Now that most dining room restrictions have eased and many diners are vaccinated, boosted and returning to restaurants in droves, independents are experiencing promising sales growth. But there isn't enough labor to keep up with demand, and experts predict the employee shortage will hold steady in 2022. With too few employees on hand, especially in the back-of-house, some operators aren't able to maintain pre-pandemic hours, and existing labor is at risk of burnout. Restaurants that have maintained a positive work environment are reaping the benefits of high retention rates, however.
This report covers key strategies for independent operators as well as the challenges they face as they move into recovery mode, including:
How independent operators are growing revenue as host and ghost kitchens
How the ongoing labor shortage is squeezing full-service restaurants
How restaurants are using technology to recover and grow sales
Why retention is key to keeping restaurants fully staffed
What the absence of the Restaurant Revitalization Fund cost operators
We hope you enjoy this deep dive into how independent operators are finding new paths to growth.
The restaurant labor crisis won't end in 2022. But it's improving.
Quits are high, but hires are higher, signaling a slow recovery this year for restaurants who can offer competitive pay, benefits and culture.
By: Aneurin Canham-Clyne• Published Jan. 27, 2022
David Nayfeld didn't want to risk reopening Che Fico, the independent Italian restaurant he co-owns in San Francisco, for most of the pandemic. Labor was hard to come by, and there was no guarantee new COVID-19 variants or restrictions wouldn't gut the business.
Before the coronavirus crisis, Nayfeld's operation employed about 100 workers. When it finally reopened fully in late October, that number was closer to 60. Nayfeld was unable to bring staffing up to previous levels because it takes a long time to find workers who fit the restaurant's culture and have the soft skills needed for their jobs.
Then from December to January, a quarter of his workers contracted the virus.
"The worst thing possible has happened," Nayfeld said.
"When you look at restaurant industry sales growth in the second half of 2021, that sales level basically remained essentially flat from July on," Riehle said. "The same is also true for restaurant industry employment."
The delta and omicron variants have dealt the restaurant industry a serious blow. The surge in coronavirus cases in late December drove down sales by more than half at nearly 60% of 1,200 restaurants surveyed by the Independent Restaurant Coalition. OpenTable data also shows a gradual fall in on-premise dining traffic in December compared to the same period two years ago.
Labor in the foodservice space has similarly dragged. About 650,000 fewer workers are currently employed in foodservice than in January 2020, and the sector has seen only gradual increases in employment since July 2021, according to U.S. Bureau of Labor Statistics data.
Meanwhile, the NRA expects consumers' disposable income, adjusted for inflation, to shrink in 2022 in the absence of further stimulus from the federal government. This decline in spending power would lead consumers to be choosier, even though diners still want to go to restaurants, Riehle said. Flat sales and flat demand, he indicated, could mean flat employment.
Elise Gould, a senior economist at the Economic Policy Institute, expects the headwinds caused by the omicron variant to be less persistent than what followed the delta variant, as case loads may fall faster, and omicron is likely milder than delta. Despite increased turnover, Gould noted, hiring has also kept pace with separations.
"We've seen record high numbers of quits in the last couple of months," Gould said. "And yet, hires are keeping up."
The number of workers employed in foodservice increased by about 40,000 between November and December, according to BLS data. Gould said the impact of the omicron variant on jobs would not be fully clear until BLS data for January comes out next month.
"We're gonna see [declining to flat jobs growth] in January, and maybe even February, because of omicron. But I hope that we will get on the other side of that and continue to see job growth over the months following," Gould said.
2022 is likely to see a gradual increase in the number of workers employed in foodservice, driven by recovering sales and improved offerings from restaurant employers, said Ted Lynch, managing director for restaurant banking at Bank of America.
"There'll be a gradual pickup, the bodies will come back online, [labor] expenses will come back up on a per person, hourly basis," Lynch said. "But hopefully there'll be a natural process where things get smoothed out."
Nayfeld is less optimistic. Independent restaurants, especially those that did not receive Restaurant Revitalization Fund grants, have faced mounting supply costs and rising rent — pushing many to take on large amounts of debt just to stay open. The uncertainty of the labor market will hurt independents more than major brands, Nayfeld said.
"We are dealing also with a historically challenging labor force," Nayfeld said. "People are worried about our industry. People genuinely think to themselves, 'Should I go back to work at a restaurant? What if that restaurant has to lay me off again?'"
Benefits, wages and safety are key to retaining workers. But many operators are struggling.
High turnover, a relatively low unemployment rate and the reluctance of workers to enter the restaurant industry has put upward pressure on wages, with many restaurants turning to wage hikes or new benefits to attract and retain talent. Chili's parent company, Brinker International, is boosting hourly pay to $18 an hour including tips by 2023, and is focusing on filling managerial roles with internal candidates. Starbucks has accelerated ongoing wage increases, and other major chains have rolled out signing bonuses and new benefits.
A combination of increased compensation and better benefits could attract more hourly workers, but that's a tall order for many independent operators. And many workers are looking for employers who offer something beyond higher pay, according to Lynch.
The companies that are succeeding in attracting new workers, Lynch said, are those trying to create a fun work environment and build a shared company culture alongside opportunities for professional growth.
Sekou Siby, president and CEO of Restaurant Opportunities Centers United, a nonprofit focused on organizing restaurant workers, agrees that wage gains alone haven't been sufficient to draw workers in.
"Workers are not benefiting from the wage increase because prices are actually going up," Siby said. "It is driving the workers out of the restaurant industry."
Siby said restaurants are competing with other employers for low-wage workers, including Amazon, which offers $15 an hour. The risks of contracting COVID-19 has also made some employees wary of returning to work in restaurants at the prevailing wage, Siby said.
"Businesses are not thinking, restaurants especially are not thinking, of increasing wages based on the amount of risk," Siby said.
"Workers are not benefiting from the wage increase because prices are actually going up. It is driving the workers out of the restaurant industry."
President and CEO, Restaurant Opportunities Centers United
Nayfeld argued that without a refill of the RRF — which closed to applications in May — it will be difficult for independent restaurants to prioritize worker safety and do right by employees if businesses shut down due to COVID-19 case surges.
"Sometimes things are bigger than the business," Nayfeld said. "People's safety is bigger than the business. But that's … why we need the federal government to step up and do their part to allow us to continue making good choices."
Employers who respond to the shortage by asking more of their workers may risk driving people out of the industry, Gould said.
"If they're … making people come to work when they [are] positive [for] COVID-19 or [have] COVID-19 symptoms because they're concerned about not having enough workers, then maybe they should be doing other things to attract and retain workers," Gould said. "Maybe they can attract other workers to fill those slots, and pay more and provide better working conditions and paid sick days."
Companies that have historically managed to keep turnover low have performed the best during the pandemic, Lynch said. Nayfeld said his restaurant has managed to retain some of its workers largely thanks to goodwill he accrued by offering paid sick leave, covering the cost of health insurance for laid off workers and paying for his employees’ COVID-19 testing. Research from One Fair Wage indicates that paid sick leave, better health insurance and other benefits could keep workers from leaving the foodservice industry.
A shift toward off-premise dining and labor-saving technology could improve labor productivity or reduce staffing needs, Lynch said. The cost savings that come with these pivots have allowed the industry as a whole to remain profitable.
"Everybody was forced to make themselves more profitable," Lynch said. "It'll be baby steps to get back to where we were, in terms of real full employment."
Article top image credit: Joe Raedle via Getty Images
By the numbers: The cost of 1 year without RRF
We took a look at several market performance indicators over the past year to see how the absence of the Restaurant Revitalization Fund impacted restaurants.
By: Emma Liem Beckett• Published May 24, 2022
A grandfather’s prized silver dime collection, lovingly set aside in the hopes of passing it on to future generations. A family home in Nevada. A string of struggling restaurant locations put on the market by an operator at the end of his rope, only to be snapped up by larger, more monied franchises.
These are just a few examples of what one year without the Restaurant Revitalization Fund has cost restaurants fighting to survive, Erika Polmar, executive director of the Independent Restaurant Coalition, said.
The $28.6 billion federal grant fund ran dry in just three weeks, closing on May 24, 2021. In May 2022, a bill that would refill RRF with $40 billion — legislation the IRC and countless operators were “belligerently optimistic” about — failed to pass the Senate. Now, it seems that nearly 200,000 RRF applicants who were approved for grants but didn’t receive them may never see that money.
“When Congress offered these restaurants the RRF lifeline, restaurant owners and operators made business decisions based on those commitments. Restaurants that are still trying to make up for what was lost in the pandemic today are struggling with workforce shortages, record-high inflation, and supply chain constraint,” Michelle Korsmo, president and CEO of the National Restaurant Association, said in a statement. “[The Senate’s] vote will further exacerbate those challenges and result in more economic hardships for the families and communities across the country that rely on the restaurant and foodservice industry.”
The disappearance of RRF’s safety net plunged many struggling restaurants deeper into financial danger over the past 12 months, but it has also wreaked havoc on operators emotionally, Polmar said.
