m done with this industry. It’s too hard. Too much of a roller coaster,” he says. “We lose managers now to non-restaurant positions, not other restaurants.”
Adams agrees restaurant workers are fatigued and burned out by many of the pandemic’s tasks, like trying to police protocols and grapple with ever-changing mandates. It’s why recognition, employee care, flexibility, and as Adams explained, creating a sense of community within the restaurant itself, goes a long way beyond the paycheck.
But as always, it starts with applicant flow. Smokey Bones uses platforms like Snag and Indeed to locate employees, yet one thing it’s worked on of late is to watch the process closer. If an applicant comes in, the brand learned it has to return the call within an hour or it’s going to lose that person, O’Reilly says.
“Even for an interview,” he notes.
Black Bear is shortening the process, too. It’s tapped text-to-apply and made it so candidates don’t have to sift through a long application. “The attention span is small,” she says. “And you’ve got a job. So we’ve tried to shorten and abbreviate at least the initial hiring to get them on board.”
One thing Black Bear stopped doing is paying sign-on and referral bonuses to hourly employees—a common restaurant tactic through the pandemic build-back. Adams says it led to a lot of filled positions, but not necessarily the quality of worker Black Bear was looking for. “We need to really focus on who is actually getting the job done a little bit more than those who just have one foot in and food out,” she says.
“We think there’s enough flow and we just have to figure out how we do a better job in that initial 90 days,” Adams adds. This has come a long way from the mid-2020, early 2021 days when brands were doing everything from giving away iPhones to hiring carside just to get bodies into restaurants.
“Now we’re very much focused on that onboarding process and there’s a big culture component to that and making sure there’s shoulder-to-shoulder training where we’re not just turning folks out and they’re uncomfortable and then they’re going I’m out of here, this is too hard,” Adams says.
Black Bear uses TalentReef to scan boards and has also implemented daily pay, where there’s been about 17 percent adoption of workers actively opting in (taking three draws in advance) to get paid early.
Smokey Bones is headed toward early wage access as well. “All the data on that seems to suggest it helps with turnover,” he says.
New role thoughts and KDS power
Building on the notion of diversifying jobs within restaurants, Moskow suggests hiring a position that supports these culture-driven points. Could you create something like a “social media concierge” where an employee goes table to table, front to back of the house, and simply records the positive experiences happening within the store? A way, in other terms, to articulate how a brand’s culture is working in a medium that consumers already engage with. “So you’re selling culture to your potential employees instead of selling them a 50-cent bump in pay,” Moskow says. “You’re speaking to the people in their language. You get to be online and you’re speaking in that regard for recruitment.”
Imagine a Smokey Bones social post where somebody is conducting a rib tasting and talking about the on-site perks and what a cool gig this is. “That might entice me to work there over somewhere else, for sure,” Moskow says.
Meanwhile, making jobs inside restaurants appealing—more guest facing and less menial—continues. Black Bear modified lines and routed KDS specific to support off-premises so it could focus on the dining room. This way, it’s not trying to shuffle the guest who got in the car and paid $5 a gallon of gas to get there. Smokey Bones has done this as well, with dedicated, mini expediting kitchens, if you will, for off-premises. There’s a KDS that routed all of the off-premises to one station.
Black Bear is even retrofitting some existing lines where it will take 25 percent off and create a mini one as well. It can still use it as before if the dining room gets busy, but generally, it will instead help move off-premises orders out of the queue and make it so customers don’t feel ignored. The businesses can operate as separate entities that don’t detract from one another.
“We heard it from our guests,” Adams says. “They’re sitting in the dining room and maybe it’s not that busy and they’re seeing this screen, and we have this expediting screen and we have 20 bags lined up, it [bothers them]. We’re trying to separate that. We’re giving all of our love to the guest who is there and they’re not being impacted.”
Smokey Bones recently built a Utica, Michigan, location that pulled the off-preemies out as a separate part of restaurant. It has its own counter, POS, and digital menuboard. Even a drinks cooler that’s been popular with delivery drivers who want to buy one for the road. But for those picking up, aggregators or not, they don’t have to walk through the lobby and across the restaurant as they once did in older units.
“It’s making the experience better for everyone,” O’Reilly says.