Originally published: Insight on Business, May 2022

 

Kim Jensen owns four restaurants in Door County, but two of them have remained shuttered since the great shutdown of 2020. Thanks to Economic Injury Disaster Loans and the Paycheck Protection Program, she says, she is able to pay her mortgage. Her sales in 2021 were up 80% from pre-pandemic levels, and customers are flocking to her establishments. Her financial anxiety is as low as it has been for 30 years, she says, but her professional stress is at an all-time high.

That’s because, like many Northeast Wisconsin restaurant operators, Jensen lives on the edge when it comes to maintaining a workforce.

“People ask me, ‘Kim, why are you wearing a mask again?’ and I can be pretty short with them,” she says. “I’m like, if I get sick, we’re not open — that’s how short-staffed we are. If I don’t cover the hours for my people [who are sick or in quarantine] I won’t have enough people. And if I have to close down, those people are going to go and find another job.”

Jensen says her labor costs average around 30% in a typical year for Mojo Restaurant Group, and right now she’s running at 67%. And in Door County, where housing and child care are almost impossible to find, recruiting challenges are multiplied. Kristine Hillmer, president and CEO of the Wisconsin Restaurant Association, says staffing tops the restaurant industry’s long list of challenges.

“It’s simply supply and demand,” Hillmer says. “If you can’t find staff, you will try to attract more people by raising wages. That’s going to translate into higher menu costs.”

Where did the workers go?
Harry Latifi, who has operated restaurants in Sheboygan since 1994, says the labor shortage in the restaurant industry is unlike anything he’s ever seen.

“I was talking to my wife and I said, ‘Where did the people go? Why aren’t they coming to work like they did pre-COVID?’” Latifi says. “So we said, ‘OK, it’s money.’ We started to pay $17 an hour for a dishwasher and advertised that. It’s not the money. I wish it was.”

Latifi’s restaurants — which include Harry’s Diner and Harry’s Prohibition Bistro, the latter of which he sold to his son Adrian within the last year — are doing well, but weekday staffing is a challenge. He says he has had to hire diner employees for as few as three hours a week just to fill gaps.

Maggie Kauer, a 24-year company veteran who now owns Culver’s franchises in Darboy, Little Chute and Grand Chute, is also navigating workforce issues that feel like foreign territory.

“I remember when we had to turn away applicants,” she says. “You had to know somebody who knows somebody who knows somebody to get a job at Culver’s in Darboy, and now it’s just, well ... it’s been challenging.”

At her Waupaca restaurant, Little Fat Gretchen’s, Gretchen Halverson is still dreaming of a return to serving dinner. She’s been closing at 2 p.m. or 4 p.m. every day since the pandemic.

“What’s tricky is, since the pandemic people don’t want to work such long hours anymore,” Halverson says. “They want to live their life, be at home and do things with their families.”

“I’m often asked, ‘Where did everybody go?’” Hillmer says. “But you have to remember that, pre-COVID, we had a staffing shortage. The competition for existing workers has been fierce. We know there aren’t enough workers in our state to fill all the jobs.”

Hillmer says the forced shutdown of restaurants in 2020 “absolutely” sped up migration out of the restaurant industry, exacerbated by capacity restrictions, the need for parents to stay home with children, and older workers retiring due to health concerns. But the workforce challenges are likely to persist because of statewide population issues.

“It’s difficult to find staff,” she says. “Operators are trying not to burn out their staff, and because they aren’t able to open as many days or hours, it’s hampering their full recovery from the pandemic.”

A source of frustration
At The Blind Horse Restaurant & Winery in Kohler, General Manager and Master Winemaker Tom Nye says his operation weathered the pandemic shutdown in large part by leaning on wine sales. Now the restaurant is bustling, but he can’t get bottles for his wine. “They’ve been on order for seven months,” he says.

The lack of available supplies is sending Wisconsin restaurants of all kinds into a tailspin. Kauer says she has spent time on Amazon and restaurant supply websites searching for items like paper cups. But when the Culver’s corporate office can’t get her food supplies, she simply has to tell customers they are sold out.

“We can’t just go to the grocery store and buy hamburger buns,” she says. “Being part of a chain, consistency and food safety are so important.”

The lack of product availability proves the restaurant industry isn’t the only one facing labor shortages, Latifi says. When he can’t get the product that he wants due to supplier labor shortages, it adds work for his back-of-house staff to tweak recipes.

And of course, when products can be found it’s consistently at a higher price. Because inflation is such a widespread issue, most Northeast Wisconsin operators say their customers are understanding and don’t complain about rising menu prices — at least for now.

“Our wine and food is higher than it’s ever been,” Nye says. “But people realize what’s happening in the world and we really don’t get complaints. We just try to run at as slim of margins as we can to not have to raise prices too much.”

But when it comes to margins, Hillmer says most restaurants don’t have a lot of wiggle room.

“For every dollar that came into a restaurant [pre-pandemic], 95 to 97 cents was already spoken for in terms of staff costs, overhead, food costs and everything else,” Hillmer says. “In today’s world you can’t be open as many days, you’re paying more for staff, and with supply prices that’s continuing to get squeezed.”

To ease the squeeze, Hillmer says the WRA is focused on advocating for the federal government to fully finance the Restaurant Revitalization Fund. The program was a lifesaver for those who received the funds, but only one-third did. Hillmer says this created “winners and losers” because funds weren’t distributed evenly; restaurants either received everything or nothing. In WRA’s most recent member survey, Hillmer says 40% of restaurants that did not receive RRF funds said they were unlikely to survive. And that, she adds, would create holes in our communities.

A cornerstone of community
What hasn’t been lost during the pandemic is people’s love of restaurants. “We know that communities are looked at as strong when they have services such as restaurants,” Hillmer says.

At the current point of what Hillmer describes as the “roller-coaster ride” of the past two years, customer demand is sky-high.

“[People] want to be out dining; they want to be having that experience,” Kauer says. “Restaurants are such a big part of everybody’s lives, and that’s never going  to change.”

Continued patience and time, Hillmer says, will bring restaurants back fully. She says she encourages customers to be kind and conscientious. Make reservations if you can. Realize empty tables might be there for a reason — that staffing, not space, is limiting operations.

Last month Discover Green Bay announced the cancellation of its popular annual Restaurant Week, citing overwhelmed restaurant operators feeling unable to participate due to rising costs and lack of workers. While the goal is to bring the event back in 2023, time will tell.

“I would love to go back to 2019,” Hillmer says. “A lot of customers go into restaurants and think it’s 2019 all over again and it’s simply not. It’s going to take years.”

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