Polmar continued, “It's been two years of not knowing how you're going to survive and how you're going to keep your people employed. … It's been awful.”
That fear has been compounded by the uneven playing field left in RRF’s wake. Restaurants that received grants have a leg up over operators still struggling to crawl out from under debt accrued during the peak of the pandemic, which has amassed like layers of “compounding grief,” Polmar said. This grant money has helped the lucky few raise wages to attract and retain better talent, or invest in remodels or expansion.
“There’s [been] aggregation of assets through the entire pandemic. The rich got richer, the poor didn’t. And I think you see that in this industry as well,” Polmar said.
Without a refill, she doesn’t see how the industry can reach true recovery.
“We heard Senator Schumer say [the first round of RRF] would be a down payment. And none of us thought that a year later, we would be still talking about that damn down payment and needing the rest of it,” Polmar said.
Beyond current monetary strain, RRF’s absence is also sapping the industry of future potential, she said.
“You can't think creatively. You can't pivot your business. … These folks are beyond exhausted. They're weary,”she said. “Right now all they're doing is thinking about the present and how they're going to make it through the next day.”
We took a look at several market performance indicators over the past year to get a sense of how the absence of RRF impacted U.S. restaurants. And while it’s impossible to know both how far the ripple effects of RRF’s closure reaches — or to what degree the closure exacerbated pain points like inflation and labor shortages — it’s clear the past year was challenging. And some restaurants fear there are more dire consequences ahead.
By the numbers
The restaurant is down roughly 800,000 jobs since the start of the pandemic, according to the U.S. Bureau of Labor Statistics reported by the National Restaurant Association.
Tipping across full-service restaurants has held steady at an average of 19.9% between Q1 2021 and Q1 2022, Toast research finds. Tipping at quick-service chains has remained at about 17% during that period.
Restaurants that didn’t receive RRF grants reported cutting their employees by 30% since February 2020, according to January IRC data. By contrast, businesses that did receive the grants only reduced their staff by 21%.
Between April 2021 and April 2022, employers in the restaurants and accommodations sector hired more than 1 million people monthly on average, but an average of 897,000 people left their jobs each month, with 746,000 quitting alongside 127,000 that were let go and 24,000 who left due to other circumstances, according to Job Openings and Labor Turnover (JOLTS) data from BLS.
Eighty-three percent of restaurants reported that an RRF grant would allow them to increase their wages, according to IRC data.
Eighty-six percent of restaurants reported that an RRF grant would allow them to hire more workers, according to IRC data.
Openings and closures
By the numbers
Independent restaurants grew by 1%, or 2,893 units, in late 2021, according to The NPD Group. This is an improvement over the segment’s 5% decline in 2020. Independent restaurants still make up 53% of total restaurants in the U.S. Independent operators are growing in large urban markets including Los Angeles, Dallas-Fort Worth and Seattle-Tacoma, per The NPD Group.
Restaurant and food new business openings in Q1 2022 (17,690) dipped 2% from Q1 2021 (18,090). However, these openings exceed Q1 2020 openings by 5%, according to a Q1 Yelp report.
Twenty-four percent of businesses that didn’t receive RRF are in danger of closing in up to three months compared to 13% of businesses that received grants, a recent IRC survey finds.
Twenty-eight percent of businesses that didn’t receive RRF are in danger of closing in four to six months compared to 11% of businesses that received grants, per IRC survey results.
Seventy-two percent of small restaurant operators fear rising costs due to inflation could force them to close in the next six months, according to May Alignable data.This is the highest percentage recorded across 12 business sectors.
Restaurants in the West have experienced the strongest sales growth between Q1 2021 and Q1 2022 at 38%, Toast finds. Comparatively, Northeastern restaurants’ sales increased 37%, while the Midwest and the South improved 24% and 21%, respectively.
Sixty-three percent of restaurants didn’t experience a complete sales recovery to pre-pandemic levels as of January, according to an NRA survey. Only 25% of restaurants reported same-store sales rose between 2019 and 2021.
Debt and bankruptcies
By the numbers
Sixty-two percent of operators report their restaurants accumulated additional debt since the beginning of the pandemic, and 57% said their restaurants have fallen behind on expenses,
Forty-one percent of restaurants that didn’t receive RRF grants reported taking out new personal loans to support their businesses since February 2020, according to January IRC data.This is only the case for 19% of restaurants that received an RRF grant.
Forty-eight percent of restaurants that didn’t receive RRF grants report they are in danger of defaulting on a loan compared to 22% of businesses that received RRF funding, per IRC survey data.
Forty percent of restaurants that didn’t receive RRF grants report they are in danger of filing for bankruptcy, compared to 25% of businesses that received RRF funding, per IRC survey data.
Twenty-eight percent of restaurants that didn’t receive RRF grants report they are in danger of being evicted compared to 20% of businesses that received RRF, per IRC survey data.
Article top image credit: dapiki moto. (2020). "New Normal" [Photograph]. Retrieved from Unsplash.
How independent restaurants are finding creative ways to survive COVID
In the wake of COVID-19, pivoting has taken on a whole new meaning, and few restaurants represent success in this "new normal" like Bywater in Warren, RI. For their cozy, upscale casual restaurant, takeout was "a steep learning curve," said co-owner Katie O'Donnell. "It was a lot of trial and error. The reason Online Ordering has taken off for us is we've tried to stay a step ahead."
Bywater's best practices for pivoting your restaurant in a pandemic:
Use email and social media to establish trust with your customers and guests.
Keep your menu and offerings interesting: partner with other restaurants, chefs, and businesses to keep your customers ordering every week.
Pay attention to your Pmix (product mix) on a daily basis, people want different food on different days of the week.
Building and optimizing an online ordering menu
When setting up their first online ordering menu, Katie looked at her Upserve Menu Magic Quadrant. "We went into Upserve to pull our best sellers that we knew people would come back for," she noted. "We set up our online menu so we could keep labor costs low, streamline our menu, and sell the crap out of everything to keep revenue high and costs down."
As the pandemic dragged on, Katie kept an eye on her Pmix to make sure they were constantly iterating on their menu to improve revenues. She noticed that guests preferred to buy cocktail mixers at a lower price point vs. to-go cocktails which had a smaller revenue margin. "People have vodka in their house," she said with a laugh. "So even though we can sell the whole cocktail, it made more sense financially to just sell the mixer. The profit margin is so different when you have to think about packaging."
She's also constantly testing the order and organization of her Upserve Online Ordering menu. "We run the Pmix in Upserve every night to see what's selling and look at the graphs," Katie said. "We refine the graph to just show the top five things and break it down, so I'm using the Upserve Menu Quadrant more than I ever used to."
Katie has found that they need to be more nimble because take out is different than dine-in in terms of attention span. "You get more direct feedback with to-go, especially with a pared-down menu," she said. "If you don't have the thing they want, you won't make the sale. They'll click over to a different restaurant."
Katie and her staff are using Upserve analytics to take a hard look at who their regulars are, who the highest spenders are, and how to keep both engaged through a mix of hard data and anecdotal feedback. One insight she has uncovered is that they may be switching up their menu too quickly. "We keep underestimating how popular things will be," she said. "Last week we took our fish and chips off the menu and we had a 40% drop in sales and non-stop calls about it. People want what they want! So we brought it back and sales were back up. If we were open for dine-in we'd never run a single menu item for this long."
No restaurant owner would choose to be in this predicament, but focusing purely on Online Ordering has shifted how Katie plans to run dine-in at Bywater going forward. "We're so focused on changing it up, that we've overlooked the long-term audience for certain dishes or specials," she said. "Now, only when sales start to drop organically do we take things off the menu."
Diversifying revenue and finding new customers
Looking at models from restaurants like Canlis, Bywater put together a box of local produce, wine, and treats that could be tacked-on to a to-go order. They sold out of their first run and made $13,000 in the first week – all money that stayed in her small community of business owners.
"The first CSA boxes were huge," Katie said. "We let it be an organic, social media-driven thing which was good because we reached our bandwidth in terms of what we could produce." They quickly pivoted to special occasion boxes for Mother's Day, which quickly sold out and generated press and buzz for the restaurant. Now, they're formulating a subscription box service that would provide a curated box every month with different partners.
Katie suggests restaurants trying on this tactic focus on an on-brand theme for each box and then work around that theme to fill it. For their Father's Day box, Bywater went for a grilling theme. They worked with a local butcher to provide prime cuts of meat, packaged alongside classic Bywater sauces. "What great wine goes with that? Is there a book about grilling that fits? It all builds around what we would do at Bywater," she says, ideally making the boxes an extension of their dine-in experience. They also promote the boxes with social media components: a video from a local pasta maker, preparation suggestions for the vegetables, or even a live wine tasting on Instagram.
"We're trying to recreate normalcy but have fun with the fact that it's not normal," she said. "If people want Bywater in their lives, but takeout gets boring, the boxes create a way to bring Bywater in peoples' homes."
