With workforce instability, hospitality was the tip of the spear for COVID-19. According to a report from shift work management software company Deputy, millennials and Gen Z employees saw a 43 percent reduction in shifts and hours from pre-pandemic marks. And to note, 75 percent of the restaurant workforce in 2020 was Gen Z or millennials. So essentially, the entire field faced erratic conditions.
Even with 194,300 jobs added in June—nearly one in every four jobs created were in restaurants—per the Department of Labor, the industry remained 1.3 million workers below February 2020.
Many employees laid off, furloughed, or simply seeking more hours or better pay, fled to different sectors. From a One Fair Wage survey, by May 2021, 54 percent of remaining restaurant workers said they were considering leaving the industry.
A Q2 2021 U.S. Jobs Market Report released by job search platform Joblist suggested much of the same, as 38 percent of former hospitality workers said they had no interest in coming back. More than 50 percent even claimed no pay increase or incentive would change that.
But will an impending (or current) cut in unemployment insurance benefits turn sentiment? One Fair Wage data last week indicated more than half (51 percent) of workers who previously received unemployment benefits that were subsequently cut, said that even with benefits taken away, they would only return to restaurants for a job with a livable wage. Only 16 percent of workers stated they would come back for any low-wage job once their benefits were sliced. Over half (54 percent) who received unemployment insurance and then lost it noted the experience of receiving benefits increased their desire for a livable wage at their next job.
In other words, the extra $300 benefit opened the eyes and reset expectations of hourly workers across the country. It was as much of a perception game-changer as it was a financial lifeline, whether that was the intention or not.
If you go off One Fair Wage’s data from 287 current and former service workers in five states (Arizona, New Hampshire, West Virginia, Florida, Texas) that prematurely ended federally funded unemployment benefits, cutting expanded benefits will not (and doesn’t) result in most workers coming back for the same wages they received before.
And regardless of whether workers had access to unemployment benefits or not, nearly 60 percent reported that they were considering leaving restaurants.
It’s been a complex few months. Behind the curtain, a lot of restaurant employees have asked operators to keep them off payroll so they could earn extra money from expanded benefits, yet also not stay home.
One restaurant franchise, who wished to remain anonymous, told FSR these came in various amounts of time and circumstances. And the operator let these employees do so, while offering a “little stipend on the side.”
The franchisee said this isn’t just going on in the restaurant business, “but others as well.” It’s a model that’s helped some restaurants stem losses.
In the end, the UI actually added some relief to small employers, the franchisee said, by supplementing payroll accidentally.
Yet moving forward, UI isn’t going to factor in forever. So what will inspire workers to return to restaurants, according to One Fair Wage data?
- A full, stable, livable wage: 69 percent
- Increased hours: 25 percent
- Paid sick leave: 63 percent
- Better COVID-19 safety protocols and enforcement: 44 percent
- Health benefits or insurance: 63 percent
- An improved working environment with less hostility from customers, coworkers, and/or management: 56 percent
- Access to child care services: 25 percent
These below results, courtesy of One Fair Wage, stem from a national worker retention survey of more than 2,000 employed restaurant workers representing 38 states. Of those, 18 states have cut unemployment insurance prematurely (of the September cutoff) and represent 54 percent of total responses.
Credit: One Fair Wage
Even ahead of COVID, there was a “talent crisis” circulating for restaurants due to staffing challenges. It simply exacerbated during COVID for a straightforward reason: Restaurants accounted for one in four of the 10 million jobs lost in the overall economy at one point. And meanwhile, some competing sectors staffed up. To put that into perspective, if the economy as a whole suffered the same level of job losses as restaurants, there would have been some 30 million jobs gone. In December 2020, there were 2.5 million fewer people employed in food service and drink places than February. Or a 20 percent reduction in roughly nine months. Overall, the country’s workforce dropped about 6.5 percent. There was a more than 13 percentage-point gap between America’s labor impact and the restaurant one headed into this year.
Restaurants weathered a sharper blow than everyone else. And they were already struggling.
Going back to pre-virus days, at the start of 2020 only 13 percent of limited-service restaurant companies reported being fully staffed in hourly, non-management positions. Full-service brands fared slightly better at 38 percent. Only 10 percent of full-service restaurant companies reported their kitchens to be fully staffed.
In sum, all of these dynamics have created a free agent market of sorts. Restaurant workers can pick and choose brands in ways they couldn’t before. It’s why concepts are raising pay, offering wild incentives, like iPhones for retention, referral bonuses, and so forth.
