Restaurants turning more to technology, retention programs to ease labor pressures

Key Points
  • Some 20 states are slated to raise their minimum wages in 2019, putting pressure on restaurants' bottom lines.
  • More than 72 percent of people left jobs in food service or hospitality in 2017.
  • Restaurants have begun implementing technology to ease staffing pressure, while bolstering their benefit programs to coax employees to stay with their companies longer.
A Domino's Pizza delivery driver
Jason Alden | Bloomberg | Getty Images

The labor market remains tight, and wages are on the rise, putting restaurants in a sticky spot.

Restaurants are meeting the challenge with a number of creative solutions that range from using technology to ease staffing pressure to bolstering benefit programs to coax employees to stay with companies longer.

The problem starts with an already tight labor market, which reflects the overall low unemployment in the U.S., and then is complicated by having fewer teens in the workforce. This trend limits the number of people seeking low-wage work and pressures companies to raise their hourly rates to woo those who are in the market.

Last year, only 19 percent of teens aged 17 to 19 were working, compared with the 80 percent that were part of the workforce in 1968, Brian Todd, president of The Food Institute, said Monday during a panel at the ICR Conference in Orlando, Florida.

Not only that, but wages were already on the rise due to state and local law setting higher minimum wages. More than 20 states are slated to raise their minimum wages in 2019.

The industry isn't a stranger to labor issues. Restaurants tend to have the worst employee retention rates in the U.S. A staggering 72.5 percent of people left jobs in food service or hospitality in 2017, according to the Bureau of Labor Statistics.

The solution comes partially from trying to reduce the number of employees restaurants need.

Wingstop CEO Charlie Morrison has gone as far as cutting items from his restaurants' menus in order to reduce the amount of labor it takes to make certain side dishes.

"In 2018, one of the simple decisions that we made that proved very effective for us was the elimination of our three core side menu items, which had been with the brand a very long time," Morrison said at the ICR Conference on Monday.

The company replaced its potato salad, coleslaw and baked beans with two new loaded fries options and Cajun fried corn. The swap reduced the amount of time employees spent making the food from scratch by five hours, he said. It also had the benefit of boosting sales, as customers ordered the new options four times as much as the previous sides.

Dave & Buster's cut the number of items on its menu by 20 percent last February, hoping to speed up its kitchen. It will shave off a few more this February, CEO Brian Jenkins said during a panel at the ICR Conference on Tuesday.

Other companies are turning to technology to solve their labor woes. One way is getting customers to order more often from their phones, tablets and computers.

For the majority of restaurant chains, around 25 percent of in-store labor is dedicated to order taking at the front counter. So, having a kiosk or mobile app that customers can use will help companies reduce the number of staff needed to man the cash register. They can then transition that labor to other areas that may need it more.

Technology is also a salve for retention issues. Shift One, a tech company that works with restaurants like Dave & Buster's, Five Guys and Applebee's, operates a mobile app platform that tracks employee progress and collects data like average check or items sold during a shift.

Managers can then send electronic recognition to these employees for their good work and track which employees should be promoted and which ones might be in danger of quitting.

CEO Ashish Gambhir said that fostering a sense of belonging among employees, engaging them in their work, and rewarding them when they are successful can go a long way to keeping good employees around.

Other restaurants like Starbucks, Chipotle, Taco Bell and McDonald's have also made retention programs a priority. These initiatives include college tuition assistance, better parental leave benefits and sick days for part-time employees

Domino's CEO Ritch Allison reiterated at ICR on Tuesday that his company has been working to give drivers less territory to cover by clustering more restaurants together. This makes their runs shorter, allowing them to make more deliveries in an hour and earn more tips. Better and more consistent tips can be a deciding factor for drivers to stay with a company like Domino's rather than leaving for a rival, he said.

"By and large wages are rising for all the right reasons and, overall, that's a really good thing for Domino's because nothing drives pizza sales more than people having jobs and having money in their pockets," Allison told CNBC Tuesday.

"It does create some challenges in terms of staffing, but frankly, it means we have to do a great job of attracting good talent, training them, giving them opportunities to grow and paying them well," he said, adding 90 percent of Domino's franchisees started as drivers and restaurant workers, Allison said.

US consumer is really strong, says Domino's Pizza CEO
US consumer is really strong, says Domino's Pizza CEO