Article top image credit:
Bywater/Jen Lial Photography
'A huge slap in the face': Milwaukee chef on losing his RRF grant
Since he was a kid in Venezuela, Amilinda owner Greg Leon was surrounded by cooking. But the pandemic nearly took that away, as his restaurant was stripped of promised funds and staffing took a hit.
By: Thai Phi Le• Published May 24, 2022
With to-go containers scattered on tables and empty seats in the dining room, Greg Leon, chef and owner of Amilinda in Milwaukee, would look around and think his restaurant wouldn’t survive. During the height of the pandemic, this crossed his mind at least once a week.
“It was soul crushing to come into a restaurant that once had been vibrant and full of life and energy and to come in and [see] it just be dead,” he said.
May 2021, however, brought hope.
Applications for the Restaurant Revitalization Fund, a federal grant program created to revive the battered industry with $28.6 billion, opened up. The fund promised a three-week priority period for eligible minority-owned businesses, and as a Latino and LGBT business owner, Leon quickly filled out the paperwork.
“So we had gotten a letter from [the Small Business Administration], maybe two weeks later saying you've been awarded $285,000. It will be deposited in your account within the next week,” Leon said.
He started thinking about all the ways he could use this money. He wanted to give all of his employees a raise. He’d pay off debt. There were going to be new tables and chairs, and he’d fix the things in his restaurant that were worn down. “For a week and a half, you're in that mental state of, ‘Oh my God, life is amazing.’”
But the day the money was supposed to be deposited into his account, nothing was there.
Leon called the SBA. A representative told him it was just a “glitch in the system” and that he would receive his money in a few days. In reality, the glitch was a delay. A group of White restaurant owners had sued the SBA, alleging the priority period was discriminatory and therefore unconstitutional.
Soon after his conversation with the SBA, Leon opened an email from the agency. “We regret to inform you…,” it began. The $285,000 promised to Amilinda was gone.
“To receive an email saying, 'Sorry, your grant has been rescinded because of this lawsuit' … it was a huge slap in the face," Leon said. "Because you know, like, literally I just spoke to you two days ago, you told me there was no problem. Now you're telling me I'm not getting this.”
The nearly 3,000 restaurants that had their grants revoked in the wake of the lawsuits were placed at the end of the RRF’s queue, but in less than three weeks, the program ran out of money. A year later, Leon has stopped waiting for additional funds.
It could have been worse for Leon. But he was smart. He hadn’t used any of the promised grant money before it was rescinded, working only with what was actually in his bank account. Amilinda didn’t expand as Leon and his team had planned. It didn’t open for more hours like they wanted. There was no additional staff as hoped.
“So that’s where we are,” Leon said. “We did survive.”
From cooking at home to finding a home to cook
Amilinda, a combination of Leon’s father’s name Amilcar and his mother Linda, pays homage to Leon’s childhood. He grew up in Venezuela, with the sounds of music and the sizzle of the barbecue permeating his home. On Saturdays, he and his brothers would wake up, eat breakfast and head to the meat market with their parents. They’d also visit the grocery store and the fish market. Then his dad would start cooking as his large family came over to spend the day together. Sunday was no different.
Leon recounts a story from when he was 17. He had asked his mom what they were doing this weekend, and she responded that they were having a barbecue.
“I was like ‘Ah again. We do this every weekend. It's so boring,’” he recalls. “And I remember my mom looking at me. She's like, ‘Your dad works really hard during the week. This is what he likes to do. This is what we're going to do.’”
Looking back, he’s thankful to have grown up in that home — a house then aptly named Amilinda as well — surrounded by family and friends. “They were the ones that, in their own way, showed me that you can use food to make the world a better place and to bring some joy to other people,” Leon said.
By 1989, Leon had moved to the United States. Five years later, he was in San Francisco, working in restaurants with “zero experience.” At first he wanted to be a pastry chef, but it “wasn’t my jam.” Then he decided to try creating savory dishes, experimenting first with French cuisine. But in 1997, he got an opportunity to travel to Spain, where learned the complexities of Spanish and Portuguese cooking.
“There’s just another level of flavors and how they relate to food and sharing their cooking that really, really spoke to my soul,” he said.
Leon returned to San Francisco but by 2012, he decided he would never be able to afford to own a restaurant there. So he packed up his belongings, grabbed his dog and they traveled across the U.S., visiting friends and looking for a place with a nice food scene.
A friend from Milwaukee invited him to visit, telling him he should open a restaurant in the Midwestern city. “It was not on my radar at all. … I said, ‘You're crazy, I don't even know where it is,’” Leon recalls. “And I came to visit and fell in love with the city. I was here for three days before I decided to stay.”
Amilinda began as a pop-up restaurant in 2013, which lasted until 2015 when he moved into his current 52-seat space in downtown Milwaukee. Over the years, his team grew to 12 employees and by early 2020, they had plans to expand into lunch service.
Then the rumblings of something called the coronavirus started.
A constant fight to keep the lights on
Leon admits, “2020 is a little fuzzy.”
In mid-March, cases were creeping into Milwaukee. Around Friday, March 13, questions started racing through his mind. “What are we going to do? What’s going to happen? I think we’re going to get shut down,” he said.
By Sunday, Leon and his now former business partner decided to close because customers were getting scared to go out to eat and no one knew how severe the virus could be. They decided to lay off all of their front-of-house workers so staff could collect unemployment.
Leon thought these cuts would be temporary, hoping he could bring everyone back by the summer. “We hung onto our kitchen crew until June, but it just became obvious that the restaurant was going to continue to hemorrhage money and that we had to get rid of everybody,” he said.
“To receive an email saying, 'Sorry, your grant has been rescinded because of this lawsuit' … it was a huge slap in the face. Because you know, like, literally I just spoke to you two days ago, you told me there was no problem. Now you're telling me I'm not getting this.”
Chef and owner, Amilinda
His 12-person crew was now down to five, which included Leon’s father and his father’s wife. “My dad and his wife washed dishes,” Leon said.
The first couple of months, Amilinda’s to-go business was bumping. People ordered frequently to try to help the restaurant survive, but as the pandemic dragged on, the numbers dropped. Leon cut the restaurant’s hours from 5 to 10 p.m. to 5 to 8 p.m., Tuesday through Saturday. Some nights, he was the only one cooking.
But Amilinda soon started cooking for different meal programs around the city, as well as World Central Kitchen, to help people in need. Leon also created a program with local pastor Karen Hagen called Hungry Hearts. The nonprofit, which had a roster of 11 restaurants, including Amilinda, gave free meals to community members in need. Every Saturday, three restaurants would provide Hungry Hearts with 100 meals in to-go containers, and in turn, the program would pay each of them $1,000.
Hungry Hearts, which was funded by donations, lasted until October 2021, helping participating restaurants take home a few thousand dollars a month. “They were able to keep their lights on, maybe keep some of their staff and stay afloat during the pandemic,” said Leon.
Amilinda was also hired to make and deliver meals to local hospitals and fire departments. And the restaurant was helped by generous landlords who told them to pay whatever they could afford and when the pandemic passed, they would figure it out. Amilinda received some small state grants as well, and landed about $30,000 through the Paycheck Protection Program.
“But there were a lot of days when it didn't seem like it was going to be feasible to keep the doors open,” Leon said, especially when his business partner and now ex-husband left in September 2020, leaving the finances in disarray.
He remembers often calling chef Caitlin Cullen crying and wondering how he was going to keep going. She'd give him a pep talk. “She’d be like, ‘You've got this. You don't want to shut the restaurant down. What are you going to do if you shut the restaurant down? Do you really want to go work for somebody else?’”
And his regulars would send notes: “Please stay open.” “Don't close.” “How can we help?” Several donated their stimulus checks to Amilinda. “So you know, that was what would get me out of a funk,” Leon said.
A ‘demoralizing’ blow to the industry
On May 24, a year after RRF officially ran out of money, there is no major financial savior in sight. Less than a week earlier, the Senate failed to pass a bill that would have replenished the fund with $40 billion.
Just three hours after the vote, Leon said he had already heard from dozens of restaurant owners that will now have to shut down. Thousands of people across the country will be unemployed, he said.
“For the industry as a whole, it’s a gigantic blow. There are a lot of restaurants that are worse off than us,” Leon said. He knows chefs who have mortgaged their houses to stay open and operators who have taken money out of their children’s college funds.
Amilinda is operating as if it’s never going to see its once-promised grant. “I haven’t put any eggs in this basket. While I was hopeful, I wasn’t counting on the money,” he said. Leon and his team will stay the course and delay opening extra days for “quite awhile now.”
“It’s very demoralizing that our elected officials don’t care. We are disposable to them. It’s demoralizing that what we do on a daily basis isn’t considered ‘enough’ to save."
Chef and owner, Amilinda
And though the restaurant’s foot traffic numbers are back to pre-pandemic levels for now, Leon’s seen cancellations increase as virus cases rise. For those who see his bustling restaurant — and the news that Leon is now a James Beard-nominated chef — and wonder why Amilinda still needs money, he reminds them, “There's still a big chunk of debt that happened during the pandemic because we weren't bringing in enough money to pay a lot of bills.” Returning customers doesn’t equal recovery.
