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How Restaurants Can Combat Labor Shortages & Wage Inflation

With inflation, labor shortages, and more, how can dining brands transform?

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Waad: You're listening to Next in Travel and Dining from Publicis Sapient. The podcast that shares insights on unlocking what's next in digital transformation.

As we make our way through the year, fast food and quick service restaurants are still facing challenges brought on by the pandemic when it comes to crew capacity, labor shortages and wage and commodity inflation. Inflation is having a trickle-down effect—as it reached its highest levels this year—and restaurants are feeling the effects in a big way. Many restaurants have looked to retain and attract workers in a variety of ways, such as adjusting operating hours, wage increases and offering better benefits.

Still, many restaurant brands are struggling to keep up with demands given the increased cost and high levels of turnover. Restaurants need to position themselves for sustainable growth and respond in the right ways. In this episode of Next in Dining, we're going to discuss what dining brands need to focus on not only to help their bottom line, but also maintain a positive customer experience.

Joining me today for our discussion is Jackie Walker, Head of Digital Strategy for Dining Experience here at Publicis Sapient. I'm your host, Waad Nakad. Now let's go ahead and jump in.

Jackie, thank you so much for joining me today to discuss this very timely and relevant topic for dining brands.

Jackie: I'm super excited to be here with you, Waad.

Waad: Awesome, well, let's go ahead and jump in. There's so much to cover with this topic. With major changes that we have seen over the past two years throughout the pandemic, customers have been getting back into dining rooms. I know I was one of the first to get back into dining rooms after the pandemic, but unfortunately, workers aren't for several reasons.

Given some of the challenges, many quick-service restaurants are shortening their hours. Some are even closing their dining rooms. What do you think will help food and dining brands in responding to these labor shortages while maintaining and managing the increased costs of inflation?

Jackie: Yeah, we're just getting right into it, Waad. Right?

Waad: Right into it. We’re wasting no time, and again, there's a lot of ground to cover.

Jackie: So, as you mentioned, brands are clearly investing in higher wages, more retention tactics such as training and benefits programs. They're really making a lot of outreach to make them seem like better employers, and that's a big piece of what is happening, but also the other side of that is that brands are really getting into a more of a “make more with less” kind of mentality, so they're really starting to more aggressively pursue technology to assist them in making more with less and being able to deal with fewer crew members and staff in their dining rooms. So, the first part of that is really a continued emphasis on digital, because there's such a lower cost to serve, and so, that's one big piece is continuing to focus on digital and drive customers to digital channels.

The other piece is contactless ordering, so brands have been investing pretty heavily in kiosks, which is very funny. Early in the pandemic, everyone thought kiosks were going to be dead. No one was ever going to touch a touchscreen ever again in the world. Obviously, we've moved on from that, so there's a lot of investment there, as well as responsive merchandising, so I think that's a way that brands can really help to make things easier is to better influence what customers are actually ordering. So how do you use mobile as a tool or even smart menu boards as a tool to help customers order the right things at the right time from an operations perspective?

And then the last piece which is really interesting is more investment around smart restaurant technology and kitchen automation. So, for a long time there was kind of this “the robots are coming for your jobs” kind of feeling in quick service, right? It was almost even a threat at times in the industry to automate more of the crew job function. And now I think what's happening it’s really shifting to more of a balanced approach where it's augmenting crew, so things like voice ordering are starting to happen, and they're really focused more on making less work for crew than necessarily replacing crew. Several brands are really pushing the envelope and starting to pilot some of these technologies.

The other piece is reopening some of the ideas about the way we were providing service during COVID. So, curbside got pretty popular, but the reality is, curbside is very expensive from an execution standpoint, because you need one person who's basically running orders from the kitchen to the car. So, I think brands are starting to also look at things like that so that they can maybe have customers do more in-store pickup or drive-thru, rollback curbside a bit so that they're optimizing crew utilization.

Waad: Yeah, that's great. I always feel bad for that person, too, that's like running orders out, and when you talk about kiosks, like we also talk about kind of like the comeback of the QR codes, too, like there's just… things are coming back that make sense for restaurants.

