Strategies For Restaurants Battling Rising Labor Costs
How Restaurants Can Offset Rising Wages Due to a Shortage of Labor
The restaurant industry today is facing a number of challenges that are impacting their ability to attract and retain talent – the main issue they are facing is a labor shortage, resulting in higher wages for low skilled workers. As of April, 2021, restaurants are actually down 1.7 million jobs (or 14%) below pre-pandemic levels in 49 states and Washington D.C. This is a serious issue as the restaurant industry is expected to expand throughout the summer.
Already 90,000 restaurants have closed nation-wide and 21 states still have some capacity restrictions. As the minimum wage continues to increase around the country, restaurants are slowly being forced to make some tough decisions; raise prices or shut down. However, none of these options are appealing to a business that relies on repeat customers to make their profits.
- Why are Restaurants Experiencing a Labor Shortage?
- What can Restaurants do to Balance Rising Wages and Labor Shortages?
- Final Thoughts
Why are Restaurant’s Experiencing a Labor Shortage?
Between stimulus checks, unemployment benefits, and safety concerns, and generally low wages – workers are opting to take the payments from the government over returning to work at a restaurant.
The flipside, is that this is simply unsustainable for restaurants. For example, California Chef Andrew Gruel tells Fox News that he’s currently paying dishwashers a wage of $25 an hour, plus a $500 signing bonus – because it’s that hard to find low skill laborers.
Covid Relief Bill & Unemployment Benefits
The $1.9 trillion American Rescue Plan provides a $300 weekly boost, extends pandemic aid until Sept. 6 and offers a new tax waiver on the first $10,200 of unemployment benefits for many Americans. The $300 a week works out to roughly $1,200 a month. This is just the federal minimum.
Each State also adds their own monthly benefit which averages out to $387 per week. Based on a 40-hour workweek, that means the average unemployed American is getting the equivalent of $17.17 an hour—more than twice the federal minimum wage.
While the goal of America’s federal-state program to provide temporary benefit payments to employees who are out of work through no fault of their own may have been created with good intentions – it’s quite obvious that small businesses are bearing the brunt and costs associated with the current labor shortage.
Low Wages, Safety Concerns & Quality of Work
The other side (the workers) state that the Federal Minimum Tipped Average of $7.13 is simply not worth the risk of returning to work. Many workers feel both unsafe, and underpaid, and in certain states the minimum average is in-fact unliveable.
This creates a tough space between especially independent restaurants and small business owners who do create a safe and liveable working environment, and a pool of workers who are standing up against the generally low wages. Is there a true solution? We’re not sure. But, we know there are tactics that are both cost effective and proven to help restaurateurs operate profitably and efficiently – even without the extra hands on deck.
What Can Restaurants Do To Balance Rising Wages and Labor Shortages?
Restaurants across the country are being forced into a very tough situation. Do you raise your prices and risk losing customers? Do you lower the quality of your food to keep prices constant? Do you work understaffed, risking a poor customer experience, slow service and low food quality? None of these are attractive options to any owner or operator. Here are some strategies your restaurant can implement today to help offset the rising cost of labor.
Limiting Reliance on Front of House Staff
Your front of house staff is the face of your restaurant. They play an important role in your restaurants dining experience and the great hospitality you provide. But a hard truth about front of house staff, is that a lot of their time is spent doing low value adding, and time consuming tasks, such as inputting orders and splitting bills. These are activities that can easily be replaced by extremely cost-effective technology.
With that said, there is a middle ground for this. It doesn’t mean replacing your waiting staff entirely, but simply cutting down the number of staff needed to provide the same level of service. And thus, saving on labour costs and improving operational efficiency.
One way to do this is to adopt a contactless order and payment system. This way guests can order and pay on their own time, increasing table turnover and average ticket size. Your working servers also benefit from this because they are able to cover more tables in a shift, and collect the tips that would have previously been shared with “X” amount of other servers.
There are many providers of this type of technology, but they will likely charge you set-up fees, commission fees, and lock you into contracts – all while the restaurant industry has emerged from one of the toughest economic hits since the great depression.
At OrderUp, we recognize what restauranteurs have been through, and are continuing to go through today. Whether it’s government enforced shutdowns, increased regulations, predatory third party app commission fees, it’s safe to say restaurants have been in a tough spot over the last year. That is why we offer our mobile friendly digital menus, and contactless order and pay to restaurants is completely free.
We Want To Help
Cut Printing Costs with a Digital Menu
With contactless ordering and payments, also comes savings in the form of printing costs. 56% of restaurants update their menus on a weekly or monthly basis. By switching to a digital or mobile menu, you can make these changes as often as you want, without having to worry about printing or re-printing.
Engineer Your Menu For Profitability
It’s safe to say that no restaurant owners WANT to raise their prices. But in situations where the cost of labor is so high, there may not be another option.
When you use a digital menu, you can make these price changes in small increments, and test different pricing strategies in real time. In theory, a restaurant could find the optimal or maximum price for any given item on their menu. No more reprinting, or relying on chalkboards.
Another benefit is being able to test where your high margin and low margin items appear. Using a digital menu gives owners or operators the ability to strategically place high margin items, to offset or support bottom line without raising prices. You can learn more about menu engineering strategies here.
We feel for all the restaurants across the United States. First a lockdown, now unsustainable labor costs, all while pressure to raise the minimum wage looms from state to state. This is a critical turning point, and opportunities for restaurants to make the most out of an unforgiving situation. If your restaurant has considered using technology in the past, but has decided against it – this may be the sign you’re looking for to give it a shot.
OrderUp’s contactless order and pay system is, and always will be entirely free for restaurants. We can’t stop the shortage of labor and rising wages, but we can help improve your operational efficiency and bottom line.