A widely held belief is that recruiting & hiring workers in the food service or hospitality industry is a pretty straight forward affair, though anyone in management will admit it has gotten considerably tougher the last 3+ years. Labor costs have increased across the board as a percentage, and new workers entering the industry have dropped, especially amongst the sub-21 crowd. With fifteen-million employees spread amongst over one-million and counting food & beverage locations in the US alone, competition for quality industry workers has never been higher or more dramatic. And the competition for US consumer dollars dictate that businesses operate fully staffed, lest they run the real risk of losing out to the competition and dying a costly, albeit quick, death.
Labor Costs are not just what an owner-operator spends to employ someone in the food & beverage and hospitality industry. It should include all costs associated with turnover such as job postings, interviews, hiring, training, and take into account the time spent by management on each task. But it goes well beyond this, whether that be a restaurant or bar, hotel or banquet facility, catering operation, and so forth. To calculate the actual cost of turnover one must take into account the cost of being short-staffed as a consequence. A consequence that drives the cost substantially to the tune of $146,000 annually, per location on average in the US. A staggering sum for the average F&B business with razor thin margins to account for.
Consider this:
- The average employment lasts less than 2 months for general staff, and just a tick over 4 months for your managers.
- It takes nearly 1 month to replace an employee, which includes posting open jobs ($), interviewing candidates ($), training new hires ($).
- 36% of owner/operators list hiring and staff retention as their #1 problem focus.
- 97% of US Consumers state the perceived customer experience as the deciding factor in whether they spend their hard earned dollars at a particular venue.
For an unintended consequence to being short-staffed that extends beyond the obvious, let’s take your standard restaurant as an example. It can be quick service, fast casual, or fine dining, Michelin starred even, because at the end of the day labor issues are impacting every single venue-type in the industry.
Labor competition doesn’t seem to be going away… I have seen it in my market, Cleveland. A lot of new restaurants are opening up here. But you will go into a restaurant and there’s a wait. But when you walk in there’s open tables. They don’t have the personnel to service you. – Adam Berebitsky, Restaurant Practice, BDO
No matter the venue-type or position(s) that goes understaffed, what transpires is a pretty standard chain of events that goes something like this:
- Restaurant is short-staffed
- Employee(s) working the shift pick up the slack
- Employee(s) working the shift become fatigued
- Restaurant is again short-staffed
- Employee(s) working the shift pick up the slack again
- Employee(s) are building up strong resentment
- Restaurant is once more short-staffed
- Employee(s) working the shift are now frustrated, easily agitated, and fully resentful of the situation and so… burnout strikes, and turnover takes place
- Cycle is quickly repeated, because turnover is causing strains on the remaining employees, driving resentment and further employee burnout, front to back of house
Continuing with consequences, the valued patrons of the restaurant end up on the receiving end. Service levels have dropped. Table turn-times have decreased, so revenue per table per hour takes a hit. It basically takes longer to do everything, from being seated to drinks to food, to getting the check, et al, and ultimately the patron’s experience is reduced to something well below their expectations leading to personal frustration and most likely poor Yelp reviews. (sigh)
These patrons truly have unlimited choices, over one-million options in fact; more so than at any point in history, and they simply make the easy decision to take their cash elsewhere. Most likely they will never return to your establishment either, at least not by choice.
The business is saturated. If you get growth, it can only come from an existing provider. You will have to work harder than ever to get customers in your door and any success could be fleeting – Jonathan Maze, Executive Editor, Restaurant Business
A drop in customer visits leads to more turnover, especially front of house, and reduces the employee applicant funnel significantly. Employee replacement takes even longer, meanwhile the cycle continues unabated and business continues to take a dive, turnover worsens, etc, until…
Game Over.
I’ve simplified things some, but you understand the basics. If a restaurant or bar or hotel or catering operation can’t attract, hire and retain employees then they can’t produce the product to be served and consumed by the valued patrons, and they will be hard pressed to make it. And this industry is supremely tough to succeed in, even without mounting labor issues.
Moving forward, the biggest challenge for the industry is going to be the war on talent. That’s where we’re focused. That’s where I think the winners will be focused. – Gene Lee, CEO, Darden Restaurants
One thing that stands out when the news covers a restaurant or bar closure, is the inevitable commentary on staffing issues or labor problems/costs as a contributing factor. They are telling the honest truth.
