Why restaurants are struggling to find and keep employees

By Kristina Gansser|Apr 18, 2023|8:17 am CDT

Restaurants are feeling the pains of a major labor shortage. From high turnover rates to difficulty attracting new workers, the restaurant staffing shortage has been the most significant post-pandemic issue. In fact, restaurant owners have said recruiting and retaining employees are among their top business challenges in 2023. So why are restaurants short-staffed? Let’s take a look.

How short-staffed are restaurants really?

Before we dive into why restaurants are short-staffed, it’s important to understand the state of the restaurant industry as it stands today.

Restaurant hiring is hot, hot, hot

Operators of hotels, bars, and restaurants are now among the country’s fastest-growing employers, according to a recent Wall Street Journal article. The National Restaurant Association (NRA) predicts the restaurant workforce will add about 500,000 workers in 2023.

Staff shortages persist

Hiring may be a top priority for operators, but finding people to fill open positions remains a daunting task. According to the U.S. Bureau of Labor Statistics, more than one and a half million leisure and hospitality job openings remain unfilled. It also doesn’t look like the labor shortage will ease up anytime soon. The National Restaurant Association states in its 2023 State of the Restaurant Industry that it expects restaurant employment to surpass pre-pandemic levels in 2023. Still, recovery will be slow, and filling positions will remain a challenge.

Restaurant Operators Report a Tight Labor Market*

79% report difficulty hiring
62% are understaffed

*According to restaurant operators surveyed by the National Restaurant

Restaurants are leaving money on the table

In response to rising costs and staffing shortages, restaurants have been reducing hours (closing for lunch, additional days shutting down operations, etc.) or short staffing their shifts. A new research study found that the average restaurant is now open for 6.4 fewer hours than it was three years ago.

Days closed, shorter hours, and fewer tables turned all lead to a very real and tangible financial cost. “We’ve found restaurants typically lose 10–25% of gross revenue per store when they cannot staff properly against demand,” shares Clinton Anderson, CEO of Fourth.

Workers feel the pain (and they want out)

To make a challenging situation even worse, existing workers are suffering under a heavier load due to short staffing. A recent survey found that roughly 90% of food service employees said they had worked overtime, double shifts, or extra shifts in 2022. Of those, 75% said they did so because of a staff shortage. Even more sobering, one in four restaurant workers expect to leave the industry within a year, according to the survey.

It’s clear restaurants today are woefully understaffed. But the bigger question is why?

“When you look at the jobs that are having trouble hiring, it’s the ones with really long hours, inflexible schedules, not great pay, and limited benefits. Running your workers like this—asking them to do 20, 30 percent more because you’re short-staffed… you’re going to keep losing people.”

Paige Ouimet, Professor at the University of North Carolina’s Kenan-Flagler Business School

Reasons restaurants are understaffed

With growing demand and an anemic labor pool, restaurant owners can’t adequately staff their kitchens and front-of-house teams. Inadequate staffing creates a domino effect of negative repercussions on the overall customer experience, making it difficult for restaurants to thrive. Why are restaurants having a hard time finding employees? Here are seven key reasons.

Low wages

During the Covid-19 pandemic, food service jobs plummeted as bartenders, waitstaff, dishwashers, bus persons, and more were suddenly furloughed or laid off. Some have returned, but others found greener pastures outside the restaurant industry where they can earn higher wages. Ashton Rodriguez told the Washington Post that she left the industry after 15 years and now “makes twice the money she made as a bartender at LongHorn Steakhouse.” The pressure to attract and retain hospitality workers drove wages up by 23% in the past three years—more than in any other sector. That’s no surprise, considering 46% of workers said that pay was the most important factor in their job satisfaction, according to a recent survey. Before the pandemic, food service average hourly wages were already above minimum wage at $14.17. At the end of 2022, they had risen to $17.30 per hour, according to the U.S. Bureau of Labor Statistics.

Unpredictable hours

The Shift Project has been tracking service sector workers’ schedules since 2017. Their findings are sobering. “Unpredictable and unstable schedules lead to higher employee turnover, household economic insecurity, and reductions in workers’ health and wellbeing,” states a recent report on the persistence of scheduling uncertainty. “For an hourly worker, their pay is determined not just by their wage, but by the number of hours,” Kristen Harknett, one of the founders of The Shift Project, observes. “You can’t create better conditions for workers by only having the one side of the equation.” As of fall 2021, 64% of workers surveyed received less than two weeks’ notice of their work schedule, more than a third received just one week of notice, and one quarter reported having as little as 72 hours’ notice. It’s not surprising that 65% of workers expressed a desire for a more stable and predictable schedule, according to The Shift Project report.

