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Now hiring: How the labor shortage is squeezing full-service restaurants

This is the first in a three-part series discussing the current labor shortage hitting the restaurant industry. 

When restaurateur Robert Micheli moved from Miami Beach to Washington, D.C., in March 2020, he was excited to take over the helm as general manager of Dirty Habit, a 10,000-square-foot restaurant attached to Kimpton Hotel Monaco in the city’s Penn Quarter. He previously ran various restaurant operations, including Katsuya by Starck, for over five years, but this would be his biggest restaurant by square footage yet.

Pre-pandemic, the restaurant, which is located across from Capital One Arena, often served 500 hockey fans beer on its 7,000-square-foot patio after games. But Micheli didn’t get a chance to see the restaurant function at full capacity. Shortly after he arrived in the District, Mayor Muriel Bowser ordered indoor dining rooms to shut down.

Operators have increasingly turned to limited time offers in recent years to entice customers and spur sales.

“When you take over a new business, as a general manager or restaurateur, there’s always so many projects to get done. And you always say, ‘Man, if I could just have a week where we weren’t open then I could clean the storage rooms,'” Micheli said. “Well, I got nine months of it.”

During the District’s dining room closures, he developed new operations and procedures, such as changing the restaurant’s orientation process and training program based on employee feedback.

When the restaurant reopened on Valentine’s Day this year, everything was in place to create a relatively seamless transition under new management. This preparation paid off when patrons flocked to the dining room, even with capacity limited.

“Guests and customers are very excited as restrictions are letting up. And we’re also seeing that the amount of people coming out is growing week over week,” Micheli said. “We’re just not able to staff that quickly.”

As of early April, the restaurant had only about 10 full-time, front-of-house employees on payroll, down from a maximum of 65 to 70. The back-of-house, which functioned with about 80 staff members pre-pandemic, currently has seven employees, Micheli said.

Restaurant employment during the pandemic

Total restaurant employees since January 2020

The struggle to bring back and hire full-time staff is a challenge restaurants across segments face as the economy reopens, but the labor shortage is hitting full-service establishments particularly hard. In Baltimore, Atlas Restaurant Group, which currently employs 1,200 people across its 18 properties, is short 100 employees, Founder and President Alex Smith said.

A Western Pennsylvania restaurant has posted a “Now Hiring” sign on its window for six months, only to receive two job applicants. Restaurants in Wisconsin are seeing that even if they have a lot of applicants, only half show up for interviews.

Foodservice job demand is low in major restaurant cities, too. In New York City, Rick Camac, dean of restaurant and hospitality management at the Institute of Culinary Education, emailed 200 of his closest industry contacts that he was looking for candidates to fill a management position and host role at restaurants he consults with. Camac, who also owns a restaurant in New York City, often helps clients find workers. This time, however, he received zero leads and no resumes.

“When you take over a new business, as a general manager or restaurateur, there’s always so many projects to get done. And you always say, ‘Man, if I could just have a week where we weren’t open then I could clean the storage rooms.’ Well, I got nine months of it.”

Robert Micheli

Though the restaurant industry lost 2.5 million jobs during 2020, hundreds of thousands of jobs have opened up amid relaxed dining room restrictions and a swell of diners hungry for a taste of pre-pandemic life. During Q1 2021, restaurants gained 442,000 jobs, but the industry still has a long way to go to break even. Some restaurants are facing a new vicious cycle as well. With so few employees available, they have to reduce hours and some have decided to close on certain days, which will only reduce revenue.

“It’s not like you flick on a switch and all of a sudden you’re ready to handle, you know, 50% capacity as opposed to 35% or 25%,” said Camac. “Yes, we’re all welcoming and look forward to getting back to higher and higher percentages, but you need to see more ramp up time.”

Unemployment benefits, COVID-19 fears are keeping workers at home

One of the biggest stumbling blocks for restaurants is searching for qualified talent. Many of these sought-after employees have moved away, experts say.

In highly populated metropolitan areas, like New York City, many long-time restaurant workers have moved to areas with more affordable costs of living. That’s what happened to many of Dirty Habit’s employees, Micheli said. Many moved outside of Washington, D.C., to areas like Philadelphia, Baltimore or Richmond, Virginia — making it too difficult to commute to the District, Micheli said. Some of Dirty Habit’s staff also took positions with restaurants that were able to open up sooner, he said.

The boost in unemployment benefits, on top of stimulus checks, have made it more worthwhile to stay unemployed than rejoin the workforce, experts shared.

“A lot of people can make as much money unemployed as they can working in a restaurant,” said Jason Berry, founder and principal of Knead Hospitality & Design in Washington, D.C. “It’s a really hard time finding employees. Now that everybody’s coming back, everybody’s hiring at the same time.”