RRF’s early closure, and a lack of a refill, has also created inequity among restaurants who received grants and those who didn’t. “It's difficult competing with these restaurants who now have this huge war chest,” Leon said.
While Amilinda now has seven employees, the restaurant is barely at half of its pre-pandemic staffing levels. “How can we tell somebody to work for me, but all I can pay you right now is $15 bucks. And they're like, ‘Well, why would I want to come work for you when the restaurant down the street can pay me $20.’”
For Leon, all he wanted was for the government to even the playing field. Its inability to do so has left lingering anger. “It’s very demoralizing that our elected officials don’t care,” he said. “We are disposable to them. It’s demoralizing that what we do on a daily basis isn’t considered ‘enough’ to save.”
Article top image credit: Permission granted by Amilinda
6 restaurant tech solutions to combat 2022's challenges
From QR codes to advanced mobile apps and robots, restaurants are planning to adopt more technology within their operations in the year ahead.
By: Julie Littman• Published April 20, 2022
A few decades ago, full-service restaurant managers and owners often greeted customers at the door, shaking their hands and checking reservations in a book at the front desk. But today, many restaurants are quickly phasing out these analog operations due to ongoing labor pressure.
So what's filling the gap left behind by these human interactions? For a growing number of restaurants, it's robots, QR codes and self-order kiosks. But interest in labor light or labor-free solutions appears to eclipse actual implementation among operators.
Ninety-one percent of restaurants believe automation geared toward inventory would be a key use case, and 62% feel it would help better manage online, dine-in and delivery orders, according to Square's Future of Restaurants: 2022 report. Despite this sentiment, only 36% of these respondents have upgraded their business technology in the last year.
"The hospitality industry has been a late adopter in many ways to the technology trends that other industries and other markets have seen such progress [in]," Stephen Mancini, senior manager of strategy, technology and transformation at CohnReznick, said.
There's reason to be cautious when it comes to investing in new technologies however. Many restaurants, especially independent operators, are struggling to protect their margins amid rising food costs, increased wages and a lack of federal support. Cutting-edge tech solutions can be expensive, and SevenRooms CEO Joel Montaniel advises restaurants to do their research and ensure they comprehend the full benefits of the technology they are interested in.
"Make sure you understand what the true cost is to use that platform," he said. "Whether that's the cost that you pay to get what you get, or whether that's the ability to integrate into things you care about or the ability to support your business."
There's a host of technologies that can optimize various aspects of restaurant business and make the challenges of the current landscape more manageable. Not sure what's right for your operation? Explore some of the most popular technology investments among restaurants below.
Mobile apps that connect to back-of-house tech
Prior to the pandemic, the focus of a restaurant's mobile app was limited to improving connections between a brand and its customers, enhancing marketing and reducing pressure on front-of-house staff, Nick Cole, head of restaurant finance at MUFG Americas, said.
Now, in order to optimize throughput and guarantee convenient and efficient service, mobile apps need to coordinate with kitchen technology to ensure orders are fulfilled on time, Cole said. This also means apps need to integrate with third-party delivery partners. Shake Shack, for example, added in-app delivery ordering in 2021 that allows diners to track their orders in real time.
Fast food chains are also starting to use advanced logistics to figure out where a customer or delivery courier is located and then notify the staff on when they should start the order, Jim Balis, managing director of CapitalSpring's strategic operations group, said. This data ties to Google Maps or Waze or other location services, he said. Taco Bell's Go Mobile stores, for example, will track a customer who orders through its app and have their orders waiting for them at the drive-thru upon their arrival.
While QSRs with drive-thrus thrived in the early days of the pandemic, fast casuals with good apps, efficient kitchens and delivery models became just as convenient as restaurants with drive-thrus — even without drive-thrus, Cole said. Panera added dine-in mobile ordering to its app in February, for example, allowing customers to order from their tables and receive alerts on their phones when their orders are ready.
"How technology in the back-of-house has married up with that front-end technology of the app ordering system [has] completely changed the landscape for some businesses and it's been a real separator for companies that have outperformed in this environment," Cole said.
While many restaurants added QR codes to their tables to eliminate high-touch menus after the pandemic began, 45% of restaurants say they plan to offer QR codes for menus after the COVID-19 crisis ebbs, according to Square.
"Interestingly the initial driver for much of this innovation — COVID — isn't even why it may stick around. QR codes at tables and new ways to serve customers will actually be driven by labor shortages and rising prices," Aman Narang, COO, president and co-founder at Toast, said in an email.
QR codes will likely become increasingly common at full-service restaurants since they can alleviate common inefficiencies, such as customers needing to flag down wait staff to order and pay. Using QR codes could help servers to focus on bringing food and drinks to tables rather than spending time taking orders and processing payments. This switch could allow wait staff to manage seven to 10 tables instead of four, Balis said.
"[QR codes are] something that's going to continue to evolve into not just ordering, but also payment and other factors," Balis said.
QR codes are also replacing tabletop ordering technology, which are becoming a bit outdated, Balis said. Restaurants would offer limited menus and games guests could pay for, which would help cover the cost of operating the device. But as more people began playing games on their phones, guests weren't using the devices in that way, Balis said.
Datassential found 58% of consumers would like the option of using a QR code to pay at a restaurant or grocery store. Among consumers who have used them, 70% said they had a positive experience, per the research.
"People are just more comfortable using their phones," Balis said.
Kiosk ordering at fast casual restaurants and QSRs is becoming more commonplace, especially in airports, Balis said. McDonald's Restaurant of the Future remodels, which included new digital kiosks, are emblematic of this trend.
This technology allows customers to place orders through a simple interface that features menu pictures and allows for customization, Balis said, which can increase efficiency. These units also help with the current labor crunch. Instead of having three people working at the cash register, a restaurant could have just one staff member on standby in case a customer needs help with ordering.
Kiosks also have flexible payment options — chains can either pay for the units they need up front or pay a few hundred dollars a month through a subscription to cover the cost. This cost would eventually be recouped through reduced labor needs, Balis said.
"You could have three or four kiosks, which ultimately may even be replaced by a phone and you walk in and it recognizes you or [it] may bring up your whatever you ordered last time … and then the restaurant doesn't even have to invest in the hardware for the kiosks," Balis said.
Some restaurants could eventually forgo kiosks entirely as apps become more advanced and better coordinate with kitchen systems and third-party delivery, as well as notify customers when their orders are ready.
"You're really behind if you don't have a good user-friendly, useful interactive app," Cole said.
Kiosks could still be attractive ordering technology in the future, however, because their larger screens allow restaurants to better promote menu items, Balis said.
Customers will increasingly order at the drive-thru with voice automation technology that is similar to Apple's Siri functionality, Balis said.
"I think that's going to take over pretty quickly," Balis said. "We see some technology around that that's really good actually. … Not only does it [try to] upsell 100% of the time to larger bundles or add a drink or dessert or whatever, but it also has technology now that … says people ordered these combinations of items are more inclined to accept upsells of this incremental item X, Y or Z. The algorithms around that have been pretty successful."
Companies are also developing face recognition technology that recognizes patrons at the drive-thru, shows them their past orders and allows them to pay with their faces, Balis said.
Fair Oaks Burger in Altadena, California, for example, has been testing facial recognition that allows customers to pay without using cash or a credit card. Customers simply ask to use PopPay and a camera takes their photos and then charges guests' account. PopPay, which is part of PopID, started out as a facial recognition system to help speed up the checkout process at kiosks located within CaliBurger.
While the industry is likely years away from robots taking a significant role in restaurants, many major chains continue to test different ways to deploy them in the back of house to save on labor costs. Chipotle partnered with Miso Robotics in March to test an autonomous kitchen assistant that can cook and season tortilla chips, while White Castle is expanding its partnership with Miso, which developed Flippy 2 to work a fry station, to 100 more locations.
Bear Robotics, which provides restaurants with food runner robots, secured $81 million in funding in March. It plans to use the additional funding to add products that will automate tasks in hospitality. The company's robots have already been used at Denny's and Chili's units.Chili's expanded its partnership with Bear Robotics in April to bring Rita the Robot to 51 additional locations after its initial 10-location test.
Robotics are particularly ideal in helping with singular tasks, and Balis has been advising robotics companies to not overly complicate use cases, he said. For example, robots can help increase order accuracy and consistency in food assembly like with pizzas and placing the exact amount of cheese or other ingredients, which could reduce food waste, but let the human put the pizza in the oven, Balis said.
But it may be some time before robotics are widely seen across the industry, Mancini said.
"I haven't seen anything that's a catalyst for a burst in application, nor have I seen anything as a deterrent," Mancini said. He added that some restaurants might implement a combination of self-order kiosks or different technology that automates payment at the front of the house and back-of-house automation, including robotics. Right now, companies are still determining if these technologies will drive value and better streamline operations, Mancini said.