65% of workers want a more stable and predictable schedule.

Poor communication

A lack of communication can be devastating to staff morale and employee retention. “Engaging with employees is vital. When employees don’t feel their needs are being met or fairly considered, employee turnover rises,” notes Clinton Anderson. “We’ve seen some restaurant chains with a 300 – 400% churn rate with their hourly staff, and it wreaks havoc on the operations and profitability.” Communication is particularly critical as restaurants onboard new team members. A recent report found Quick Service Restaurant (QSR) workers are 5X more likely to quit over miscommunications with management during their first 90 days than after.

Physical challenges

As any dishwasher, server, or line cook will tell you, jobs in the food service industry can be physically grueling. Employees carry the weight of the job on their backs (and feet) — nearly half of restaurant and food service workers surveyed complained of back and foot pain. And one in three said they had been injured on the job. This physically demanding work can be particularly challenging for older workers, which may account for why they have failed to return to the workforce at the same rate as younger generations.

New IRS-proposed tip reporting program

In February of this year, the IRS announced a proposed revenue procedure to “establish the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program between the IRS and employers in various service industries.” Recent claims on social media may have alarmed restaurant employees, only exacerbating the challenge of bringing workers to the service industry. Mike Palicz, director of tax policy at the conversation advocacy group Americans for Tax Reform, tweeted, “Those 87,000 new IRS agents that you were promised would only target the rich… They’re coming after waitresses’ tips now: ‘monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer’s point-of-sale system.’” Of course, tips are already subject to federal income taxes. But alarming headlines and incendiary posts on social media can cause workers to think twice about taking on jobs that rely heavily on tips for income.

Difficult customers

It isn’t just a physical toll restaurant workers face every day. There’s an emotional toll as well. Numerous news stories have put the behavior of rude and disruptive patrons full display. And a 2021 survey from Black Box Intelligence reports that nearly 2/3 of workers reported receiving emotional abuse and disrespect from their customers. Alicia Grandey is a professor of psychology at Penn State who has been studying how the mistreatment of frontline service workers affects their health and productivity. “With the Great Resignation, we’ve seen that employees are saying it’s not worth it anymore—rather than dealing with customers’ bad behavior, they can go get a higher-paid remote or desk job,” explains Grandey. No wonder employees are looking for restaurant owners to show they have their backs. Doing so is even in the owners’ and operators’ best interest. Recent research found that when customers witness other customers being uncivil to employees, more than half believe the organization should be doing a better job protecting employees, and 40% question whether they want to do business there again.

Customers judge restaurants by how staff is treated

When customers witness other customers being uncivil to employees, their feelings toward the workers’ organization shift in surprising (and costly) ways:

  • 42% report the behavior changes their perception of the company
  • 40% question doing business there again
  • 65% think the organization should do a better job protecting employees
  • 45% question the organization’s values

High turnover

Looking at the reasons above outlining why restaurants are understaffed, it should come as no surprise that the seventh and final reason is high turnover. Monthly hospitality and food service labor turnover is twice the national average at 5.4%. It will only continue to drive increased costs in 2023 as operators need to recruit, hire, and train more people. Employers who aren’t actively working to mitigate issues like low wages, inflexible and inconsistent scheduling, and abusive customer behavior will continue to face sky-high churn rates. It’s a vicious cycle that leads to worker burnout as existing workers are forced to pick up the slack, and managers spend more time recruiting and interviewing than coaching their teams and driving profitability.

What does this mean for short-staffed restaurants?

The struggle is real. For the foreseeable future, restaurant operators will continue to face the challenges of a tight labor market and fierce competition for talented workers. It makes it more important than ever to understand how to motivate restaurant employees so you can attract top talent and keep them, and to optimize your labor with demand forecasting.

Fourth leads the industry when it comes to helping restaurant owners and operators overcome the challenges of the day. At a time when the hourly labor market is experiencing its most significant shortage in over 70 years, the Fourth Intelligence Platform helps you:

When every hour of every shift matters, Fourth helps you conquer the day.

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