Workers’ wages rose 3.6 percent overall, year-over-year, per June data. In particular, hospitality workers made 7.9 percent more compared to February 2020.
Something else to consider is former President Donald Trump’s decision to suspend J-1 work-and-study visas as a coronavirus precaution. Foreign workers, often brought in on these, historically gobbled up summer jobs.
In the wake of Trump’s call, however, the number of U.S.-issued J-1 visas plunged 69 percent in the fiscal 2020 year. It fell to 108,510 from 353,279. Couple that with concerns held by older workers, such as health issues and childcare, and it’s opened the flood gates for younger employees, who are fast becoming more selective than past generations due to wider access to college education and the extra-curricular activities universities covet.
In May, 33.2 percent of Americans aged 16–19 had jobs, according to the DOL. That’s the highest percentage since 2008.
How can restaurants gain a strategic advantage in this “talent war?”
Bruce Tulgan and RainmakerThinking released a white paper addressing the labor shortage and how to recruit and retain today.
- 1. Define a clear value proposition.
- 2. Build and maintain a supply chain of applicants.
- 3. Be very, very selective.
- 4. Stay in close dialogue between hiring and day one.
- 5. Structure on-boarding and up-to-speed training.
- 6. Turn every manager into a chief retention officer.
“The employer side of the transaction is always the same: Employers want to get as much of the highest priority work done as well as possible, as fast as possible, with the least possible cost or friction,” Tulgan said. “The employee side of the transaction is more complex and variable: Employees want to earn money, have favorable working conditions, and make a positive contribution to the mission.”
How the company breaks this down is through what it labels “dream job factors.” It’s entirely possible none of these were part of the playbook before COVID for some operations. But it’s likely they are now. And few, if any, restaurants will be able to meet all of these. “But you have to offer something,” Tulgan said. “The less you offer in one category, the more you must offer in another.”
1. Performance-based compensation
How much is baseline pay and benefits? Are they comparable to competitors? Are there clearly defined opportunities to learn more based on extra-mile effort and results?
2. Supportive leadership
Is there an immediate manager who provides regular guidance, support, and direction? Will they make expectations clear, provide regular feedback and recognition?
3. Role and responsibilities
What is the nature of the actual work itself? Is it difficult, repetitive, or tedious? Or is it interesting and valuable? Is it mission driven? Does it have positive, meaningful results?
This is one area where community involvement can be a key unlock for restaurants; helping people align with a mission.
As FB Society CEO Jack Gibbons told FSR: “Skills can be taught, but hiring employees who embody your brand and its core values is not teachable. At FB Society, all of our concepts build from within through a strong and meaningful culture that aligns with each brand’s DNA. Then we hire people who believe what we believe and it creates an unspoken bond that makes the headwinds we’re currently facing as an industry a bit easier to navigate.”
Smokey Bones CEO James O’Reilly refers to this as “human-centric leadership.”
“We also support our workforce with generous benefits beginning on day one of employment, including basic medical, prescription drug, a la carte hospital, illness, and disability benefits, scholarships for all employees and family members, benefits and discounts on thousands of companies’ products and services, legal, and mental health services,” he said.
GSR Brands (Tom & Chee and Gold Star Chili) CEO Roger David, who started as a dishwasher in his father’s restaurant, said simply, “All the money in the world doesn’t matter when someone dislikes the company they work for.”
“Employees need to know they can be heard, and they want to work for a company that has a positive impact on their community,” he added. “A culture of fear creates resentment, distrust and instability; a supportive one fosters hope, happiness and innovation. Company culture and values positively impact employee satisfaction, so if building a solid culture isn’t at the top of your to-do list, it might be time to add it.”
4. Location and workspace
Is the work done in a particular place in a specific geographic? Or can the work be done from anywhere? Sometime? All of the time? Is there a particular place? Is it pleasant?
Naturally, restaurants don’t offer hourly opportunities to remote employees. Yet work and online business are here to stay in many industries, which may see 25 percent more workers than previously reported switch to a new industry altogether.
Narrowed into a hospitality angle, restaurants can think about workspace as an evolving target. GSR, for instance, doesn’t just tell employees they can advance—it lets them see it for themselves through cross-training. This allows employees to step in whenever needed or wherever they want to go, David said. “Building a diverse and robust set of skills is the first step in moving up,” he said. “When the opportunity is available, we know they’re ready to get that promotion to a shift lead, a manager, a regional manager and more.”
