Imagine showing up to your favorite restaurant or go-to coffee shop only to find it closed. One sign on the window says ‘Help Wanted’ while another says ‘Closed due to staff shortage.’ 

We’re experiencing a post-pandemic labor shortage, even as business and life return to normal, and it’s anyone’s guess when it will end. In this article, we’ll discuss impacts and possible causes. In a follow-up article, we’ll cover how operators are tackling the new era of staffing challenges.

The Staffing Situation is Dire—Even Causing Closures—Just as Sales Ramp Up

• Restaurants are closing due to staffing shortages. According to a survey conducted by QSRWeb in May 2021, more than 32% of restaurant leaders have closed or are considering closing restaurants as a direct result of staffing shortages.
• According to industry hiring app Landed, the staffing deficit for food service is 3.4 million positions and shows signs of growing.
• Staff shortages and restaurant closings due to staffing challenges are occurring just as sales show persistent stability, with positive same-store sales growth for the tenth consecutive week as of near the end of May 2021, as reported by Black Box Intelligence. Limited-service segments (defined as Quick Serve and Fast Casual) outperformed most of the industry based on same-store sales growth. Limited service also reported the largest growth in average check.

Staffing Shortages Have Been a Challenge For A While. But How Bad Is It, Really?

• Since June 2020, interest in restaurant jobs has fallen 40%, according to a survey conducted by employment platform Joblist.
• One Fair Wage also stated that 40% of restaurant companies reported difficulty finding cooks, counter personnel and other workers.
• As restaurateurs are all too aware, if a restaurant has enough staff to open its doors at all, a shortage of staff impacts guests and profitability with longer wait times, reduced accuracy, and order delays.
• The quit rate in the hotel and restaurant industry hit an all-time high of 5.6% in June 2021.

What are the Possible Causes?

Employment among certain age groups — including those often employed in Quick Serve and Fast Casual — was already declining.

According to a “Post-Millennials” Pew Research Center study, employment among people under 22 years of age has plummeted. Details of these trends include:
 

• Almost 50% of 15-to-17-year-olds were employed in 1968 compared to just 19% in 2018.
• 80% of 18-to-21-year-olds were employed in 1968 compared to 58% in 2018.

According to an article in Eater, the labor shortage is further rooted in a combination of things. 

During the Covid-19 pandemic, while restaurants were cutting hours, furloughing or laying off workers, other industries kept hiring. And some of the big names in retail have been raising hourly rates, including Amazon and Target, who offer $15 an hour.

The available pool of candidates interested in restaurant work is smaller. According to a survey conducted by employment platform Joblist, 30% of restaurant workers are actively switching out of the industry.

Workers are concerned about their own safety, since restaurant work puts them in close contact with coworkers and the public.

And where Covid restrictions limit a restaurant’s re-opening capacity, fewer patrons means front-line staff are likely to earn fewer tips. Staff may decide that potentially risking their health for less pay simply isn’t worth it.

The fact that federal unemployment benefits are augmenting benefits provided by states could be keeping some workers out of the market for the time being. Restaurant Business quotes Carl Howard, CEO of Fazoli’s: “In Ohio you can make $452 a week in unemployment. The federal government is going to top that with $300. That’s $752. If I pay $15 an hour, that’s $600. They’re making $18.55 to stay home.  I’ve got to pay $18.55 if I’m going to attract workers. That doesn’t work in our model or anyone else’s model.” 

Because these benefits are temporary, however, we could see a return of applicants and workers once these benefits end.

Bigger picture, hospitality industry workers have long sought a better package of pay and benefits. In fact, poor pay is the primary reason 76% of restaurant industry workers leave the industry, according to "raise the minimum wage" organization, One Fair Wage. Even though the current climate is bringing some wage and benefit improvements, there are now more employment options available, which makes the pool of candidates smaller.  

Signs of the staffing shortage are everywhere, and businesses are trying a variety of ways to attract applicants and hire crew members. Here are a few examples:

• Signing and retention bonuses in various forms and schedules, e.g., $50 for hiring on, and another cash payout after 90 days.
• A free iPhone as a hiring bonus
• A voucher for free appetizers or $50 just for showing up for an interview

Interestingly, the franchise owner offering $50 for an interview has had better success with “referral programs, signing bonuses, and allowing people to apply via text message. Last week alone, his 60 restaurants hired 115 new workers,” according to the Entrepreneur article.

Closing Thoughts

Today’s shortage of applicants could be indicative of a long-term issue, if workers who left restaurants have indeed found more stability and perhaps better pay, benefits, and working conditions in other industries.

In our next article, we’ll discuss possible responses and solutions to the staffing challenges.