Wages are Up, Traffic is Down, and Guest Satisfaction is in Flux: How You Can Beat the Crisis

Minimum wage increases hospitality

Running a hospitality business – restaurant, hotel, or another guest-focused venue – is harder than ever before. Minimum wage increases are usually great for your workers, but they put pressure on employers to make changes throughout their business to accommodate these adjustments.

According to a recent Harri study of restaurant operators, close to half (46%) saw labor costs rise between 3 and 9 percent, with 12 percent of those people seeing labor costs increase by at least 15%.

Many restaurants have buffered the impact of wage increases by raising menu prices by an average of 4.3 percent. But foot traffic is down for twelve consecutive quarters and price adjustments alone will not close the gap.

Cutting back employee hours or eliminating positions results in stress and job dissatisfaction, which ultimately has an impact on service. 

“Many operators are forced to make lose-lose decisions, including reducing employee hours and even eliminating jobs altogether. Ironically, the legislation that was intended to improve employee conditions in the hospitality industry is having a direct, adverse effect.”  Luke Fryer, CEO & Founder, Harri

The Painful Impact of Wage Inflation

A comprehensive study by Harri, as featured by CNBC, Fox Business, Bloomberg, citing more than 4,000 restaurants and 112,000 employees revealed that, after minimum wage increases, 64 percent of operators reduced employee hours, 43 percent eliminated jobs, and 9 percent closed locations.

Operational changes led to employee dissatisfaction, and turnover increased 35 percent. A staggering 50 percent of businesses are seeing turnover rates of 50 percent or more. 

Raising menu prices is a seemingly simple and immediate alternative to making labor adjustments, with 71 percent of the restaurants surveyed taking that action, but the impact on diner perception can be deadly, especially at a time when restaurant traffic is down.

“Restaurants and hospitality organizations across the country are facing unprecedented challenges in maintaining the economic integrity of their business. Ironically, the legislation that was intended to improve employee conditions in the hospitality industry is having a direct, adverse effect.” Luke Fryer, CEO & Founder, Harri

Wages Are Up, But So is Turnover

Turnover rates in our business range from 25 percent to a high of over 120 percent in the hospitality industry, according to a Cornell University study. The cost of losing employees after finding, hiring, and training them is upwards of $5,000.

Roller coaster income and personal life balance are among the many reasons restaurant workers leave. A fair workweek involves scheduling that accommodates the employer, the employee, and the business bottom line.

“Now in the glaring media spotlight, old-school ‘kitchen culture’” contributes to what many see as a negative working environment of mental and physical stress that leads to burnout, discouraging great talent from entering the industry.” (Michelin Guide

Restaurant Traffic is Down

Demographic, economic, and shifts in consumer behaviors have all led to more people dining at home rather than visiting restaurants. A recent study revealed that over the past decade, the number of people eating at home has increased from 75 to 80 percent. Cost is one factor, as restaurant meal prices have increased 2 percent (and climbing, due to wage inflation). 

When consumers do eat out, their satisfaction level is directly affected by how they are treated as guests. In fact, three of the five measures of diner satisfaction relate to service quality. Slow service, wrong orders, and rude service are among the most common frustrations, along with meal price and cleanliness. 

So, how can you ride out this imperfect storm of labor costs, traffic drops, and employee management issues?

Although automation will, in the long run, reduce certain operating costs and speed service delivery, the restaurant experience will always involve people. Technology adoption will not make today’s very real and significant issues vanish overnight.

“Technology doesn’t need to replace your people. Instead, it should empower them to do what they’re best at – which is serving your guests. Automation tools allow this to happen.” (Modern Restaurant Management)

The acceptance of the status quo plagues our industry and leads to costly mistakes. Operators need to use technology to help them make better, faster, and more cost-efficient hiring and staff management decisions. 

Don’t Procrastinate…Automate

Beyond food preparation, the right technologies and systems can be extremely powerful decision-making and management tools that have an impact on every aspect of costs and employee satisfaction.

  • Retention is About More than Just Engagement: Many operators are taking the POV that a one dimensional strategy, solely investing in training and development, is the silver bullet to retaining your staff.  Rather, a wholistic approach to pre and post hire techniques are emerging as the most impactful and predictable way to drive retention. Hiring the right people ultimately has an impact on turnover. If you use data and technology to properly hire and screen, you will be assured of hiring more of the right people for the right positions.
  • Real-Time Analysis and Insights: Fully utilizing your POS system and integrating it with your scheduling system to understand traffic patterns and costs will enable you to create an optimize staffing plans.  Additionally, having an environment that integrates Time & Attendance, Communications, Scheduling, and POS is the perfect world scenario. With those systems speaking to one another in real-time, sales, labor, compliance, scheduling management, and communications on the frontlines can be easily actioned and accessed, even from one mobile app.
  • Smarter Scheduling: Scheduling systems are not created equal. Historic sales, service delivery and layout driven labor matrixes, reservations, employee availability, weather, and fair work week compliance are all factors that drive your staffing plan and labor costs. Today’s scheduling system needs to be mobile first and consumer- and employee-minded. In fact, some municipalities have begun to adopt predictive scheduling laws, requiring operators to alert employees two weeks in advance of their work hours.  In combination of a highly informed methodology, the time savings associated with publishing schedules, that would normally take hrs to coordinate, can now be completed in minutes. 

With the right systems in place, you can make people decisions based on facts and trends rather than on gut, potentially saving you thousands over time. Keep in mind too that the right system will incorporate compliance considerations (alerting you of overtime costs and restrictions). That ultimately keeps your legal and turnover headaches to a minimum. 

Although the right technology platform can’t control minimum wage legislation and diner behaviors, it can give you the insights you need to run your business cost-effectively — real-time and long-term. An all-in-one solution (hiring, management, scheduling, analysis, and reporting) will save you resources in the long-run, as will working with industry experts who care about your people and your bottom line and not just technology.

Check out Smart Scheduling by Harri. Your restaurant’s survival may depend on it.

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