Many unemployed workers are making between $700 and $1,000 each week, with the addition of the $300 bonus offered by the federal government, Berry said.

Despite the fact that over a third of the nation’s population is fully vaccinated, according to the Centers for Disease Control and Prevention, workers still remain reluctant to return. Many are also waiting to be fully vaccinated themselves, Micheli said.

“The delay in rollout has affected people being able to come back in certain counties that aren’t as quick to give vaccinations to everybody [and] has also slowed down my rehiring process,” Micheli said.

The combination of higher income on unemployment and better safety at home is a disincentive for restaurant employees to return to work, SevenRooms CEO Joel Montaniel said.

The industry’s instability over the past year hasn’t helped retention either, Montaniel said. COVID-19 restrictions would loosen and restaurants would bring back employees, only to lay them off again when indoor dining capacity would contract. After about two or three cycles of this, many workers have had enough, Montaniel said.

“Many of the people who aren’t coming back are looking for other lines of work,” Montaniel said.

The growing talent gap

An exodus of restaurant staff with 10-plus years of experience has left behind a learning gap, Montaniel said. These servers have trained a lot of staff members.

“We can’t get people in quick enough. We can’t get them properly trained. They’re, in some cases, not as good as their predecessors because their predecessors have more experience,” Camac said. “We’re bringing in some people who are pure entry level and we’re trying to teach them the business of hospitality and without enough time to do adequate training.”

With a lack of proper staffing and training, service may suffer.

“You have less people paying attention to the guests. … The attentiveness could go down if you don’t have as many people on the floor,” Montaniel said.

The ripple effect is even worse in restaurant kitchens.

Landed, a mobile app that connects hourly food and retail workers with employees using AI-based technology, has seen three times the number of applicants interested in roles like cashier, host, server and carside/curbside expeditor roles, compared to back-of-house positions, Founder and CEO Vivian Wang said. On Landed, there are four times more kitchen positions available than front-of-house roles.

This is a problem for restaurants experiencing increased order volumes as indoor dining capacity limits broaden across the country and takeout demand remains high, Wang said.

“[The back-of-house is] understaffed and it places more strain on existing staff,” Wang said.

Kitchen staff members are wearing multiple hats and working stations they’re just not fully trained for, Camac said. The additional work and strain has resulted in many of these employees turning toward front-of-house roles that are seen as more desirable and less strenuous, Wang said.

Dirty Habit now has to closely manage its bookings and control how many seats are available on reservation platforms to accommodate its smaller team, Micheli said. The restaurant is also only open four days a week, serving dinners Thursday, Friday and Saturday nights, as well as brunch on Saturday and Sunday.

“We would love to [serve] 500 people every single night, but especially COVID-wise, you just can’t do that because you have to have distance between tables,” Micheli said. “So that automatically knocks down the number of guests that you’re able to accommodate.”

Dirty Habit can currently service about 150 guests a night and could potentially push that number to 175 if it added an extra hour to service, but that extra hour comes with risk.

“I don’t want to stretch anyone so thin that tomorrow they say, ‘I can’t do this anymore.’ So we have to pace ourselves,” Micheli said. “We have to make sure that we’re really being aware of how hard we’re pushing ourselves while still making the money we need to make to stay open.”

Restaurants raise pay, offer hiring bonuses to attract workers

Finding staff to fill in these gaps has pushed operators to ramp up recruitment efforts, pay more than the minimum wage and lean into technology.

While Micheli said he prefers personal referrals to find qualified staff, he has also hosted recruiting events on Tuesdays and Wednesdays from 1 p.m. to 3 p.m. Anyone can stop by Dirty Habit with their resume and have an interview with Micheli or another leadership team member. The company is looking for bartenders and servers specifically because it is planning to open its patio for Cinco de Mayo.

Atlas Restaurant Group has been hosting a series of hiring events around the Baltimore area to try and attract workers who don’t have a background in the hospitality industry, Smith said. Unfortunately, a lot of hospitality career workers have left and found jobs outside of the sector because of the instability over the past year, Smith said.

“What we need to do is go out and … create a passion for our industry again and let people know we really can make a great living in the hospitality industry and have a great career,” Smith said.

The restaurant group is taking on more entry-level people to train them from the ground up. During one recruitment event, Atlas hired 12 entry-level people, Smith said. While it won’t staff all of these new employees at one restaurant, it will spread them across its 20 properties and assign them to coaches and a leadership team to train them, Smith said.

