The Predicament
- Most restaurants remain understaffed.
- Salary is the #1 factor drawing Gen Zs to a job.
- The majority of hourly new hires are Gen Zs.
- Turnover is easing but remains higher than pre-pandemic levels.
- Workplace benefits and training play a pivotal role in employee retention.
As if the restaurant industry hasn’t faced enough staffing challenges, another dilemma has been added to their plate. With the largest generation in American history exiting the workforce, employers are racing against time to fill the gap with the next batch of workers: Gen Zs.
But as more of this generation enters the talent pool, they bring along a whole new set of challenges, values, and expectations—meaning restaurants may have to adjust their approach to remain competitive in attracting this new segment of the workforce.
So how can brands not just attract but also manage and retain a far younger workforce?
First, Mind the Gap
Based on Black Box Intelligence (BBI) data, as of February, the average number of non-management hourly employees at limited-service restaurants decreased by 4% year over year.
In full-service restaurants, the average number of front-of-house (FOH) workers remained flat, while back-of-house (BOH) experienced a 1% increase. Additionally, in the limited-service segment, new hires in the 17-and-under and 18-to-22 age groups decreased from 71% in 2019 to 66% in 2023.
These figures highlight the ongoing challenge of finding and keeping talent in the limited-service sector.
Further, although there have been gains since 2022, most restaurant companies remain understaffed in certain areas. According to our research, in 2022, 5% of available hourly FOH positions were fully staffed, compared to 33% in 2023. And 10% of available hourly BOH positions were fully staffed in 2022, compared to 21% in 2023.
As we head deeper into the year, the demand for workers is projected to climb:
- As per the National Restaurant Association’s (NRA) 2024 State of the Restaurant Industry Report, the industry workforce is projected to grow by 200,000 jobs this year.
- Nearly half of restaurant operators, 45%, admit not having enough employees to meet customer demand.
- Furthermore, 60% of operators experiencing understaffing report that their staffing levels fall more than 10% short of their requirements, resulting in reduced operating hours for 65% of establishments and the inability to operate at full capacity for 52%.
Given these challenges, operators aren’t wringing their hands. The NRA reports that in November 2023, 88% of operators said they were likely to hire additional employees this year, while 62% said they were “very likely” to expand payrolls.
These proactive measures are necessary. Being fully staffed pays dividends for restaurants: Based on BBI data, in 2023, companies that were fully staffed had comparable store sales growth that was 2.8% higher and comparable traffic growth that was 2.7% higher than those that were frequently understaffed.
Gen Z Wants What Gen Z Wants
Our Workforce Intelligence data shows that the majority of hourly new hires are from this generation. In 2023, 73% of full-service new hires and 82% of limited-service new hires fell within the 17-and-under to 30 age group. Additionally, Gen Zs filled 57% of full-service hourly positions and 71% of limited-service hourly positions in 2023.
So restaurants have already had a taste of what it is like to work with a younger workforce, but as more of this generation reach working age, these percentages will only increase.
To appeal to this demographic, restaurants must develop a deeper understanding of what they look for in employment. (While some of the data points below may not directly apply to restaurants, they shed light on the younger generation’s mindset.)
A recent Deloitte survey reveals that:
- When choosing employers, Gen Z values work-life balance, career development opportunities, and pay.
- Mental health support is a top priority for 8-in-10 Gen Zs when considering employers.
- More than half of Gen Zs (55%) research a company’s environmental impact before accepting a job.
- 46% of Gen Zs have secondary jobs, often gig work like food delivery or ride-sharing. (25% of operators are considering turning to gig workers to alleviate staff shortages, according to the NRA.)
- Compared to older generations, employed Gen Z respondents are more likely to feel their pay doesn’t support a good quality of life and less likely to feel fairly recognized at work.
- 77% of Gen Z respondents are actively looking for new jobs, nearly double the rate of other respondents.
- Gen Z (62%) with work experience are more likely to discover job opportunities on social media than older generations. They are also more likely to have applied to job opportunities they found on social media than their older cohorts. (Chipotle is already capitalizing on this by leveraging TikTok Resumes).
The Center for Generational Kinetics states that the primary factors drawing Gen Z to a job or employer are:
- Salary: 49%
- Scheduling flexibility: 32%
- Benefits: 28%
The factors most convincing to Gen Z to stay at a job after the first week are:
- Schedule flexibility: 49%
- Liking coworkers: 36%
- Liking the boss: 34%
Additionally, the social cause most likely to motivate Gen Z to join a company is supporting diversity, equity, and inclusion.
