48% of restaurants struggling with rising labor costs, study finds

Dive Brief:

The top barriers to improving operations for restaurants include rising labor costs (48%), employee turnover (44%) and insufficient training (39%), according to a Zenput and Technomic survey of 295 restaurant operators emailed to Restaurant Dive.
Two top priorities for the respondents are improving employee productivity (48%) and compliance (43%).
Twenty-seven percent of operators said they are using technology to automate various aspects "to a great extent," with 33% of corporate stores using technology versus 18% of franchisees. For operators that have adopted it, 83% said they had positive experiences.

Dive Insight:

Labor continues to be a challenge for restaurant operators. With a historically low employment rate, restaurants are having trouble attracting and retaining quality labor. Low employment means job applicants tend to have the upper hand when it comes to settling for a certain wage or seeking better pay elsewhere.

Other labor-related pressures involve a new minimum salary for overtime eligibility from the Department of Labor, and growing consumer interest in seeing a $15 minimum wage become federal law. The DOL is also proposing further changes to rules regarding tip pooling and tip credit, which has been a particularly confusing subject for the industry during the past few years.

Fortunately, technological innovations are offering restaurant operators a few ways to tackle some of the labor-related challenges identified in the study. Outback is tapping AI technology to analyze diner interactions with staff, for example, including lobby cameras and wait time tracking. Mangers review the data in real-time so that any poor reviews in the making can be remedied before the guests leave the restaurant.

Robotics and automation also made a debut in the restaurant space, but overall adoption has been low, especially among large operations that have more difficulty rolling out systems to automate tasks. Small chains, those with less than 50 units, were more likely to say they would use automation in the future. That hasn't stopped large chains, however. McDonald's piloted an automated fryer in the kitchen last year as well as voice-activated drive-thrus in Chicago. It's also introducing automated beverage equipment. The endeavor is designed to reduce customer wait times while making employees' jobs easier. Freeing them up from some of these more mundane tasks allows them to focus on cultivating a better customer experience through interaction and service. Futurists are betting on robots to take over even more restaurant operations during the coming decade.

While technology seems to be addressing some of the labor-related pains, training and retention have ample opportunity for improvement as well. A few brands have invested in better training opportunities for employees like Denny's partnership with Magic Johnson focusing on leadership training and McDonald's women-focused career excellence and Women in Tech initiatives. To boost retention rates, chains like Starbucks, Noodles & Company, Chipotle, Shake Shack and Sweetgreen bulked up employee benefits last year.