At a time when the nation’s economy is unpredictable, many companies and organizations are trying to find immediate cost-saving strategies. With widespread strikes for higher minimum wage, companies are spurring towards innovation to reduce rising costs. Unfortunately, layoffs in the Hospitality Industry are far too real an occurrence due to the high labor costs associated with operating those types of businesses. Layoffs are generally the simplest way of reducing costs but are often met with low employee morale, the need for new efficient solutions to replace positions, severance packages, and unemployment benefits to finance. The current and unique solutions that the Hospitality Industry is introducing include cultures of accountability, cross-training, and selecting products and equipment that require less training while maintaining quality.
In a report from the Congressional Budget Office, it states that a minimum wage at $10 per hour would cost the economy 500,000 jobs. What this analysis failed to take into account is the benefits of “innovation stimulus” from a minimum wage hike that would add higher-skilled jobs to the economy. If we take, for example, the model of McDonald’s, one of the largest employers of minimum wage workers, it owes much of its success to increased minimum wages. With the original idea to develop more efficient ways to produce food using automated equipment rather than employees, it is now a trendsetter for fast-food chains internationally.
It might have seemed far-fetched that one day a customer could order food in a restaurant without speaking to an actual person but the future is here. Companies such as Chili’s and California Pizza Kitchen have introduced tabletop ordering devices in which customers order and pay for their food without ever talking to a waiter or waitress. Relying on technology has now become a necessity to fight federally increased wage hikes. In a recent poll conducted by the National Restaurant Association, it ranked computerized menus as the top tech trend for 2014. Many CEO’s including Andy Puzder, CEO of CKE Restaurants, the parent company of Carl’s Jr., Hardee’s and various other brands, has cautioned legislators that a higher minimum wage is “encouraging automation.”
Labor costs are the second highest cost in the food service industry, making it imperative to keep them under control. With labor costing restaurants 30%-35% of total sales, it’s essential that attention is paid in full detail and cost-saving practices are put into effect. Many restaurants and hotels use tactics such as menu planning, sales forecasting and employee training to ensure they remain profitable without sacrificing quality.
With proposed wage hikes, employers are faced with the tough decision to either reduce staff or raise prices, both of which are common ground in the QSR arena. Companies are either slashing training budgets or doubling down and focusing on their current staff. Naturally, companies that improve or refine their training processes tend to have employees who perform better and are seen as people with needs and potential, not just burger flippers. One day, humans might not even need to cook consumers’ food. San Francisco-based Momentum Machines has a burger flipping robot that replaces a full-time staff of three. Innovation, of course, helps in resolving human error but where do we draw the line?
Cross-training staff is perhaps one of the most vital sources a restaurant or hotel can rely on to reduce labor costs. The more a single staff member can do, the more productive a staff becomes. This makes labor reduction a safe and effective way of reducing labor costs. Inevitably, there are going to be situations in businesses that produce gaps in staff tasks; workers getting sick, employees quitting unexpectedly and no call, no shows. Cross-training is effective in this sense because managers are not solely relying on specific individuals for a specific task. Hosts or hostesses can be trained as backup servers, bussers can expedite and run food, and servers can bartend or vice versa. Effective cross-training provides a staff that is more efficient, flexible and knowledgeable about understanding the challenges of other jobs within the business.
Today, many hotels and restaurants rely on time-saving products and equipment as a genuine source of reducing labor costs. “Labor-saving equipment that can multitask, produce higher volumes and run by itself has always been in high demand but seems to be increasingly so as of late,” says Richard Dieli, FCSI, principal of Dieli Murawka Howe Food Service Design Consultants in San Diego. Examples such as combi ovens, sous vide technology, cook-chill technology and volume steamers are a few of the examples that are in today’s restaurant or hotel. Many operations are utilizing design consultants to design foodservice spaces to maximize the use of labor. “Basically we want to figure out how we can minimize the equipment going in, which will minimize the required labor and maximize the menu,” says Dieli. Unfortunately, not everyone can afford the equipment that is required to reduce labor in such a drastic way. In this case, restaurants and hotels turn to time-saving products.
Food suppliers have found dramatic ways to reduce the labor needed to produce dishes with various semi-finished ingredient solutions. While they can sometimes be slightly more costly, they can significantly reduce the hands needed for the original ingredient, cooking methods and preparation. With conventional food systems there are many disadvantages that include labor-intensive procedures, lack of consistency, higher food costs and food safety. On the other hand there are advantages of ready-prepared and semi-finished food systems. These include flexibility in scheduling food preparation and lower labor costs, but there are many disadvantages as well, such as limited menu variety, high initial capital investment on equipment, perceived loss of quality, recipe modifications and food safety problems.
With products ranging from semi-finished to ready-made, such as sauces, marinated proteins, and powdered crème brûlée which only needs the addition of milk, there are a wide range of food solutions that companies have begun to manufacture to fight the onslaught of rising wage costs. Perhaps the most difficult challenge that chefs have to face is their egos. Most chefs, whether they work in hotels or restaurants, simply have to cope with the fact that costs are more important than their egos. Although the idea of scratch-made is what most chefs prefer, the reality is that sometimes scratch-made is not the most cost-effective way. When labor, equipment, ingredients, etc. are factored in, the costs of semi-finished or ready-made foods are much more cost-efficient even though the quality might not be the same. While some might reject the fact that they must use convenience products, the reality is that convenience products reduce purchasing time, storage facilities and food costs, ultimately providing a cost-effective strategy for an ever-increasing cost-driven business. Although no one likes the idea of cutting costs by reducing staff, the reality is that now, more than ever, the hotel and restaurant industry must re-think their labor structures. Fortunately, many companies offer current solutions for any and every problem to evolve with the ever-changing workplace. Whether it be designing kitchens that are more efficient or utilizing more convenience products in a menu, the solutions are wide and varied, and are most likely here for the long run.