Jackie: Totally. 100%.

Waad: Well, we touched on some trends. And we touched on some things that are happening in the marketplace right now. What would you say are the main focus areas that dining brands, and more specifically QSRs, should focus on working through these challenges, so more specifically, touching on wage and commodity inflation?

Jackie: Yeah, so the reality is, there’s a confluence of things happening, and it's like almost a perfect storm of events that are coming together. So, you've got labor availability super low. You mentioned that they're having a hard time staffing, and that continues to be a challenge. That's putting immense pressure on wages, because brands’ only choice is to try to get more crew members in the door with higher wages.

Turnover is also super high. So I recently saw some numbers that quit rates in the food and dining industry have been more than twice the national average across industries. So, this sector is being particularly hard hit by the Great Resignation, so there's a much higher cost that's associated with hiring, with training and then with retention.

And then on top of that, you have cost of goods that are going up at the same time, so restaurants are kind of getting hit from all possible sides with increased cost. So, the focus has to flip to optimization and a long-term ability to control cost. So, from a customer perspective, how are they better enabling self-service? Can automation be enabled to take orders? I saw one pizza brand recently is starting to try handling all phone orders via a chatbot instead of having crew pick up the phone, because during dinner rush, having that extra person picking up the phone is really unrealistic.

From an operation standpoint, how are we thinking about the systems integration and an optimization so that we're really reducing end-to-end complexity and increasing both kitchen efficiency and accuracy? So those are really key elements for brands to focus on as they're dealing with inflation from every angle.

And then the last piece is from a supply chain standpoint. How do they start to optimize and get better with managing their cost, have a little bit more predictability, a little more control? And then also do better demand forecasting so that we're reducing food waste, which is great for the environment as well as being great for minimizing wasted cost.

Waad: Yeah, so you touched on some things that I'd love to dig a little bit deeper in. When it comes to food and dining brands, of course, at the beginning of the pandemic, brands rushed to adopt and adapt at the beginning of the pandemic to be more digitally enabled to better service their customers, and in some cases—probably most cases—this put a lot of stress on the back end operations for food and dining brands, and again, specifically quick-service restaurants.

This past year was about adding new channels for their customers to feel safe coming into dining rooms and getting back to what we all thought was normal, right? And so, the focus should now be on having those channels really come together to streamline operations and focus on their crew.

So, in your opinion, how should brands be tackling these challenges while also putting that focus on their crew experience?

Jackie: Yeah, I think the thing that's kind of funny working in a digital organization is that we come from a very digital point of view, and it can be easy to forget that with restaurants, it's all about the food.

It's ultimately about the food. Your experience is made or broken by the food experience and that overall interaction of actually getting the food. So is it quick? Is it convenient? Was there transparency along the way? Did you get exactly what you wanted? Those are really key pieces that, as complexity of operations has increased, it’s gotten more difficult to just get back to the basics and get customers the food they wanted at the quality they expect. So, I think customers are going to know if the crew experience is not good. You know, there's some expression that diners can always tell if the cook is unhappy. You can taste it in the food.

I think there's an element of that here in restaurants at play where, if the crew experience is not good, if there are too many systems, if it's a disjointed process—from crew to navigate, from order intake to cooking, packing the bag, getting it out to the customer, or out to the customer via a delivery driver—that is really challenging to execute, and the customers are clearly knowing that something is wrong if any part of that process breaks.

So, I think as these new kind of functionalities and services have been rolled out, the emphasis has been placed almost exclusively on the customer. How do we make it easier, faster, more convenient for the customer? And it's been at the expense of the crew, right? A lot of programs that have been rolled out as they're doing crew training, they're thinking about almost, “How far can you push the crew before it's too far and things fall down?”

Whereas I think the reset that has to happen is to actually relook at the overall service design and really optimize it or execution. So, where can steps be removed? Where can systems be streamlined? Where functionalities were built in disjointed ways, how do they start to get brought together? Point of sale, where can it provide better support for loyalty or better support for offers so it's not a disaster when a customer uses a coupon? How does it enable suggestive selling?

