Increasing margin pressure and a heightened battle for market share are two of the most significant issues facing restaurant operators today. Both factors are driven in part by current labour conditions.
Profit margins are being squeezed due to external labour considerations, such as the efforts to raise the minimum wage and reform the Temporary Foreign Worker Program.
Further complicating the matter is the reemergence of a tighter labour pool. A 2015 survey by Toronto-based Restaurants Canada revealed that 42% of foodservice operators are experiencing skilled-labour shortages, and 24% are facing a shortage of unskilled labour.
Restaurants Canada projects that labour shortages will become even more severe in the years to come, because the share of retirees in the population is on an upward trajectory and the share of youth is decreasing.
The battle for market share is also compressing margins, as full- and limited-service operators now have to compete with delivery services, “grocerants” and even home meal preparation. Consumers are choosing these latter options more frequently because they question the value—a combination of dining experience and price—that full-service restaurants are able to deliver.
“Today’s consumers are far less willing to accept the kind of inconsistent, undefined dining experience that staffing issues can create,” says Gordon Food Service Commercial Segment Manager Doug Owens. “When the quality of the dining experience falters, price becomes more important—and other foodservice outlets have a clear advantage over full-service restaurants in this regard.”
While your ability to influence external labour factors is limited, you can do a great deal to mitigate the margin impacts of employee acquisition and turnover.
There are multiple factors at work in this new labour environment, so there is no single solution to improve profitability and gain market share. Operators must develop a strategic plan with multiple solutions. The following are necessities of any approach.
Benchmarking. First, benchmark your operation to determine the real financial impact of labour/staffing issues. This will help determine how you’re performing against similar operators and guide development of achievable goals to reduce labour costs.
Restaurants Canada provides a starting point with its annual Foodservice Operations Report. By providing general industry standards (such as labour accounting for roughly 31% of operating revenues in the average commercial foodservice business), it will enable you to gauge your relative performance.
“Operators should purchase this report annually to continually set reasonable goals and track progress against those goals,” Owens urges.
Hiring and recruiting. Before you begin the tactical process of hiring, define the “value proposition” you offer employees.
“Think of potential employees the way you think of customers,” advises Lisa McKiernan, Manager of Talent Acquisition for Gordon Food Service. Just as you create a brand that promises customers a unique dining experience, you should build one that promises employees a unique working environment. “Recognize that you are being interviewed by candidates who have options,” she continues. “You need to give them a compelling message that speaks to their needs and expectations.”
As noted earlier, those needs and expectations have shifted over time. For one thing, millennial employees won’t automatically grant you their devotion. You need to earn their loyalty over time—just like you do with consumers—by carrying through on the promises you’ve made them.
One way to do this is to involve them more fully in your operation. “Millennials want engagement and transparency from employers,” Owens says. “They want to have influence and ‘skin in the game.’”
If you can offer that to employees, you need to let candidates know it in the interview process—and let them know what else they can expect, good and bad. For instance, “You may not make as much in tips here as you would the steakhouse down the street, but we have a clear path to leadership, if that’s what you want.”
This honesty will help ensure that you hire the right people—ones who understand and support your vision. “That significantly improves profitability by diminishing training and turnover costs,” Owens says. “Consistency in employees also helps drive a consistent dining experience over time, keeping the brand promise with consumers.”
The hiring process. The hiring process has evolved as radically as the work values of today’s employees. Emboldened by technology, people are searching for jobs and making employment decisions in a much smaller timeframe. Operators must provide multiple technology touch points to reach job candidates.
“Internet job postings, online applications and pre-vetting solutions that identify candidates with desired behaviours and attributes have changed the process for employees and employers alike,” Owens says. These technologies can help position you as an employer of choice while reducing the time and cost of employee acquisition.
Retention/motivation. Retaining employees in a highly competitive market is challenging. Higher competitive wages can drive employee defections, but you can counteract the lure of higher pay by continuing to deliver on your value proposition.
Here are four retention strategies worth considering:
“Operators are often reluctant to invest in retention, but it more than pays for itself in reducing turnover costs,” Owens assures.
The leadership factor. None of the strategies outlined here will be successful unless you develop strong leaders. Provide both leadership candidates and already-in-place leaders with ongoing training, which must include an understanding of your target employees.
Your leaders’ ability to communicate your brand and vision to your employees will directly affect the employee experience—and in turn, the guest experience.
The key to resolving your staffing issues isn’t in the identification of issues and potential solutions. It’s in the ability to implement solutions through strategies your leadership can deliver against. Make that happen, and you’re on your way to increased profitability and guest counts.
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