November 15, 2022

Restaurants in a Post-Covid Economy: Confronting a Labor Shortage and Supply Chain Crisis

The restaurant industry was hit especially hard by the coronavirus pandemic and though government programs like RRF and PPP loans were a life raft for many businesses, there are several issues still facing restaurants.

A nationwide labor shortage has hit the industry hard, making it difficult to both find and retain workers. Compounding that is a supply chain crisis which has raised food inventory prices and made some ingredients impossible to attain.

We have a few potential solutions restaurant owners should consider while facing these twin crises.

Hiring and Retaining Restaurant Workers During a Labor Shortage

Staffing Shortage Takeaways:

  • Create positive culture in the workplace to attract top talent and keep them
  • Consider incentives or bonus structures tied to sales or overall profitability
  • Some compensation packages you offer could be used as tax deductions

One of the biggest pain points affecting the entire restaurant industry is hiring and retaining staff. In order to attract high quality talent, restaurants should concentrate on building a good culture within the restaurant that makes people want to come to work. Using pandemic relief funding is a great way to make an investment in the workplace.

Focus on ways to make work both fun and productive for staff so there’s extra incentive for them to make it through the door to their shift. If finding staff remains an issue, consider reducing opening hours or closing for an additional day during the week to ensure staff coverage on days you know you’ll be the busiest.

It’s not just finding staff that’s been difficult. Try to retain experienced employees by offering incentive packages for them. One option might be bonus structures based on sales or the restaurant’s overall profitability.

Offering retirement plan benefits, or some other kind of vested compensation may also work for your business. These types of packages can be beneficial both for the worker and employer as there are sometimes tax deductions available, which an experienced CPA would know.

Managing Supply Chain and Inventory Issues

Supply Chain/Food Inventory Takeaways:

  • Scale down menu options based on costs, availability and popularity
  • Consider finding a new, less expensive food vendor
  • Renegotiating lease agreements can be a viable way of cutting costs

Another major issue driving up costs for restaurants is continued supply chain bottlenecks which have resulted in difficulties obtaining raw materials and ingredients. This has caused higher prices on ingredients, leading to narrowing or even disappearing profit margins.

Obviously, this is a huge concern for businesses who are still recovering from the pandemic, but there are ways to cut costs and get those profit margins back at a healthy level.

If your food vendor’s prices are rising beyond what’s feasible for your business to pay, it might be time to look for a different, less expensive provider.

Buying in bulk can also reduce costs by getting you a lower price per unit. Raising prices could also help combat inflation, though most restaurants have been generally reluctant to do so. At a certain point, a price increase may be unavoidable and have come to be expected by consumers.

Lease agreements may be another area where restaurant owners may be able to cut down their costs. Generally, most landlords want tenants to stay where they are, so they might be willing to adjust your lease terms to ensure their building has no vacancies.

Another great place to look for ways to scale down costs is the menu. Are there any items that aren’t frequently ordered? Consider cutting it out and concentrating instead on products that bring in the most money at the lowest cost to protect profit margins. Are there any products that you’ve been struggling to find in general, or to find at a relatively good price? Perhaps that’s another item that could be cut from the menu.

Our team of CPAs and advisors assist businesses in the lodging, food and beverage industry add value through tax strategies and financial advice. Learn more about how we can help you by contacting an Anders advisor below.

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