Article

How labor shortages are affecting your restaurant’s profits

April 10, 2024 · Authored by Brian Campbell, David Foster of Foster and Associates

The pandemic brought with it a myriad of challenges to the restaurant industry. Extended restaurant closures were one of the most significant. And the fallout from those closures still impacts the industry today.

Many restaurants were forced to close or curtail operations during the pandemic and lay off staff, many employees sought positions in other industries. Managers, chefs, bartenders and servers pursued new career opportunities. Post-pandemic, many of those that left the restaurant industry never returned. A few of the reasons they stayed away have been lower wages, long hours, lack of benefits and often the lack of advancement opportunities they encountered in the restaurant industry. This, accompanied by today’s revitalized economy and low unemployment numbers, has caused a chronic staff shortage that is particularly acute in the restaurant industry.

So how has this labor shortage impacted restaurant profits? The most obvious impact of the labor shortage on profits has been the higher wages needed to attract and retain staff. An operator only has to look at their prime costs to see that the higher average wages have driven overall labor costs higher and negatively impacted profitability. Finding it necessary to close all day or close early on certain days due to staff shortages means reduced revenue and less profit. These are the easily identifiable effects of the labor shortage.

But we can’t forget the not so obvious factors that are negatively impacting profit:

• When your restaurant is short-staffed in the kitchen, it can result in longer ticket times. This, in turn, results in slower table turns. Longer waits for food means less revenue and an increased number of unhappy guests.
• Being short-staffed in the front-of-the-house often results in servers being forced to take more tables than they can adequately handle. The impact of this situation is that your servers end up becoming “order takers” instead of “salespeople.” The result? Lower appetizer, drink and dessert sales as well as a drop in guest service levels. And even worse, more unhappy guests.
• The increased need to call in staff on their days off to cover when your restaurant is already at a critically low staffing level for that shift. This in turn results in increased overtime and higher labor costs, as well as unhappy staff members.
• When you are running a skeleton crew, the result can often translate into an overworked staff. This leads to lower performance and an even more unhappy crew. And an unhappy crew leads to higher turnover rates resulting in more staff shortages and higher new employee training costs.