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Economic development đź’° What can be done about restaurants reducing their operating days?

Doberman

Cyburbian
Messages
227
Points
9
Restaurants in our area are gradually opening their spaces back up closer to capacity. We already lack daytime and lunch traffic in our city. We now have several restaurants that are reducing not their hours, but the days they operating as well. One of several restaurants, just cut back from to only be open 4-days a week. The other three they closed altogether, no pick-ups or Door Dash, etc. I got the sense that is because people who would work in this setting are not returning to the workforce due to the assistance being doled out.

Is there anything an ED can do to combat this? Frankly, I don't see how any restaurant can pay their lease if they are only open 4-days a week. I am afraid this is just the start of their decline.
 

kms

Cyburbian
Messages
6,832
Points
45
Because multiple restaurants have told me that they have employees that aren't returning to work because they can make more on unemployment.
A restaurant owner told me this, too. He wasn't complaining. He said that most of his staff are single parents and can really use the extra money.
 

Gedunker

Moderating
Staff member
Moderator
Messages
11,820
Points
47
I don't think there is really any role for the public sector in when a business, such as a restaurant, operates. The caveat would be if the public sector is in some kind of incentive package with the private sector. When government otherwise starts telling restaurants you must be open these days and these hours, we've stepped out on a slippery slope, IMO.
 

arcplans

As Featured in "High Times"
Messages
6,742
Points
35
I don't think there is really any role for the public sector in when a business, such as a restaurant, operates. The caveat would be if the public sector is in some kind of incentive package with the private sector. When government otherwise starts telling restaurants you must be open these days and these hours, we've stepped out on a slippery slope, IMO.
All of this. Yes, if you secured a PPP loan, you are probably better off not operating a full tilt because of some of the payback requirements. My muni has provided assistance grants to enable business to get by. Now what they do with that is entirely up to them. Also we have started a buy local program that provides gift cards for local merchants when you make a local purchase of $100 or more. All of these extra funds are derived from our cannabis tax revenue. So toke up.
 

Hink

OH....IO
Staff member
Moderator
Messages
16,382
Points
59
I think this is an interesting topic. Restaurants want government bailouts, because they need the funds to operate, but then government wants to force them to operate.

In my opinion the creation of a place is done by having a business owner WANT to be part of the fabric of your downtown. If you are forcing them to be part of it, they will not be the type of business you want any longer. Sure they may serve food to people, but they won't be part of the solution and long term will be a bigger problem.

I think you market the hell out of that business for the 4 days they are open. Tell the owner how happy you are to have them in your downtown. Push to have them be a part of any groups you have related to COVID funding or incentive packages. Make them feel supported.

Once this moves on, if they feel supported and the financials make sense, maybe they open to 7 days again. Maybe not and they fail with this restaurant. Either way the business owner has a positive interaction with the government agency and will consider working in that jurisdiction in the future. I deal with restaurant owners who have had three or four businesses within my community. Some have failed, and some have succeeded. They keep coming back because they know we are fair and equitable to work with.
 

Doberman

Cyburbian
Messages
227
Points
9
Well then maybe they need to pay better wages.
I agree. It's a mixed bag. Some of them have outright limited operating days. Other fast-food restaurants, such as Jack's, have closed their dine-in room and put out a sign out saying it's because of a lack of employees. The chains probably have more flexibility than the locally-owned restaurants to pay better wages.
 

MD Planner

Cyburbian
Messages
3,058
Points
49
Sorry Doohickie but it's not BS. There are stories everywhere of people who have no concept beyond the next two weeks who think their $1,400 check will sustain them. We're seeing it here in restaurants, retail and even landscaping companies. Between additional unemployment insurance and stimulus payments there are lots of people who simply are choosing not to work. Then you have lots of places that are forbidding evictions so it's not like you have to worry about paying your rent. We have a lot of people in this country who are not very responsible and accountable for their own lives. So naturally they expect the government to help support those poor choices.
 

