By Adrian Johansen, Contributor
The COVID-19 pandemic had a devastating effect on the restaurant industry as many owners were forced to close their doors and try to weather the storm. Now that vaccines are making the rounds, restaurants are reopening. However, now the new predicament is a nationwide labor shortage. If you want to stay profitable during these tough times, then you need to do what you can to attract and retain your employees, and the best way to do that may be by offering a higher pay wage.
Many restaurant owners will think this is easier said than done, especially with fewer customers coming through the doors, but with smart budgeting and a close look at your finances, you can make some tweaks and provide the higher pay that your employees will appreciate. Let’s look at the situation and some crucial next steps.
The Restaurant Pay Situation
Right now, the U.S. is facing a labor shortage. Many factors are contributing to this issue and a lot of it has to do with health concerns among potential candidates and a general uncertainty of what the future holds for the country. On top of that is a growing desire to work remotely, which is encouraging many people to hold off on getting a new job until they can get one from home.
The restaurant industry is particularly at risk, and a lot of that has to do with the number of customers who are coming through the doors. Many restaurant workers get close to minimum wage for their hourly pay and depend on tips to supply the bulk of their income. With fewer in-house guests, the chance of getting the tips they need to survive is greatly diminished, so many employees don’t see the point of returning to work.
With proper budgeting and by cutting down on unnecessary expenses, you can find the money to pay your employees a bit more. It is important to remember that you don’t have to double the pay if you can’t afford to do so, as just a bump can make a big difference. This was proven back in 2015 when McDonald's decided to pay their employees just one dollar over minimum wage. The result was lower turnover and radically improved customer reviews.
So, just by paying a bit more than a competitor, you could find quality employees that can improve your business for the better.
It’s Time to Look at Your Restaurant’s Finances
So, now that you know that you need to increase employee wages, let’s look at several approaches that you can take to modify your finances to find the cash you need to make that a reality.
To start, you need to start by creating a detailed budget of the money you have coming in every month, along with a list of every expense you have, including labor costs, food & drink costs, maintenance, rent, heat/electricity, and anything else that you pay for regularly.
If the process becomes too confusing or you do not have time to create an in-depth budget, then it may be time to turn to a professional to assist. If you have the funds available, that may mean hiring an accountant who can stay on board for at least a few months so they can get an idea of your finances and recommend necessary tweaks. Another idea is to consult a financial manager, a professional who can help you to set long-term goals and give you a good idea of how much you could potentially pay your employees to remain competitive.
If you can’t hire a financial professional, just remember that you don’t have to solve this puzzle right away. Instead, set a target date for when you hope to increase the hourly wage and set small goals in the meantime that are easier to achieve. Accomplishing these goals will be incredibly satisfying and will create a snowball effect of sorts that will encourage you to continue finding ways to tweak your finances for the better.
Taking Action to Save Money
Once you have figured out the best approach for saving the money necessary for your higher pay rate, it is time to take action. Even if you believe you run a tight ship, there are always expenses that can be cut or methods to save money. For instance, speak with your food suppliers and see if there is a special deal that can be reached. If not, consider shopping around at competitors to see who may have the best product for the best price.
You can also consider modifying your menu and the number of items available to customers. Analyze which menu items sell the most and which “sit on the shelves.” If some guests clamor for a dish you have removed, you can turn it into a special every few weeks and charge a bit more for it.
On the topic of avoiding waste, also try to keep your utility bills manageable by unplugging appliances when not in use, avoiding water waste, and switching to LED bulbs.
If your restaurant is not dependent on your current neighborhood, then another big decision could be to move your entire restaurant to a different location. Research the nearby towns or states and look at their tax rates, rental fees, and other expenses to find a place where you can save the most money. Moving a business can often be a hassle, so if you do decide to relocate and you only want to move once, find a new location that offers suitable leasing terms and plenty of room to expand the business if you decide to do so.
In the end, it may sometimes be a hard pill to swallow, but if paying your employees a bit more will keep your business afloat in this uncertain climate, then it may be wise to investigate the possibility. Doing so will keep your doors open and will lead to a happier and more efficient staff.
Photo by Petr Sevcovic on Unsplash
