Labor issues dominate discussion at recent DiRoNA Educational Conference

Nation's Restaurant News,  Sept 24, 2007  by Paul Frumkin

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COEUR D'ALENE, IDAHO -- As the foodservice industry continues to wrestle with a steadily tightening labor market, leading fine-dining operators are taking unprece dented measures to ensure that they attract and retain the type of skilled employees necessary to run their businesses.

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Restaurateurs attending the 17th annual Distinguished Restaurants of North America Educational Conference and Gala at the Coeur d'Alene Resort here said the days of simply offering competitive wages are long gone. Today's workers are looking for quality-of-living enticements like health care benefits, flexible scheduling, a 40-hour work week and even housing.

"Kitchen guys used to expect to work six days a week," said Bert Cutino, co-owner of The Sardine Factory in Monterey, Calif. "But things have changed over the past five years. Today it's not just about the money. People want quality time in their lives. Now it's 40 hours--maximum--and with two consecutive days off."

But while operators observe that many employees are holding out for compensation packages, they also acknowledge that the labor pool itself is progressively growing shallower and more problematic.

Teresa Siriani, president of People Report, a Dallas-based research firm that tracks human resources practices in the restaurant industry, told the conference's 150 attendees that the current labor shortage differs from the one faced by the industry in the 1990s. Not only is the unemployment rate stationary around 4.6 percent--the federal government regards 3.6 percent as full employment--but the situation is complicated by generational shifts and the fact that the country is experiencing a wartime economy.

At the same time, other industries, notably health care and education, now are competing for many of the restaurant business' traditional pool of workers, particularly managerial candidates with two years of college education. While the foodservice industry is expected to grow by 16.4 percent through 2014, health care and education will expand by 30.3 percent and 32.5 percent, respectively, during that same period.

"Foodservice was the choice for individuals not wanting to pursue four years of education," Siriani said. "But now they have more choice."

In addition, experts indicate that the industry's core labor force, individuals between the ages of 16 and 24 years old, is not expected to grow between 2006 and 2016. By comparison, the foodservice industry is expected to add 1.9 million jobs during that period.

And while hiring presents a new set of difficulties to fine-dining operators, retention also remains a problem. A new study of fine-dining restaurants in New York, conducted by People Report in partnership with American Express, reflects the monetary cost of losing good employees. The year-long study found that the turnover rate for hourly workers in fine-dining restaurants in New York City was 82 percent, while the turnover for managers was 38 percent. On average, Siriani told DiRoNA members, it costs $2,336 to replace an hourly worker and $19,661 to replace a manager.

Using those figures, she demonstrated that it could cost one high-volume New York restaurant with 123 hourly employees and 13 managers an approximately $335,760 a year to replace those individuals who leave to take other jobs.

"Finding and retaining good people is one of the hardest things that most of us have to deal with," said Rod Jessick, executive chef at the Coeur d'Alene.

Some DiRoNA members even traveled to the three-day conference with the intention of discussing solutions with their peers. Jack Czarnecki, chef and owner of the 42-seat Joel Palmer House in Dayton, Ore., said he was preparing to offer his 11 full-time employees a benefits package, but was interested in what other restaurateurs had to say.

Czarnecki said he is looking to offer a high-deductible--$2,000--health care and dental plan for which the restaurant would pay 90 percent and the employee 10 percent. However, he also wants to arrange another smaller plan that would be paid for by employees that would help to cover the deductible payments.

He said he also is considering offering life insurance and a 401(k) plan.

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"It's a tough market, and we have to find ways to compete with the chains that want to put us out of business," he said. "One way to do that is to take care of our workers. Besides, it's just the right thing to do."

Not all restaurateurs are rushing to add benefits packages, however, citing the potentially high price tag and complicated paperwork. Given the current labor trends, though, experts say those restaurants eventually may have to change their policies or risk extinction.

"We say we're the industry of choice, but when you say that, you also have to be consistent in how you provide for people and offer them benefits," said Ferdinand Metz, former president of The Culinary Institute of America and a keynote speaker at the event. "The industry provides a great sense of opportunity, perhaps more than other industries. But when it comes to benefits, we have yet to step up to the plate. We may not offer the same benefits that other industries have."