Computer vision, which uses up to 50 cameras to monitor operations and notify staff of inaccurate orders, is also expanding within the restaurant space. This technology can also monitor team members over time, gathering data on how they work together and providing analytics on who works well together in which positions, Balis said, which could also improve back-of-house efficiency.
A growing number of computer vision companies are entering the foodservice space.
Lifestream AI entered the U.S. in April to help restaurants and hospitality industries analyze on-site and off-premise consumer behavior. Presto also offers camera technology through its Vision product that identifies throughput and order accuracy issues, which can also be applied to drive-thrus. Agot AI, which uses computer vision in the kitchen and drive-thru, secured $10 million in funding last year.
Operators put data to work
Among the biggest shifts within restaurant data usage and strategy will be a focus on financial planning and analysis tools. These capabilities allow an organization to run simulations to better understand the impact of disruptions like weather or supply chain. Operators can do scenario forecasting to better understand potential positive or negative impacts on the company, Mancini said.
If a restaurant wants to increase its off-premise sales by a certain percentage, for example, it can see how many staff members may be needed to hit this benchmark.
The next stage of customer engagement and loyalty will be ushered in by better understanding customer habits and integration of that data into one single-stack solution, Mancini said. Aggregated data could provide better insights into how customers react to marketing and what kind of impact campaigns have on revenue, he said.
"There's opportunity for real enhancement of the loyalty space and customer engagement and that frictionless checkout component," Mancini said. A combination of accessing loyalty points, checking out at a table and removing the payment processing aspects of the customer experience are real opportunities going forward, he said.
Geofencing to target consumers in specific market areas or on-premise with marketing could also become more common, Mancini said. For example, restaurants can use tracking data to understand on what day and time customers visited a specific location and then send out push notifications at that same time on a subsequent day to inform the customer of new offers or ask them if they'd like to order something that day, he said.
Article top image credit: Courtesy of Miso Robotics
Want to expand through host kitchens? Here's what you need to know.
Brands should keep in mind how they plan to maintain consistency in food quality and the customer experience.
By: Julie Littman• Published Oct. 7, 2021
This is the second in a three-part series highlighting host kitchen partnerships and virtual brands. The first in the series discussed how restaurants can become host kitchens.
In 2021 fast casual Asian chain Wow Bao hit a milestone that would have been unthinkable just a few years ago: It opened 53 locations in one day. How did it pull it off? None of those units were traditional brick-and-mortar restaurants — they all opened inside other restaurants' existing kitchens.
"The problem with the brick-and-mortars opening is you need construction schedules, you need to hire people. There's all this involved right now, [including] capital expense. We don't incur any of that," Geoff Alexander, Wow Bao president and CEO, said.
This strategy is part of the company's Dark Kitchen program, which was established in 2019 as a way to quickly expand without having to turn to traditional growth. Through its Dark Kitchen program, it partners with other restaurants to deploy its brand in delivery-only kitchens with a menu of buns, bowls and potstickers. When the pandemic hit, the plan paid off.
Since April 2020, Wow Bao has opened 400 delivery-only kitchens and was on its way to another 300 by the end of 2021, Alexander said. Prior to its Dark Kitchen program, Wow Bao had only six physical locations in Chicago and six physical airport locations.
Other restaurants and restaurant-adjacent companies have used host kitchens to expand rapidly during the pandemic as well, including Dickey's Barbecue Pit, which aimed to be in 25 host kitchen locations by the end 2021, and Nathan's Famous, which opened its 100th ghost kitchen location in February 2021. Creating Culinary Communities (C3) partnered with Chowly, a point-of-sale integration company, in June to give 10,000-plus kitchen partners across the country access to C3's virtual brands. Nextbite is also expanding its reach with its virtual brands and celebrity brand partnerships, adding George Lopez Tacos to its lineup in May.
Host kitchens can offer restaurants limitless opportunity, Alexander said. If you have seven brands, you could have seven different restaurants in New York City operate one of each of these brands and then a block over you could have another seven restaurants hosting one, he said. Just about every restaurant in the U.S. could have a Wow Bao in it, he said, adding that it can also be a global opportunity.
"You can just turn on more restaurants overnight," he said.
Even with the rapid growth potential, Alexander doesn’t see a risk in oversaturation, but a chance for consumers to have more choice.
Ghost kitchens providers, on the other hand, need to find locations large enough to accommodate a shared kitchen operation, which means there are limited amounts of opportunities in a city, he said.
The host kitchen can also help struggling independent restaurants tap into new revenue at little cost or disruption to their business.
"What I’ve heard from operators going back to last summer and even now is that without us those restaurants might not even be around," Alexander said. "We were their beacon of light that allowed them to keep the doors open, pay the rent and so on."
While Wow Bao built its own host kitchen program, other restaurant chains like Nathan's Famous have leaned heavily on partnerships with host kitchen facilitators like Franklin Junction. Nathan's Famous is using the channel to expand not only its main brand but also its two virtual concepts, Wings of New York and Arthur Treacher's, James Walker, senior vice president at Nathan's Famous, said.
"We wanted to really bring our product to where consumers are, in a way that made sense for consumers and also made sense for our business partners. Both of those aspects are critically important to us," Walker said.
Nathan's portfolio has grown to include 235 delivery kitchens as of August, and many of these locations launched during the pandemic.
"Opening 235 brick-and-mortar locations not only would have been more costly from a capital expenditure standpoint but also just more time consuming," Walker said.
He pointed out restaurant demand for access to the Nathan’s, Wings of New York and Arthur Treacher's has been strong globally and across the U.S., so it made sense to partner with a company like Franklin Junction that could fast-track expansion.
"We believe what's critically important in our offerings and our three brands is that they are branded, they have a history [and] they've got a very strong consumer proposition," Walker said.
Working with Franklin Junction also allows Walker and his team to focus on other business opportunities. The platform handles the client restaurants serving as host kitchens and offers them support, much in the same way Nathan’s would manage its franchisees.
He also mentioned Franklin Junction prefers to work with established brands instead of using delivery-only concepts.
"We believe there's plenty of great brands already out there that are looking for that rapid expansion opportunity and to access new markets and new consumers that otherwise would either take them many, many years to[capture] with lots of money, or may just not be possible," Rishi Nigam, Franklin Junction CEO, said.
Because people recognize the Nathan's name, it continues to see robust sales just a year or two after the brand is launched virtually in a new market, Nigam said.
Darrin White, COO at Frisch's Restaurants, which owns and operates nearly 100 Big Boy restaurants in Indiana, Kentucky and Ohio and franchises 25 units, said he prefers working with established restaurant brands, like Nathan’s Famous. White is a long-time proponent of host kitchen partnerships and has seen an increase in revenue from hosting brands from Franklin Junction’s network.
A brand with history — even if that history is a few locations in one city — is very identifiable and has more customer awareness than anentirely virtual brand with no physical presence, White said. This way, even if a customer has not heard of a brand before, they can look for it on Google and see that it actually exists. This tends to lend credibility to the brand, White said.
Brand and menu consistency are key
Even though well-established restaurant brands benefit from customer recognition, there are still a lot of things chains need to understand before entering a host kitchen partnership, experts said. For example, chains will lose control of food quality and consistency by outsourcing their brand to host kitchen operators, experts said.
"I think that’s probably where we’re going to see the shakeout in terms of brands and [host kitchen] facilitators," Michael Schaefer, global lead of food and beverage at Euromonitor International, said. "The ones that can ensure that consistent quality ... [become] a viable model for brands and for restaurants."
Restaurants need to be wary of presentation, consistency, the host kitchen's coordination with delivery drivers and the overall customer experience, Buck Sleeper, head of retail experience consulting at EPAM Continuum, said.
"If you're an established brand like Nathan's Famous, you need to be very careful when you put your brand out there. Because if it flops in partnership with someone else's infrastructure, they don't get the blame, you do," Sleeper said.
Even if a restaurant brand is well known, the host kitchen operator could be functioning on a level of anonymity, which can be at odds with consumer demands for transparency and accountability, Sleeper said.
"I do think that for franchise brands that are used to working with outside operations, this host kitchen could be attractive for the right menu items for the right situations," Schaefer said.
Nathan's food works well in this model because hot dogs and sandwiches travel better than fried foods, for instance.
"But [host kitchen partnerships] also [require] tailoring of the brand experience, so that you're really only putting out food and menu items that are executable in that environment as opposed to something that requires a greater specificity of a unique kitchen or a differently trained staff," Sleeper said.
Despite some of these challenges, middle managers and owner/operators of restaurant brands have told Sleeper this arrangement really works for them. Host kitchens allow them to significantly scale — opening 30, 40 or even 100 virtual kitchen locations — and that dynamic is worth the loss of brand control, Sleeper said.
Choose your partners wisely
One way to help ensure brand consistency is to be careful when selecting host kitchen partners, Walker said.
"[Host kitchens are] going to represent your brand, regardless of whether it's the delivery experience. We view delivery as just a different avenue to create an experience. We are just as concerned with the delivery experience as we are the dine-in experience," Walker said.