There's a lot that can be done, and it can't be any more that operations and customer digital are two separate parts of the organization that are disjointed and on their own mission. It really has to be brought together. Crew experience and customer experience are flip sides of the same coin, so they really have to be improved in the context of each other. And I think that is really the type of digital transformation that has to start to happen in restaurants pretty quickly.

Waad: Yeah, I couldn't agree more. I actually—I grew up basically in a restaurant. My family owns restaurants. I even speak to my father now. And with these times, things are obviously changing for him, too. He has a family dining, and so this is hitting restaurants in many different ways.

So yeah, I couldn't agree more, and I think from an ownership standpoint, too, they really need to start thinking through how this is affecting their crew, and then that trickle-down effect to their customers.

Jackie: Absolutely.

Waad: Overall, these challenges, too, right, that the dining industry is facing have forced businesses again to think in new ways.

We've touched on some major restaurant trends, and I'm sure we're going to see more of that in the future. Do you think what's happening right now is ultimately changing the future of the industry moving forward and why?

Jackie: I do. 100%. I think it's a couple of things. So, one, this whole industry backdrop that we talked about at the beginning of this conversation… Challenged supply chains, labor challenges, increased costs… None of these are really going to go away anytime soon. So, especially if you look at wage inflation in particular, that's going to be a fairly permanent change. Once you start bringing in a new workforce at a higher base pay rate, those rates aren't going down. They're going to either hold steady or continue to rise, so that's a new cost that brands are really going to have to rationalize longer term, and I think that's all here to stay.

The other thing that's here to stay is delivery. So, there were some questions early on in the pandemic. Delivery grew much, much faster than anyone was predicting, and there was some feeling—and I had this feeling too, you know—what is going to happen when people start to get back to normal and start to go into dining rooms again? Is that demand going to drop off or is that going to be the new way of life?

And so, I think it's becoming much, much more clear that delivery is going to be here to here to stay. It's a great convenience to customers. They're addicted. At this point, you look at customer surveys and such a high majority of customers say delivery is a key part of their way of life, which, if you think about even five years ago, unless you were talking about pizza, that was just absolutely not the case.

Waad: I can attest to that. Delivery is like my lifeline right now.

Jackie: I understand. You know, it's easy for customers, but it is much more difficult for the crews that are executing on it and for the brand. So, even things like digital orders coming in, you have all these orders that are coming in at the same time during peak times. The crew is not necessarily able to serve them all, and that can cause a lot of additional issues.

The last part is just digital adoption. So, customers are not going to go back to deleting all of their apps, right? Customers are now understanding the value of engaging with brands and restaurants, particularly on their mobile phones, and part of that is loyalty, and I think brands have done a really good job tying mobile loyalty to the overall value proposition, so they're really driving that. These customers are going to keep engaging in that type of behavior.

And if you look at the market, I think what's super interesting is that as Wall Street is considering brand health for these restaurant brands, loyalty and digital adoption have become such huge metrics for brand health, so I think that's the other piece is when you have so much pressure as a brand from, you know, kind of analysts to continue to grow customer acquisition, grow downloads, grow repeat user base. Brands are going to just keep doubling down on that over time, or it's going to start to have impact on their valuation, so that's going to continue to be a priority for sure.

Waad: Yeah, I agree. So, you actually mentioned something that made me think about this. So, this was interesting, too. I think that over the pandemic, customers were giving brands grace because of what was happening in the world. Do you think that grace period is over?

Jackie: I do, I really do. There have been so many customer surveys done about tolerance for wait times, and what's actually happened is the tolerance has come way down from even pre-pandemic levels. So, customers who will say a long line is like four or five people in front of them, they'll walk out the door. If they feel like they're going to wait more--

Waad: Yeah.

Jackie: you know, more than five to 10 minutes? They’re out, right?