Suburb Repairman

moderator in moderation
Staff member
Moderator
Messages
7,449
Points
35
There isn't a lot you can do. You can look at deferred forgivable and revolving loans to function as financial bridges during the post-COVID reopening. You can get really aggressive in supportive marketing and localvore initiatives. You can help fund capital costs for restaurant reinventions. You can help with data research to identify consumer patterns. But you have to understand that there is no fighting the market--some things die. For restaurants, assistance largely came too little too late, with the PPP program's first iteration being a complete clusterf*** of abuse by big businesses that cut out small businesses as well as an administrative mess.

You also have to put the employment situation in context. A lot of restaurant workers were unceremoniously laid off. Those that remained through PPP, etc., lost tip income. A lot of them found other employment. At least locally for me, restaurant owners have said their employees simply found more stable employment options after the open/close/open/close mess created by Governor Asshat in my fair state. With so many people still resistant to dine-in, that still means tip wages are suppressed and restaurant/bar work isn't as lucrative as before. I can vouch for that as my friends that were bartenders and waitstaff who basically said "F-this I need something reliable" after they went through the second shutdown here. Several of them took $15/hr - $20/hr jobs at the grocery warehouse distribution center since they were hiring with increased demand. They don't enjoy the work like they did the restaurants, but they have stability. They aren't living and dying by tips, which is reality for restaurant workers. Restaurant work is hard work, but it is a high-risk, high-reward industry. Personally, I look for employees that have worked in this industry because I've found their work ethics and interpersonal skills superior to those that haven't.

The "lazy restaurant worker" anecdotes are the exceptions, not the rule. They are a convenient scapegoat that is simply another iteration of the mythical "welfare queen" of the 1980s. It isn't malicious on the part of the restaurant owners--it follows a long pattern of restaurant owners coping with underperformance and failure. I'll explain more in a sec... first let's talk staffing.

There are general staffing thresholds that trigger the hiring of basically a whole additional shift of workers and shift supervisors/asst managers. Those generally occur when going from 4-days to 5-days (if an 11-9 style restaurant), extending a typical day beyond 10 hours including opening hour prep, adding a Saturday, and adding a Sunday. Restaurants operate on incredibly narrow margins, especially if they don't serve alcohol (alcohol is usually a 400% markup and helps support longer hours on more days along with lower food prices). Across the board, you've seen a lot of menu simplification as owners looked to streamline their operating costs. Some restaurants are not opening dining rooms because the demand isn't there to staff it. If you thought you were tired of fried chicken literally everywhere before COVID, buckle-up. That's actually a high-margin restaurant type, as is pizza. They are variations on a basic theme with a small ingredient pallette.

And you need to understand restaurants in general: they have the highest failure rates of almost any business. Approximately 60% of restaurants fail within the first year of operation and 80% fail within the first five years. Attrition in this industry is normal. It often starts with contraction in hours/days. And restaurant owners blaming everyone but themselves is also normal. The COVID shutdowns basically reset every established restaurant to the point it is like they are opening for the first time or are back in their "first five" struggles. This is especially true for restaurants that previously specialized in food that doesn't do well as a take-out product. That's a shock to the system of even the most established, mature restaurant owners.
 

WSU MUP Student

Cyburbian
Messages
11,191
Points
52
You also have to put the employment situation in context. A lot of restaurant workers were unceremoniously laid off. Those that remained through PPP, etc., lost tip income. A lot of them found other employment. At least locally for me, restaurant owners have said their employees simply found more stable employment options after the open/close/open/close mess created by Governor Asshat in my fair state. With so many people still resistant to dine-in, that still means tip wages are suppressed and restaurant/bar work isn't as lucrative as before. I can vouch for that as my friends that were bartenders and waitstaff who basically said "F-this I need something reliable" after they went through the second shutdown here. Several of them took $15/hr - $20/hr jobs at the grocery warehouse distribution center since they were hiring with increased demand. They don't enjoy the work like they did the restaurants, but they have stability. They aren't living and dying by tips, which is reality for restaurant workers. Restaurant work is hard work, but it is a high-risk, high-reward industry. Personally, I look for employees that have worked in this industry because I've found their work ethics and interpersonal skills superior to those that haven't.

This.