When a potential restaurant partner inquires about Wow Bao's Dark Kitchen program, Wow Bao will review its menu, photos of food and reviews online, Alexander said. Wow Bao also sends prospective host kitchen partners a marketing deck and reseller agreement, which typically leads to a phone call where Wow Bao can provide background on the program. A savvy operator usually asks a lot of questions. If an operator just sends back a signed agreement sight unseen and Wow Bao’s team never meets its leadership, that’s typically a red flag, Alexander said.
"If you're an established brand like Nathan's Famous, you need to be very careful when you put your brand out there. Because if it flops in partnership with someone else's infrastructure, they don't get the blame, you do."
Head of Retail Experience and Consulting, EPAM Continuum
"What you have to be careful with when you grow at such a rate ... [is that] consumer sentiment cannot be forgotten," Alexander said. "Very good operators know how to continue that hospitality feeling for the buyer at home."
Wow Bao offers a training program with virtual videos and Zoom walkthroughs to make sure the right kitchen equipment is set up. These sessions allow the company to be confident the operator will execute the brand correctly, Alexander said. Wow Bao supplies its food products — the operators just have to steam these items and prep them for delivery.
"We're not teaching [host partners] how to make recipes. We're not teaching them how to do prep work," Alexander said. "It's very simple as a product."
While Wow Bao and other brands are growing through this model, Alexander doesn’t think brick-and-mortar stores will ever go away.
"The restaurant industry needs to constantly evolve. This is just a new evolution, a new innovation to how we can reach customers," Alexander said.
Article top image credit: Permission granted by Wow Bao
Now hiring: How the labor shortage is squeezing full-service restaurants
Foodservice workers burnt out by the segment's recent instability are leaving for other industries or living on high unemployment benefits, sparking a staffing crisis as dining rooms open.
By: Julie Littman• Published May 4, 2021
When restaurateur Robert Micheli moved from Miami Beach to Washington, D.C., in March 2020, he was excited to take over the helm as general manager of Dirty Habit, a 10,000-square-foot restaurant attached to Kimpton Hotel Monaco in the city's Penn Quarter. He previously ran various restaurant operations, including Katsuya by Starck, for over five years, but this would be his biggest restaurant by square footage yet.
Pre-pandemic, the restaurant, which is located across from Capital One Arena, often served 500 hockey fans beer on its 7,000-square-foot patio after games. But Micheli didn't get a chance to see the restaurant function at full capacity. Shortly after he arrived in the District, Mayor Muriel Bowser ordered indoor dining rooms to shut down.
"When you take over a new business, as a general manager or restaurateur, there's always so many projects to get done. And you always say, 'Man, if I could just have a week where we weren't open then I could clean the storage rooms,'" Micheli said. "Well, I got nine months of it."
During the District's dining room closures, he developed new operations and procedures, such as changing the restaurant's orientation process and training program based on employee feedback.
When the restaurant reopened on Valentine's Day this year, everything was in place to create a relatively seamless transition under new management. This preparation paid off when patrons flocked to the dining room, even with capacity limited.
"Guests and customers are very excited as restrictions are letting up. And we're also seeing that the amount of people coming out is growing week over week," Micheli said. "We're just not able to staff that quickly."
As of early April, the restaurant had only about 10 full-time, front-of-house employees on payroll, down from a maximum of 65 to 70. The back-of-house, which functioned with about 80 staff members pre-pandemic, currently has seven employees, Micheli said.
Restaurant employment during the pandemic
Total restaurant employees since January 2020
The struggle to bring back and hire full-time staff is a challenge restaurants across segments face as the economy reopens, but the labor shortage is hitting full-service establishments particularly hard. In Baltimore, Atlas Restaurant Group, which currently employs 1,200 people across its 18 properties, is short 100 employees, Founder and President Alex Smith said.
A Western Pennsylvania restaurant has posted a "Now Hiring" sign on its window for six months, only to receive two job applicants. Restaurants in Wisconsin are seeing that even if they have a lot of applicants, only half show up for interviews.
Foodservice job demand is low in major restaurant cities, too. In New York City, Rick Camac, dean of restaurant and hospitality management at the Institute of Culinary Education, emailed 200 of his closest industry contacts that he was looking for candidates to fill a management position and host role at restaurants he consults with.Camac, who also owns a restaurant in New York City, often helps clients find workers. This time, however, he received zero leads and no resumes.
"When you take over a new business, as a general manager or restaurateur, there's always so many projects to get done. And you always say, 'Man, if I could just have a week where we weren't open then I could clean the storage rooms.' Well, I got nine months of it."
General manager, Dirty Habit
Though the restaurant industry lost 2.5 million jobs during 2020, hundreds of thousands of jobs have opened up amid relaxed dining room restrictions and a swell of diners hungry for a taste of pre-pandemic life. During Q1 2021, restaurants gained 442,000 jobs, but the industry still has a long way to go to break even. Some restaurants are facing a new vicious cycle as well. With so few employees available, they have to reduce hours and some have decided to close on certain days, which will only reduce revenue.
"It's not like you flick on a switch and all of a sudden you're ready to handle, you know, 50% capacity as opposed to 35% or 25%," said Camac. "Yes, we're all welcoming and look forward to getting back to higher and higher percentages, but you need to see more ramp up time."
Unemployment benefits, COVID-19 fears are keeping workers at home
One of the biggest stumbling blocks for restaurants is searching for qualified talent. Many of these sought-after employees have moved away, experts say.
In highly populated metropolitan areas, like New York City, many long-time restaurant workers have moved to areas with more affordable costs of living. That's what happened to many of Dirty Habit's employees, Micheli said. Many moved outside of Washington, D.C., to areas like Philadelphia, Baltimore or Richmond, Virginia — making it too difficult to commute to the District, Micheli said. Some of Dirty Habit's staff also took positions with restaurants that were able to open up sooner, he said.
The boost in unemployment benefits, on top of stimulus checks, have made it more worthwhile to stay unemployed than rejoin the workforce, experts shared.
"A lot of people can make as much money unemployed as they can working in a restaurant," said Jason Berry, founder and principal of Knead Hospitality & Design in Washington, D.C. "It's a really hard time finding employees. Now that everybody's coming back, everybody's hiring at the same time."
Many unemployed workers are making between $700 and $1,000 each week, with the addition of the $300 bonus offered by the federal government, Berry said.
"The delay in rollout has affected people being able to come back in certain counties that aren't as quick to give vaccinations to everybody [and] has also slowed down my rehiring process," Micheli said.
The combination of higher income on unemployment and better safety at home is a disincentive for restaurant employees to return to work, SevenRooms CEO Joel Montaniel said.
The industry's instability over the past year hasn't helped retention either, Montaniel said. COVID-19 restrictions would loosen and restaurants would bring back employees, only to lay them off again when indoor dining capacity would contract. After about two or three cycles of this, many workers have had enough, Montaniel said.
"Many of the people who aren't coming back are looking for other lines of work," Montaniel said.
The growing talent gap
An exodus of restaurant staff with 10-plus years of experience has left behind a learning gap, Montaniel said. These servers have trained a lot of staff members.
"We can't get people in quick enough. We can't get them properly trained. They're, in some cases, not as good as their predecessors because their predecessors have more experience," Camac said. "We're bringing in some people who are pure entry level and we're trying to teach them the business of hospitality and without enough time to do adequate training."
With a lack of proper staffing and training, service may suffer.
"You have less people paying attention to the guests. … The attentiveness could go down if you don't have as many people on the floor," Montaniel said.
The ripple effect is even worse in restaurant kitchens.
Landed, a mobile app that connects hourly food and retail workers with employees using AI-based technology, has seen three times the number of applicants interested in roles like cashier, host, server and carside/curbside expeditor roles, compared to back-of-house positions, Founder and CEO Vivian Wang said. On Landed, there are four times more kitchen positions available than front-of-house roles.
This is a problem for restaurants experiencing increased order volumes as indoor dining capacity limits broaden across the country and takeout demand remains high, Wang said.
"[The back-of-house is] understaffed and it places more strain on existing staff," Wang said.
Kitchen staff members are wearing multiple hats and working stations they're just not fully trained for, Camac said. The additional work and strain has resulted in many of these employees turning toward front-of-house roles that are seen as more desirable and less strenuous, Wang said.
Dirty Habit now has to closely manage its bookings and control how many seats are available on reservation platforms to accommodate its smaller team, Micheli said. The restaurant is also only open four days a week, serving dinners Thursday, Friday and Saturday nights, as well as brunch on Saturday and Sunday.
"We would love to [serve] 500 people every single night, but especially COVID-wise, you just can't do that because you have to have distance between tables," Micheli said. "So that automatically knocks down the number of guests that you're able to accommodate."
Dirty Habit can currently service about 150 guests a night and could potentially push that number to 175 if it added an extra hour to service, but that extra hour comes with risk.
"I don't want to stretch anyone so thin that tomorrow they say, 'I can't do this anymore.' So we have to pace ourselves," Micheli said. "We have to make sure that we're really being aware of how hard we're pushing ourselves while still making the money we need to make to stay open."