“We’re doing it slowly. I think every couple of months, our idea is to bring 12 to 15 new people who are new to the hospitality industry and teach them skills that can allow them to move up in our corporation,” Smith said.

Increasing pay is an obvious draw for these candidates, Wang said. For example, wages for back-of-house line cooks has gone up almost 20%, Wang said. Some operators are offering additional dollars to get their teams vaccinated, which can help overcome hesitancy to come back to work, Montaniel said.

Dirty Habit is offering pay higher than the local minimum wage, Micheli said. At Atlas Restaurant Group, Smith said hourly employees are making a minimum of 10% to 15% more than they were in 2019. Front-of-house staff under tip credits are earning more too because customers are tipping more generously, Smith said. Knead Hospitality has been offering hiring bonuses to entice new workers, Berry said.

Flexible hours are also becoming more important at these restaurants.

“I’m not going to let someone go because they need to go to a birthday party that was scheduled before they got rehired,” Micheli said. “We have to live in this world of push and pull all over the place so my understanding and compromise level has definitely gone up.”

But not all restaurants can afford to pay more. Many can offer pre-pandemic wages, but can’t go higher than that, Montaniel said.

While the Restaurant Revitalization Fund will help with payroll, restaurants will likely need more financial assistance to offer higher wages to attract more workers, Montaniel said. The Small Business Administration has already said the $28.6 billion program won’t have enough funds available to help all eligible restaurants.

The Paycheck Protection Program helped a lot, but it wasn’t specific to restaurants and many didn’t get funds through this program, Montaniel said. Restaurants also could use the funds toward operating expenses like rent and other expenses such as safety equipment and to-go packaging so there was less left over to spend on increasing employee pay, Montenial said.

The labor shortage has also pushed restaurants to invest in technology that can bridge their staffing gaps. A South Florida restaurant spent $30,000 on robots to help greet customers, show them to their seats and deliver food to tables. The robot can even sing “Happy Birthday” in four languages.

Dirty Habit uses Bebot, which is a QR code program used in the adjacent Kimpton Hotel, Micheli said. Instead of having to call the restaurant, which can take time away from busy staff, guests at the hotel are able to order their meals through a QR code in their rooms and can pick up their food when it is ready, which helps control the amount of hotel guests coming into the restaurant.

Contactless ordering and payment is becoming more popular, especially since it can allow customers to pay at the table without needing a server, Montaniel said.

Meanwhile, business is booming

Despite the labor challenges, diners are returning in droves, and some nights at Atlas Restaurant Group’s locations have felt like the pandemic didn’t happen, Smith said.

“It’s a lot like The Avengers. Everybody disappeared for a year and then all of a sudden it’s like boom everything is back open and there’s thousands of people coming out. It’s been crazy,” Smith said.

Smith anticipates that by fall, business will be pretty much back to normal.

Because everyone is so excited to be out in public, tables are sitting longer as well, Micheli said. Before the pandemic, a table of two would sit for maybe an hour-and-a-half to an hour and forty-five minutes. Now they’re sitting for two hours to two-and-a-half hours. One table over Easter weekend sat for almost three-and-a-half hours.

Dirty Habit’s staff is trained to gently try to get these lingering guests to move on or offer a drink for them to sit elsewhere, but “if they’re not going to move, they’re not going to move, and then you just have to work out your next tables around that,” Micheli said.

While the lack of staff has limited Dirty Habit’s dining room, it could cause even more problems during the upcoming wedding season. Dirty Habit reopened in October for micro-weddings and private events and was booking between six and eight private events a month, Micheli said. For that staffing model, the restaurant just allocated existing staff as needed and that worked out well, but that might not necessarily work for larger weddings, he said.

“In a hotel, you have banquets and restaurants. How do you staff both of those?” Micheli said.

Weddings require one server for 10 people and one bartender for 20 to 25 people, Micheli said. For a 500-person wedding, Dirty Habit would need at least 50 servers and at least 20 bartenders. And time is running out. The restaurant is likely to have its first wedding on May 15, Micheli said.

There is also more opportunity to attract additional business. Washington, D.C., eased restrictions on live entertainment starting May 1, and Dirty Habit is considering offering live music outside or hosting drag brunches, Micheli said.

“We’re excited to see the activations of the property in general coming back. Our name is Dirty Habit. We have fun. We want people to have fun,” Micheli said.

While Micheli is optimistic about the restaurant’s potential, one thing will remain the same for a long time.

“We’re hiring. We’re hiring. We’re hiring,” he said.

https://www.restaurantdive.com/news/now-hiring-how-the-labor-shortage-is-squeezing-full-service-restaurants/599453/

Julie Littman | Restaurant Dive