We've been working with a couple local industry groups and the restaurants in particular are hard up for labor. I've been looking at weekly continuing unemployment claims for our metro area and while they are up compared to early 2020, they are no longer up anywhere near the levels that would explain the labor shortages we're experiencing (continuing claims are now up about 5% over the pre-pandemic time, compared to the literal 1,000% increases we were seeing in April and May of last year.

Here we've seen a lot of older workers, across all industries, just decide to retire and not rejoin the labor force at all after furloughs and lay-offs last spring. Those in industries like retail and restaurant have been jumping ship to better wage or better stability industries in droves, especially logistics, low-skill manufacturing, medical offices, warehousing, etc.

I am sure there are some who are deciding not to work because of the added benefits right now but I don't think they're as big of a segment of the labor force as a lot of people like to believe.
 

WSU MUP Student

Cyburbian
Messages
11,191
Points
52
There's an article in Eater yesterday about the very topic of the labor market and the restaurant industry: The Lie of 'No One Wants to Work'

It's lite on quantitative data but does mention many of the points we've been trying to make with our local business community and our workforce development folks for years: Employers have been having labor force issues in these low pay, low skill, industries for years. They ask for our analysis and we can show them that their wages are low (low regardless of how you control for skill/education, COL, experience, etc.) and how they will open themselves up to a larger labor pool and have less turnover if they increase wages by $X or increase/add whatever benefit. Those employers that make a serious effort see significantly lower turnover and have a better pool of applicants when they do post openings (and we have the data, both empirical and anecdotal to back this up). Those that don't make an effort usually come back to us 6 months or a year later with the same labor force problems.

This isn't limited to the restaurant and hospitality industry but I think it's most noticeable there, thanks in part to the lower minimum wage for servers. We see the same problems, to different degrees, in light assembly and low-skill manufacturing, facilities maintenance, and retail.

Another thing that exasperates the problems in these industries is the rate of poaching by employers. We commonly hear complaints about employers in hospitality and entry-level folks in the skilled-trades in particular who rarely post job openings and instead fill their openings by poaching from other establishments in the area. I don't know why the complaining employers would expect their employees to be particularly faithful when they are earning such low wages; at that level of pay, an extra ~$2 can make a pretty significant difference.
 

Hink

OH....IO
Staff member
Moderator
Messages
16,382
Points
59
To add to WSU above, we now have many large distribution companies (here's looking at you Amazon, and the like), that have popped up and pay $17 / hour. The restaurant industry seems to think that unskilled labor only deserves $8 / hour. Well if you don't want to deal with people and are unskilled, you can now make $17 / hour starting out, with a reasonable expectation that if you go to work (on a regular shift work schedule), you will make a lot more than that over a short period of time.

The big box distributor that will not be named (not amazon), that is currently hiring, is paying its workers $15 / hour starting out, with a guarantee of $19 / hr after 6 months. That is a big money promise.

I think it isn't just that people want free government money. I think it is also coupled with the fact that people have other options to allow them to make more money. The restaurant industry model has never really worked, but it just leaned heavy on high school kids and unskilled labor that didn't have any alternative (i.e. needed the work). Now there are reasonable alternatives that are paying better, providing more consistency and scheduling, and in a lot of cases providing better benefits.

I don't know that paying $15 / hr will fix the problem. I would guess you would need to see $20 / hour before the problem is truly "fixed", if that is what you are trying to accomplish.

We just need to move the goalposts as to what a company should expect to profit. You can still make money and pay your employees better. There are LOTS of data points that support that fact, but almost all of that requires modifications to the higher management compensation models, which no one wants because it could mean less profits for the company and shareholders would be wa-wa sad.
 

kjel

Super Moderator
Staff member
Moderator
Messages
12,617
Points
44
A business model that is built on paying crap wages and offering few benefits is bound to fail at some point, especially when the economy is stressed or in the midst of a pandemic.

Immigration policy over the past 4 years has hurt the service industry a lot with fewer people coming in to work the bottom jobs and more people leaving out of fear. Child care is a huge issue right now, schools still aren't operating fully and it's hard finding childcare or childcare that is affordable (I can't and I am not struggling financially).

And as Hink pointed out, the distribution/warehouse jobs are taking up people that often worked in restaurant and retail because they pay better.
 
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