Restaurants raise pay, offer hiring bonuses to attract workers
Finding staff to fill in these gaps has pushed operators to ramp up recruitment efforts, pay more than the minimum wage and lean into technology.
While Micheli said he prefers personal referrals to find qualified staff, he has also hosted recruiting events on Tuesdays and Wednesdays from 1 p.m. to 3 p.m. Anyone can stop by Dirty Habit with their resume and have an interview with Micheli or another leadership team member. The company is looking for bartenders and servers specifically because it is planning to open its patio for Cinco de Mayo.
Atlas Restaurant Group has been hosting a series of hiring events around the Baltimore area to try and attract workers who don't have a background in the hospitality industry, Smith said. Unfortunately, a lot of hospitality career workers have left and found jobs outside of the sector because of the instability over the past year, Smith said.
"What we need to do is go out and … create a passion for our industry again and let people know we really can make a great living in the hospitality industry and have a great career," Smith said.
The restaurant group is taking on more entry-level people to train them from the ground up. During one recruitment event, Atlas hired 12 entry-level people, Smith said. While it won't staff all of these new employees at one restaurant, it will spread them across its 20 properties and assign them to coaches and a leadership team to train them, Smith said.
"We're doing it slowly. I think every couple of months, our idea is to bring 12 to 15 new people who are new to the hospitality industry and teach them skills that can allow them to move up in our corporation," Smith said.
Increasing pay is an obvious draw for these candidates, Wang said. For example, wages for back-of-house line cooks has gone up almost 20%, Wang said. Some operators are offering additional dollars to get their teams vaccinated, which can help overcome hesitancy to come back to work, Montaniel said.
Dirty Habit is offering pay higher than the local minimum wage, Micheli said. At Atlas Restaurant Group, Smith said hourly employees are making a minimum of 10% to 15% more than they were in 2019. Front-of-house staff under tip credits are earning more too because customers are tipping more generously, Smith said. Knead Hospitality has been offering hiring bonuses to entice new workers, Berry said.
Flexible hours are also becoming more important at these restaurants.
"I'm not going to let someone go because they need to go to a birthday party that was scheduled before they got rehired," Micheli said. "We have to live in this world of push and pull all over the place so my understanding and compromise level has definitely gone up."
But not all restaurants can afford to pay more. Many can offer pre-pandemic wages, but can't go higher than that, Montaniel said.
While the Restaurant Revitalization Fund will help with payroll, restaurants will likely need morefinancial assistance to offer higher wages to attract more workers, Montaniel said. The Small Business Administration has already said the $28.6 billion program won't have enough funds available to help all eligible restaurants.
The Paycheck Protection Program helped a lot, but it wasn't specific to restaurants and many didn't get funds through this program, Montaniel said. Restaurants also could use the funds toward operating expenses like rent and other expenses such as safety equipment and to-go packaging so there was less left over to spend on increasing employee pay, Montenial said.
The labor shortage has also pushed restaurants to invest in technology that can bridge their staffing gaps. A South Florida restaurant spent $30,000 on robots to help greet customers, show them to their seats and deliver food to tables. The robot can even sing "Happy Birthday" in four languages.
Dirty Habit uses Bebot, which is a QR code program used in the adjacent Kimpton Hotel, Micheli said. Instead of having to call the restaurant, which can take time away from busy staff,guests at the hotel are able to order their meals through a QR code in their rooms and can pick up their food when it is ready, which helps control the amount of hotel guests coming into the restaurant.
Contactless ordering and payment is becoming more popular, especially since it can allow customers to pay at the table without needing a server, Montaniel said.
Meanwhile, business is booming
Despite the labor challenges, diners are returning in droves, and some nights at Atlas Restaurant Group's locations have felt like the pandemic didn't happen, Smith said.
"It's a lot like The Avengers. Everybody disappeared for a year and then all of a sudden it's like boom everything is back open and there's thousands of people coming out. It's been crazy," Smith said.
Smith anticipates that by fall, business will be pretty much back to normal.
Because everyone is so excited to be out in public, tables are sitting longer as well, Micheli said. Before the pandemic, a table of two would sit for maybe an hour-and-a-half to an hour and forty-five minutes. Now they're sitting for two hours to two-and-a-half hours. One table over Easter weekend sat for almost three-and-a-half hours.
Dirty Habit's staff is trained to gently try to get these lingering guests to move on or offer a drink for them to sit elsewhere, but "if they're not going to move, they're not going to move, and then you just have to work out your next tables around that," Micheli said.
"It's a lot like The Avengers. Everybody disappeared for a year and then all of a sudden it's like boom everything is back open and there's thousands of people coming out."
Founder and President, Atlas Restaurant Group
While the lack of staff has limited Dirty Habit's dining room, it could cause even more problems during the upcoming wedding season. Dirty Habit reopened in October for micro-weddings and private events and was booking between six and eight private events a month, Micheli said. For that staffing model, the restaurant just allocated existing staff as needed and that worked out well, but that might not necessarily work for larger weddings, he said.
"In a hotel, you have banquets and restaurants. How do you staff both of those?" Micheli said.
Weddings require one server for 10 people and one bartender for 20 to 25 people, Micheli said. For a 500-person wedding, Dirty Habit would need at least 50 servers and at least 20 bartenders. And time is running out. The restaurant is likely to have its first wedding on May 15, Micheli said.
There is also more opportunity to attract additional business. Washington, D.C., eased restrictions on live entertainment starting May 1, and Dirty Habit is considering offering live music outside or hosting drag brunches, Micheli said. The District also allowed restaurants to return to full dining capacity on May 21.
"We're excited to see the activations of the property in general coming back. Our name is Dirty Habit. We have fun. We want people to have fun," Micheli said.
While Micheli is optimistic about the restaurant's potential, one thing will remain the same for a long time.
"We're hiring. We're hiring. We're hiring," he said.
Article top image credit: Adeline Kon/Restaurant Dive
Retention is key to solving the restaurant industry's labor crisis
As restaurants struggle to bring on employees, others have had success with keeping their workers by creating a positive company culture, boosting benefits and offering clear paths for career growth.
By: Julie Littman• Published May 18, 2021
When Delaware Gov.John Carneyinitially shut down restaurant dining in March 2020, Heirloom Restaurant owner Meghan Lee called her dad to figure out what to do. She had over a dozen people on salary, many had been with her for two to five years ago, when the restaurant opened. During her conversation with her father, she realized she'd have to lay everyone off so they could go on unemployment.
"I literally was like, 'I'm going to throw up.' Some of [my staff] have children. It just sent me into a panic," Lee said.
In addition to making sure unemployment was filed quickly on her end, Lee gave her staff food from her pantry and raised $40,000 through a GoFundMe campaign, which she distributed equally among her employees. Since she knew the restaurant would eventually be allowed to reopen, she created odd jobs for her workers in the meantime, such as power washing the patio, and paid them in cash.
Her efforts have paid off. During a time when many independent and chain restaurants are struggling to rehire and attract new employees, Lee has retained her team. Many restaurants are also experimenting with tactics to make sure their culture is welcoming for workers, boosting benefits and developing cross-training to build up workers' skills.
Experts say retention is one of the best cost-saving labor strategies, as well.
"It's the self-defeating loop as the main reason that companies should look at this. If you don't focus on retention, you're always going to be focusing on attraction and hiring," Dan Sines, Traitify CEO, said. Traitify works predominantly with high-volume restaurants, retail and hospitality companies to help with hiring.
For national QSRs with 100% to 200% turnover rates, this could be a $20 million to $40 million problem, which could substantially impact bottom lines, Sines said.
"If you can refocus your efforts, making sure you're providing a better work environment for these people, paying these people more, keeping them excited about the positions that they're in, and showing them upward mobility, that cost goes way down," Sines said. "And it becomes something that, I think, is a real ROI generator for the business."
Improving training, staff communication
Once employees are brought onto the job, proper training is key to retention, especially when it comes to career progression. Cross-training is becoming more common in QSRs, where it is easier for employees to swap roles because most employees tend to work behind the counter either in the kitchen or at the cash registers, Vivian Wang, Landed CEO, said. Landed is a mobile app that helps match hourly food and retail employees with employers.
Front-of-house staff are trained in back-of-house so they can be deployed in either role, Wang said. This tactic can also help employees gain the skills they need to move up. For example, positions like kitchen management still have a heavy emphasis on customer service, and those skills can be learned by interacting with customers at the cash register.
"We're seeing those employers [offering cross-training] are more successful in employee happiness and lower attrition," Wang said.
Lee uses this strategy at Heirloom, where her sous chef can run food out to customers while food runners can make cheese boards, for example.
"Anytime anybody new comes into the building, they are completely 100% cross-utilized," Lee said. "If you are running a tight ship and a small staff, everybody knows how to do everything."
Another way to decrease turnover is by improving the manager-employee relationship, Sines said. Traitify launched a tool during the pandemic called Engage that is designed to help solve this issue. It offers 90 days worth of development tips based on an employee's personality and ways to better interact with their co-workers and managers, Sines said. The idea behind this tool was to help with voluntary turnover, especially in QSRs, he said.
