Published in Economic Development
Restaurants like Rockford Brewing Co. have had to get creative and embrace technology as they try to find solutions for a widespread labor shortage. For Rockford, whose Chef Ryan Bolhuis is pictured here, that includes using a local third-party food delivery service. Restaurants like Rockford Brewing Co. have had to get creative and embrace technology as they try to find solutions for a widespread labor shortage. For Rockford, whose Chef Ryan Bolhuis is pictured here, that includes using a local third-party food delivery service. PHOTO BY JEFF HAGE

Feeling the Heat: West Michigan restaurant industry grapples with labor shortage

BY Sunday, July 08, 2018 07:00pm

A struggle to find dedicated staff willing to work for minimum wage has one Grand Rapids pizza shop shifting to a focus on technology. 

Mike Raymond, the owner of Grand Rapids Pizza & Delivery (GRPD) in the city’s Heritage Hill neighborhood, last month decided to transition to limited front-of-house operations and leverage a delivery model using Uber Eats, a third-party delivery service operated by ridesharing company Uber Technologies Inc.

Raymond said the decision largely came about because of the region’s shrinking labor pool, particularly as unemployment hovers at or below 4 percent. By adopting the third-party delivery model, GRPD will be able to shrink its workforce from nearly 20 people at its peak to a skeleton crew of less than five workers, he said.

At GRPD, raising wages to attract additional workers did not make for a viable solution to maintaining the status quo, according to Raymond.

“It’s hard work. People who are in it for the passion of food, money is a secondary consideration for them,” he told MiBiz. “They have to pay their bills, but a place like GRPD or McDonald’s, those are part-time jobs. What people have forgotten is that a part-time job or minimum wage job is not a job where you make a living wage. It’s a stepping stone.”

Raymond’s philosophy, however, contrasts with several other restaurant owners contacted by MiBiz who say they’ve found success by focusing more on the culture of their establishments and working toward a certain level of professionalization, which includes paying more for kitchen workers and servers.

When Rockford Brewing Co. opened its full-scale kitchen in the fall of 2016, the company initially struggled to attract enough kitchen staff to keep its restaurant open seven days per week, said co-owner Seth Rivard, who attributed the challenge in part to the number of other restaurants that opened around the same time.

But a focus on culture and staff benefits — such as discounted food and beer — has alleviated much of that issue, he said.

“Having an awesome culture where everyone gets along and likes to hang out and have fun is important. You work hard, but you play hard, too,” Rivard said. “I like to hang out with staff. They’re friends and we all really enjoy it. We do different events as well. Having that culture, it’s more than just a job. And people want to work for a brewery.”

Rick Muschiana, owner of The Sovengard in Grand Rapids, echoed that sentiment.

Speaking during a restaurateur roundtable convened by MiBiz, Muschiana — whose restaurant and bar focuses on Scandinavian cuisine — called for more professionalization in the West Michigan hospitality industry and for diners to value food and service workers.

“I think that if we’re serious as a city being considered to be a food destination, then you have to have the professionals to be able to execute that,” Muschiana said. “That’s what big cities have: They have world-class chefs. They have world-class sommeliers and bartenders. And those people have the pick of the litter now. The ball’s in their court. They can go and work anywhere.”

A WIDESPREAD ISSUE

Given the shrinking labor pool, restaurateurs’ struggle to find workers has become a common theme in the industry. According to survey from the Michigan Restaurant Association, 62 percent of restaurant owners across the state cite “an inability to meet the demand for labor” as their largest challenge. Hiring demand also increased 10 points since the end of 2017 with 32 percent of respondents saying they planned to hire in the first quarter, according to the MRA survey.

“It’s unquestionably the number one concern for restaurant owners across the state,” MRA President and CEO Justin Winslow said of the labor shortage.

As well, the limited labor pool of service workers in the restaurant industry extends far beyond Michigan.

In high-cost San Francisco, for example, restaurant workers can’t afford to live in the city, resulting in a shortage of potential labor, according to a June report in the New York Times. As a result, many restaurant owners — including at high-end establishments — are asking diners themselves to take on core functions like hosting, fetching drinks and bussing tables.

The demand for restaurant workers has resulted in increasingly higher wages around the country. According to the U.S. Bureau of Labor Statistics, the average leisure and hospitality worker made $13.78 per hour in May 2018, up about 50 cents per hour from the same time last year.

Most restaurant owners MiBiz contacted for this report said they’ve started to increase wages in a bid to attract workers. While many said that the upward cost of labor continues to create challenges in an industry known for its relatively thin margins, one restaurateur also alluded to downward pressures on his business caused in part by an unwillingness in West Michigan to pay the prices that highquality food should command.

“For the restaurant business, the price we can charge for food is limited by the market, partly because of competition, and also consumer willingness to pay more,” according to Paul Vander Heide, owner of Vander Mill LLC, a Grand Rapids-based cider producer and restaurant.

EMBRACING TECHNOLOGY

To date, Grand Rapids-area restaurateurs have turned to a variety of solutions to alleviate the challenges posed by the overall labor shortage.

Like GRPD, Rockford Brewing has tapped into a third-party delivery service to open a new revenue stream for the company’s kitchen, Rivard said. Over the past several months, the brewery has used the local online service Rockford Food Express to deliver food in the area.

Still others say that easing regulations at the state and federal levels could go a long way to alleviate labor shortages in the industry.

For example, as a business that derives more than 50 percent of its revenue from alcohol production, Vander Mill is barred from hiring anyone under 18 years of age, Vander Heide said.

“We have a shortage of supply at the moment,” Vander Heide wrote in an email. “It seems to me an efficient place to start would be the young people in our communities. Between regulation and minimum wage increases, we are killing many opportunities for young people to enter the workforce.

“Working provides young people with the perspective of time and its value, the satisfaction of a job well done, and earning for the betterment of their families.”

To Vander Heide’s point, the youth unemployment rate in the U.S. has been steadily on the decline in recent years and stood at 9.5 percent in 2017, its lowest point since 2000, according to data from the World Bank.

While shifts to technology or the easing of regulations may help to bring more people into the restaurant workforce, ultimately, sources say the focus needs to be on stemming the state’s stagnant population growth.

“There are fewer and fewer Millennials to work,” Raymond with GRPD said. “We can’t make more people in a timely manner that will fill the void. We have to either import them from other states to fill our jobs or we have to change our way of doing business.

“For the immediate future, many people are going to have to think about their way of doing business — especially the small business owners.”

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Editor’s note: This article has been updated to reflect that GRPD did not cease all dine-in options. The company still offers limited dine-in and takeout options. We regret the error.

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