It’s how you end up with the stories of drive-thru or steam table workers progressing to franchise owners. Or dishwashers and servers climbing through the ranks to management or corporate.
Nick Reader, CEO of quick-service chicken chain PDQ, offers employees a paid day to come to HQ and shadow execs if they’re interested in those paths. And when hourly employees churn, PDQ tries to make the exit a welcome one to foster word-of-mouth referrals through people-first practices. For example, some stores have thrown graduation parties for employees moving on after getting degrees. One worker felt so strongly they returned and got married in a location.
5. Scheduling flexibility
Is the job full-time, extra time? Or is it part-time, flex time? Is there any ability to set one’s own schedule? Occasional scheduling accommodations?
This is one arena restaurants can separate from the pack. According to a study from BTIG analyst Peter Saleh, 45 percent of unemployed people surveyed said they were seeking greater flexibility with respect to when (days/hours) they work. Also, 18 percent of candidates said they were now interested in gig-economy work, up from 11 percent pre-pandemic. That aligns with the notion people are searching for more work-life balance and control in regards to when and how they work.
Flexibility is an important message for restaurants to share. In the interim, Saleh said he believes restaurants could boast larger rosters of employees working shorter shifts. It’s a reflection of opening the door to more people, no matter how few hours or when they want to work.
“There are a lot of people who don’t want to come back to work and work an eight-hour day. Or work that overtime. I think you’re going to have larger rosters of individuals working shorter shifts, which means training costs are going to go up,” he said.
Training for an hourly restaurant employee can run anywhere between $3,000–$4,000 per employee and up to $15,000 for managers, Saleh said. He also noted this will usher in “substantially higher” wages throughout the sector, and as a result, higher menu prices.
6. Training and development
Are there formal and informal opportunities to build new, relevant knowledge and skills? Is there a chance to become a deep subject matter expert? Or to build a wide repertoire?
This goes back to Saleh’s point. Training is critical with fewer employees available and thus, fewer chances to get it right. And there’s often a link between retention and well-trained workers. Investments in learning results in more pride, better service, and workers who clearly see the different rungs of the career ladder.
This is becoming more frequent in virtual, easy-to-access mobile platforms. Functions like text-to-apply or inserting AI functionality into the recruitment process are also easing the burden on hiring managers while appealing to the evolved desires of a candidate.
But also, beyond making learning and applying accessible and fluid, brands have a chance to imprint culture.
To kick off training at FB’s Society’s new Haywire restaurant, employees were treated to an immersive food and beverage experience each day and received gift cards to have an experience at the brand’s Plano, Texas, location. Concept Whiskey Cake even gives new employees a plant to take care of throughout training.
7. Relationships at work
Is the workplace welcoming and inclusive? Are there opportunities to build productive and mutually supportive working relationships with colleagues, leaders, clients, or decision makers?
Of course, this is a massive story in restaurants, where long-hours, crazy hours, and social atmospheres breed challenging dynamics.
Some chains have taken added steps to find ways for like-minded employees to connect and make sure they have space to air concerns, both about the company and social issues in general. A lead internal effort at Wendy’s is its “Employee Resource Groups,” which have grown to six different fields.
Each ERG has a senior leader tied as the executive sponsor. They enable employees to learn, share, and network, and yet also help Wendy’s corporate get a grip on what’s happening throughout its worker base.
- Women of Wendy’s
- Wendy’s Equality Resource Group (WeQual)
- Wendy’s Young Professional Resource Group
- Wendy’s Veterans Resource Group
- Wendy’s Black Employee Resource Group
- Wendy’s Cultural Diversity Resource Group
Liliana Esposito, the chief corporate affairs and sustainability officer at Wendy’s, told QSR these groups create a herd employees can connect with. And it’s found some of the chain’s “most promising talent” within the organization has come up through the groups.
It’s also presented a good way for corporate to respond to external issues, such as the Black ERG, which was formed out of the racial injustice events that took center billing in 2020.
8. Autonomy and creative freedom
Is it clear what exactly is up to employees, and what is not? What is required in every job? What is allowed? Where do employees have discretion in how they complete their work?
“Success in business doesn’t come from being stagnant, so expecting quality candidates to come work for a job where their growth will be stagnated doesn’t make sense,” David said. “As so many companies have learned over the pandemic, opportunity is key to attracting and retaining employees; training them to see those opportunities in your company is a great means to achieve this.”