It also helps provide managers with more perspectives on how employees see things, and vice versa, helping teams find ways to get on the same page, Sines said.
"We've been able to see that by really just taking that time to show you care, [employees] are far more likely to stay and stick around," Sines said.
"We're seeing those employers [offering cross-training] are more successful in employee happiness and lower attrition."
Traitify has helped the companies it works with reduce involuntary turnover by 30% by providing personality assessments that help employers match people into the best roles, which can help eliminate firing, Sines said.It's also seen an uptick in the amount of time workers are staying. Typically staff stay about three months at a restaurant, but are now staying about a year or longer after using tools like Engage, he said.
Landed has been working with its clients to help train them on ways to better manage staff. So instead of one general manager overseeing 120 employees at a single fast food restaurant, management would expand to include an assistant manager or a shift lead who can have closer relationships with and better manage hourly employees, Wang said.
Restaurants are also making it clear there is a chance for upward mobility for employees and that restaurant roles can be long-term jobs, Sines said.
Chipotle offers transparent career paths that include certified training at every level, and crew members sometimes become a manager of a restaurant within 18 months, Marissa Andrada, Chipotle's chief diversity, inclusion and people officer, said. Last year, the company promoted 13,000 employees in the organization and 70% of its general managers come from hourly workers. In May, the company announced it has created a path for hourly crew members to become restaurateurs, the highest general manager position, in as little as three and a half years.
"When we talk to our employees, [we ask] what is it they want to be able to grow and develop and be successful and productive human beings," Andrada said.
Once an employee starts at Pajco Inc., a convenience store and franchise operator of Midwest chain Imo's Pizza and Rally's, they learn about the company's growth trajectory during onboarding and training phases, Brett Anderson, vice president of operations and business development, said. This helps communicate that the company believes in its future, and isn't just putting on a facade to attract workers, he said.
In order to create a more consistent experience, the company brought on a director of people and culture earlier in 2021 to make sure that onboarding and training is not just telling a good story but an accurate story about the company, Anderson said.
"We certainly have our struggles, but I think ultimately, we have hired the [right people] for a very long time and it's paying some dividends for us, but it's still more difficult than it’s ever been," Anderson said.
Boosting benefits reduces turnover
Many chains and their franchisees are using same-day pay apps to offer an additional perk to employees and entice them to stay, while others like Chipotle and Starbucks are offering a number of educational and health benefits.
Tapcheck, an on-demand pay mobile app founded in 2019, integrates with existing payroll processing programs to gauge an employee's earnings as they go through the pay cycle and allow them to receive their pay when they want it, Co-Founder and CEO Ron Gaver said. Tapcheck works with chains like McDonald's, Burger King, Dunkin' and Little Caesars, as well as full-service restaurants.
Offering flexible pay schedules is making restaurants more competitive with the gig economy, which offers same-day or next-day pay as well, he said. It's also doubling the amount of applications a company receives and is helping reduce turnover by 48%. Employees are picking up more shifts and absenteeism is reducing by 78%, Gaver said.
Tapcheck offers financial education for employees in its app, including 1,000 articles and video courses that discuss topics like budgeting, saving for goals, spending less credit, creating an emergency fund, banking and credit cards, Gaver said.
Full-service chain Beef O' Brady's is doing a series of focus groups and surveys to make sure the company doesn’t miss any benefits or perks the employees find important. Frequency of pay is one area the restaurant is considering, CEO Chris Elliott said. Beef O' Brady's is looking into how weekly pay might benefit its workers. The company is also considering technology that would allow servers to get their tips sent to their bank accounts at the end of their shifts.
One of the most impactful benefits to Chipotle's retention has been its debt-free educational program, which it has offered since 2019 through a partnership with Guild, an education and upskilling company. Employees that have been with the company for four months and work 15 hours a week on average are eligible to participate, Andrada said. As of early April, Chipotle has seen a 3.5 times higher retention rate among students enrolled in the program, according to a press release. Crew members are also 7.5 times more likely to move into a management role if they use this benefit.
"This is a key benefit that is not only helpful for us in terms of developing leaders for the company, but leaders for life, whether they're here or they decide to go somewhere else," Andrada said.
The company also offers English as a second language and GED completion programs for all employees and families, Andrada said.
Additionally, Chipotle offers a healthcare concierge for all of its employees and families, regardless of whether they are enrolled for the company's healthcare benefits. That program helps employees access mental health counselors, including for telehealth appointments, for a nominal cost if the employee doesn't have insurance, Andrada said. For those with insurance, the concierge can also troubleshoot billing issues and help employees get a second opinion or appointment, among other services.
"When you take care of your people, they will take care of the experience and the experience will translate to growth in the business," Andrada said. "The only way you can run a successful restaurant — and we have 2,300 of them — is that they have to be fully staffed."
Why culture matters
For many restaurants, their most impactful retention strategy has been creating a positive company culture. At Beef O' Brady's, culture means employees are treated like valuable assets and not commodities, management has a strong rapport with their employees, orientation and training is done well, and employees are offered competitive wages and benefits, Elliott said.
"The culture in the store is key to minimizing turnover," Elliott said. "Minimizing turnover is the key to being able to stay properly staffed."
Culture begins with the interview process, how a job offer is made and what the first day is like, Elliott said. Did someone meet them on their first day to show them around? Did they get to meet the other staff members? Were they trained properly or do they have the proper experience in the job to effectively perform in their new role? Did they get good performance feedback? Is their pay competitive? Is there recognition and awards for good work? What's the environment of the restaurant? Is there good camaraderie? Is it a fun place to work?
"The reason why we're emphasizing the culture piece is that's really the piece that has to be in place to ultimately solve this challenge that our owners are facing," Elliott said.
Beef O' Brady's stores that are doing well have employees who have worked at these locations for over a decade, he said. One owner will make a birthday cake for each employee on their birthday, for example.
"People will tell you the culture at that store is second to none because the owners treat the employees like an extended family and they love working there," Elliott said. "And [the employees] have a lot of loyalty to the owners. They're not going to quit and go down the street for 50 cents more per hour."
Creating a family atmosphere has helped with retention at Pajco as well. The average tenure of its management teams is 17 years, Anderson said. With about half of its employees starting out as customers, that atmosphere starts with greeting people as they walk through the doors and thanking them when they leave, Anderson said.
"A lot of people talk about [how] there's nobody out there that wants to work. I'm here to tell you, they're out there. You just have to find them," Anderson said. "Are they willing to come into your four walls? Are you willing to recruit them by doing it the right way? Your company culture speaks for itself. The proof is in the pudding, so to speak."
Diamond Hospitality Enterprises — a multi-unit franchise operator that owns over 30 Hardee's restaurants in four states — decided during the height of the pandemic to not lay off any employees, owner Rob Schmidt said. The company, which employs about 800 people, shifted labor to focus on creating a great drive-thru service when dining rooms were closed, he said.
"If we had laid off 25% of our employees or had closed restaurants, we certainly would not be in a position like we are today where we're saying, 'Hey we're ready to grow, we need more. We want to add employees,'" Schmidt said.
"A lot of people talk about [how] there's nobody out there that wants to work. I'm here to tell you, they're out there. You just have to find them... Are you willing to recruit them by doing it the right way?"
VP of operations and business development, Pajco
Schmidt recounts a story from earlier this year when he sent his office manager out to visit all of the company's restaurants in Mississippi and Alabama. He told her to bring doughnuts, coffee and do something special. She was to go in and do nothing but give everyone a pat on the back, fists bumps and tell them they are doing a great job and are appreciated.
"It was one of the most impactful things we did," Schmidt said. "My restaurants had a high-level executive person who's not normally in the restaurants who went out of [her] way, took a bunch of time away from her family to go visit restaurants and just thank our people for being there for working hard, and doing the job that they're doing."
Employees later sent emails and text messages saying how much that meant to them, Schmidt said.
The company has such a positive perception within the local community that Schmidt is already receiving phone calls from prospective employees who heard about its partnership with Tropical Smoothie and its plans to open 16 locations, he said.
Heirloom's owner has also found success in creating a culture of respect with her staff, which have become an extended family, she said. Since the pandemic, Lee has found ways to help boost employee earnings and make sure they can get as many shifts as they can without cutting any other staff.
Lee, for instance, changed her approach to her front-of-house staff to boost individual earnings. Instead of bringing on five servers per shift, she brought on more support staff. Each shift would have three or four servers working alongside a busser and a runner, allowing the waitstaff to earn more in tips, Lee said. Instead of cutting staff when capacity was reduced by the governor, she reduced the number of shifts available per employee while offering them shifts if the restaurant was busy over the weekend.
"I've been really lucky that I've kept the same people, and I really take care of them," she said. "That's my goal and they know that. They are very loyal to me and I'm very loyal to them."
Article top image credit: Permission granted by Chipotle/ Design by Adeline Kon/Restaurant Dive
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