Turnover Remains an Issue
The Bureau of Labor Statistics reports the food service and accommodation sector has the highest quit rate of any industry, standing at 4.7% as of February 2024.
So filling the talent gap is one thing—retaining employees is an entirely different kettle of fish and requires restaurants to reassess their benefits, training, and workplace culture.
Our data shows that despite turnover easing, it remains higher than pre-pandemic levels: In Q1 of 2024, turnover for non-management limited-service employees was 140%, compared to 133% in 2019. In full service, turnover stood at 101%, compared to 105% in 2019.
Why are workers leaving? The top three reasons for voluntary termination among non-management hourly FOH employees are job abandonment, personal reasons, and poor work-life balance. Similarly, for hourly BOH employees, the main factors include job abandonment, seeking higher compensation, and personal reasons.
The primary cause for job abandonment appears to be a general decrease in job satisfaction. Workers may be seeking greater flexibility, stability, and higher pay, which means they are transitioning to different industries.
Benefits—Not Just Perks
Our data clearly indicates that workplace benefits play a pivotal role in employee retention.
In 2023, restaurants with more than 30% of hourly staff enrolled in a healthcare plan saw 17.2% lower hourly employee turnover than the segment average. On the other hand, restaurants where fewer than 8% of hourly staff were enrolled in a healthcare plan saw 12.1% greater hourly employee turnover than the segment average.
Additionally, brands that offered 14 days of paid time off had 7.5% lower turnover compared to those that offered fewer days off.
It’s simple: When employees feel like a company prioritizes their well-being, they are more committed to the brand and less likely to switch jobs.
And since financial stability, health benefits, and flexibility are key concerns for many Gen Z workers, it makes sense for companies to tailor their recruitment and retention plans accordingly.
Chipotle, for example, is doing precisely that. The fast-casual chain recently announced they are boosting their financial and mental health benefits to attract more Gen Zs and retain current employees.
The new benefits include:
- Retirement benefits: Matched 401(k) contributions up to 4% of salary if the employee makes student loan payments.
- Banking benefits: Access to banking service, featuring a high-tech Visa card, fast paycheck access, and a “credit optimizer” for boosting credit scores.
- Financial management: Services offering financial education, personalized assessments, and tools for improvement.
- Mental health resources: Chipotle’s Employee Assistance Program, SupportLinc, provides six free sessions with licensed counselors, along with additional support for legal, financial, or family matters.
You Get What You Put In
Employee training is absolutely critical to minimizing turnover.
Inadequate employee training results in overwhelmed staff, unmet job expectations, increased stress, resentment toward the company, lower-quality work, etc.—the perfect building blocks for a revolving door.
BBI data puts it into perspective:
- Companies with 40 or more hours of training have 21% lower BOH hourly turnover on average and $7 better sales per labor hour compared to companies with 21 hours or less training.
- Those providing 4 hours or more of orientation had 46% lower BOH hourly turnover on average than those who provided 3 hours or less.
- Teaching your managers to be better leaders pays off: Companies that spend over 30% of their annual managers’ training on developing their leadership skills had 10% lower non-management turnover on average than those that spend less than 10% of their training time on leadership.
- To boot, new-hire training correlates with better customer food sentiment: Restaurants with 35 or more hours of training for BOH non-management employees improved food sentiment by 12% on average, and the same training for FOH improved food sentiment by 6%.
"All Information Looks Like Noise Until You Break the Code." – Neal Stephenson, Snow Crash
If the current participation rate of younger workers can be maintained, there will be an additional 1.7 million workers in the labor force by 2032. This means restaurants must leverage this large pool of workers to remain productive and competitive. And understanding what motivates this demographic is crucial for making the restaurant industry appealing to them.
Of course, not all businesses have the flexibility or resources to meet every Gen Z demand. Showing them that you are serious about creating an environment in which employees feel safe and appreciated is the first step, whether this involves performing regular check-ins, creating a culture of recognition, implementing improved training programs to foster a more confident workforce, and so on.
Not every change needs to be immediate and drastic.
But, if you’re not aware of what’s happening in local markets, how will you know whether your actions are in fact hitting the mark?
This is where hyperlocalized benchmarking comes in. It involves analyzing your workforce data, such as demographics, skills, and performance, in very specific geographic areas and comparing these metrics to those of competitors. This level of detail enables you to tailor your strategies to target Gen Z employees more effectively in certain locations.
Without this granular view, you won’t know what you’re up against—and you may risk losing your share of younger-generation workers.
Need a nudge in the right direction? Click here to speak to one of our experts.