It is no secret that the biggest issue Arizona restaurant owners face is the labor issue. It is increasingly difficult for restaurant owners to find new employees and retain their best people. The labor market is dissipating as restaurant workers leave the industry in favor of Arizona industries that provide better pay, hours, and benefits. Despite an overall increase in restaurant worker wages over the last two years, it is not enough to retain good employees because other industries are paying more on top of providing benefits that are not as common in the restaurant industry. Workers have better options than working at a restaurant and owners are not addressing the issue at all. Arizona restaurant owners are scared to match the wages of other industries because they are concerned about passing that cost onto the customer. The cost of labor due to the market and an increase in the Arizona minimum wage as well as major increases in costs of goods due to inflation are squeezing Arizona restaurant owner margins. This is causing owners to reactively raise prices instead of proactively solving the labor issue. The reality is that owners need to think bigger than wages and start thinking about incentives. You can’t keep people in the restaurant industry based on wages alone because other industries are going to pay more. However, you can implement different revenue-sharing strategies as a way to create incentives to retain your best people. It is difficult for restaurant owners to compete with the wages in other industries, but many employees are passionate about working in the industry and would gladly stay if they were more invested in the business. Here are a few revenue-sharing strategies to improve retention in restaurant industry.
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Start a bonus pool
One of the simplest ways to create more buy-in among employees at your restaurant is to start a bonus pool. Everyone knows a tip pool where waiters share their tips with bussers, cooks, and host staff to ensure everyone is getting a cut of the extra tips that waiters typically make. A bonus pool is taking that further and sharing the profits of your restaurant with the whole staff. You can set whatever percentage of profits you want to share as well as how frequently you do it. For example, you can meet with your whole team and say you are going to do a bonus pool taking a small percentage of the profits each month and split that amongst every employee. You can do a larger amount and apply it annually if you prefer. If your restaurant does not make a profit in the period you set then employees don’t get anything from the bonus pool. This gives your employees more incentive to stay at your restaurant and work harder since the outcomes of your restaurant benefit your employees’ bottom line in more ways than just a wage. A bonus pool is a simple way to profit share and increase employee retention.
Provide a 401(k) package
Retirement plans are an essential component of a competitive employee benefits package. Employees stay at companies that care about their ability to save for retirement. A lack of 401(k) retirement packages is all too common in the restaurant industry and that should change. Only 18 percent of restaurant owners offer a 401(k) plan according to a 2019 Restaurant Success report from Toast Simply providing a 401(k) retirement plan can go a long way in improving retention and puts your benefits package ahead of 82 percent of restaurant owners. If an employee can see a path to professional growth and a chance to save for retirement they are more likely to stay. Talk to a financial advisor and start a 401(k) plan for your team.
Create a buy-in program
When you find an amazing manager you never want to let them go. The best way to keep the best employees is to allow them to put their financial skin in the game. A lot of restaurant groups have buy-in programs for management positions that allow them to take a certain amount of their wages and buy an ownership stake in your restaurant. It is an excellent program to retain the people you absolutely cannot lose and works great for FSRs and QSRs. Allowing managers you trust to buy into your restaurant incentivizes them to help grow the restaurant because it grows their investment. Managers who buy in are also less likely to leave since they are personally invested in the restaurant. A buy-in program is a proactive way to keep managers on your team who walk the walk and talk the talk of a competent owner. You might be hesitant to give up any ownership of your restaurant, but giving up some ownership stake for the cost of growing your restaurant is worth it.
The Arizona restaurant industry needs to be pro-active in addressing its labor issue and Arizona restaurant owners must address the issue immediately, instead of reactively responding to inflation or minimum wage hikes. If restaurant owners know employees will leave soon after they are hired, then try to lay the foundation to keep them before they come on board. Revenue-sharing programs are a great way to personally invest your team in the success of your restaurant. Revenue sharing can be as simple as a 401(k) or bonus pool or can go as far as a buy-in program for your best managers. Restaurant owners can solve the labor issue with competitive revenue-sharing programs.
Author: Gary Pryor was the founding partner of notable Phoenix metro area restaurants including Michaels at the Citadel / M Culinary Concepts, Zinc Bistro, and Taphouse Kitchen. Mr. Pryor was also Director of New Products at Circle K Stores Inc., in Phoenix where he developed Emily’s Market, a “Home Meal Replacement” version of AJ’s Supermarkets, in Chandler, AZ. Mr Pryor owned and operated Boombozz Craft Pizza & Taphouse, in Louisville KY and Gilbert, AZ. Pryor is also a Senior Business Consultant at Waters Business Consulting Group in Scottsdale Arizona
