Cost Reduction

From Boston to LA: Labor Issues Top of Mind for Restaurant Operators

A panel of small multi-unit owners in Boston decried an inability to retain back-of-house staff as a major hurdle, while their single-unit fine-dining counterparts were struggling to attract qualified servers and hosts. Alternately, two medium-sized chain executives in California are dreading impending minimum wage increases while the state and federal government has mom-and-pop operators in upstate New York scrambling to get exemption statuses and I-9s in order. 

These are the labor-related challenges that restaurant operators are facing, and below is what operators can do to mitigate risks and off-set costs to drive success.

The labor process starts with building an organization and an employer brand that is attractive to the labor pool from which you are recruiting. 

Meghann Ward from Tapestry Restaurant in Boston developed a full learning kitchen in order to attract talent at a wage that she and her partners felt was fair for all parties. Ward and her staff spend hours teaching young chefs techniques and recipes that will help them develop professionally so that they receive the on-the-job experience necessary to advance their careers. 

“The teaching kitchen is a give and take between the restaurant and the employees,” Ward said, and so far the strategy has worked wonderfully.  Since the restaurant opened in May 2016, not a single person has left.  “We haven’t had to rehire,” Ward stated.  “They’re an amazingly dedicated, talented group and they know that they’re learning.”

A learning kitchen is, of course, not the right solution for every operator, but it has helped Tapestry balance out their need for qualified talent and their obligation to pay an appropriate wage.  It’s a fact of the industry that wages are going up: due indirectly to the war for the talent and more directly to an increase of minimum wages throughout the country.  The truth is, there is really nothing that most operators can do about it.  Lobbying may slow the process down, but minimum wage increases are not going away. 

One of the answers is to offset the increased cost of labor by finding other areas to apply cost savings methods to, many of which may even decrease the labor hours that are needed in a given week.  Third-party purchasing and supply chain consultants help operators identify opportunities to save costs and decrease labor. 

Wade Winters, vice president of Supply Chain at Consolidated Concepts, gives these examples of recent labor-savings recommendations that he’s made to clients:  “We helped save X Hours in weekly labor by encouraging a 50-unit Italian operator to switch from a seven-ounce untrimmed chicken breast to a six-ounce trimmed breast,” Winters says.  “Not only did they cut back on hours of labor, but they improved their yield by minimizing the large amount of trim that was ending up in the trash.” 

This particular operator also was processing the chicken breast for scaloppini, which requires very thin slices.  There is skill involved to make these types of cuts without ruining the breast meat. Culinary skills like this don’t come cheap, which means the restaurant was paying their kitchen staff top dollar. 

“Sourcing pre-cut chicken slices was another option to reduce labor costs and improve yield,” Winters said. “Other recent labor-savings solutions that we’ve developed have involved purchasing broccoli florets instead of whole crowns, switching to premium fry oil, which requires fewer fryer changes, and recommended portioning tools to reduce over-portioning or the time that prep chefs need to spend weighing food on scales.” 

When restaurants spend more than $15 per hour on wages, reducing even a few hours of labor each week can add up to significant savings, especially when other efficiencies are achieved in the process.


Pay Practices

Not only are minimum wage laws raising the cost of labor, but they also demand that operators put clear tracking systems in place to protect against a potential audit or lawsuit.

“It is critical for employers to both correctly classify exempt employees and track the hours that non-exempt employees work,” said David Robinson, Esq. of Ruberto, Israel & Weiner in Boston, MA.  “Employees who are misclassified as exempt are retroactively owed all the overtime that they worked, which in a restaurant is most likely going to be substantial.  Similarly, failing to keep track of employees’ hours worked is both a violation of law and removes the employer’s ability to defend against an employee who exaggerates their hours worked.” 

Robinson recommends that restaurants annually review their pay practices to make sure they are compliant under both state and federal law and to speak with an experienced employment attorney if they have any questions about their obligations.  “The cost of non-compliance of the wage and hour laws are simply too high for a restaurant to ignore,” he said.

Immigration law is also a major area of concern to the restaurant industry, which employs more immigrant labor than most other industries. According to Anas Saleh, employment and immigration lawyer at Bousquet Holstein PLLC, “The majority of I-9 immigration law cases that [his] firm has seen this year have been in the restaurant industry.”

The challenges to immigration law compliance are infinitely complex. Operators must track all appropriate information, without demanding too much documentation from their employees and risking document abuse. The most important thing, according to Saleh is consistency and planning. 

“Auditors really want to see consistency in the way that an employer handles I-9 documentation. The best advice I can give is to plan ahead.  It’s more cost effective to make a plan and do it now than to pay the price later,” he said.



Cost Reduction
  • Subscribe to our latest insights


Are you capital raise ready?