So, I do think that that grace period is over, and I think it also ties into just the quality of the experience overall. There was a lot more tolerance of order inaccuracy, and now I think that is also waning. People don't want to wait, and they do not want the wrong thing. And if either of those are happening, I think it really does negatively affect the customer’s perception of that brand and their likeliness to return.

Waad: Yeah, I mean I think even sometimes when it comes to delivery, too, when you're working with a third party, is it the third party that looks bad in that case or is it the dining brand that you're ordering from, right? And so, there's that fine line, too. Or ultimately, you're thinking about the food coming from the brand as opposed to the third-party delivery person.

There's a balance, and so I definitely think that now is the time that brands really need to start to think through what that that back-end operations looks like to help mitigate all these issues that are happening in this space.

Jackie: Absolutely, and I think as much as brands are beholden to their frontline crew for the food execution, they're also beholden to their delivery partners to carry through, because ultimately, if the order is inaccurate, if there's not the right stuff in the bag, I think people pretty universally blame the brand.

But even if the food is cold, right? Fries are not good. You're probably still blaming the brand--

Waad: Right.

Jackie: so I think there is a real need to start to figure that out and improve the customer service loops, too. I think that is a huge part of the equation that's been missing is that for customers who are ordering delivery, the idea of reporting a problem is actually pretty complicated. What are you going to do? You're going to pick up the phone and call the restaurant.

Are you going to submit an email to the customer service email? I always think when something is wrong, I want there to be a button in the app. You know what I mean? Like, something’s wrong with my order. When I go through the drive-thru, I always check my bag and make sure everything’s there, and if it's not, it's a real pain go back through the drive-thru again or actually park the car and walk into the restaurant.

Delivery is even worse. You're at your house, the food is there and what are you going to do? So, I think that is a huge place where brands can take much more ownership over the customer experience and provide better ways for customers to have recourse no matter what the service method is.

Waad: Yeah, I totally agree. They're making some moves. I think there's still a lot of work to be done.

So, as we know, we've been talking about inflation as well, and we know that there's a trickle-down effect when it comes to what that means for brands in regards to inflation. Higher gas prices could result in less traffic in the drive-thru. In addition to gas, there's also cost pressure on wage and commodities that we've been talking about, so I don't think that the higher menu prices are lost on customers right now.

Maybe a couple months ago they were understanding of the circumstances again. And I think thus far customers have been understanding of the increases, but some might argue that chains are testing the boundaries to ensure that they're protecting their margins while some might be struggling, so where do you think the focus should be for these brands—protecting their margins, the customer experience, and ensuring they still have that loyal customer at the end of the day?

Jackie: Yeah, I think this is really fertile territory right now. Brands are definitely experimenting with price increases. I think as they they're doing these price increases, they're really looking very closely at whether it is impacting sales numbers. Brands do recognize that, as much as they're impacted by inflation, their customers are impacted by inflation, too. And the reality is, when you look at quick serve in particular, it always comes back to convenience, value and fun, right?

And as soon as customers start to feel like the value isn't there, that is a real challenge for these brands to overcome, so I think there's going to continue to be a lot of sensitivity and a lot of folks inside these brands paying attention to make sure that as margin is being optimized and increases are rolling out, that it's not having a knock-on effect on sales.

And then the last part of that is just leaning into loyalty, so it's an interesting time in terms of loyalty program design, because a lot of these programs have been built conceptually around discounting, which is the opposite of what brands want to be doing right now. So, I think continuing to balance the rewards for customers so that they are continuing to build that loyalty and let customers see the value of being loyal to a brand is going to continue to be really important.

And brands are going to have to work on not only the pricing strategy but also the offer strategy, and how are they optimizing so that they are not losing out further on margin because of rewards to customers?

We've actually done a lot of work in that space, and in really thinking about the long-term impacts of offers on campaign budgets and how do you get much more precise through personalization in rewarding the right customer with the right offer at the right time to incentivize the right behavior, and I think that is going to continue to be more and more important as time progresses.

Waad: Yeah, I totally agree. From a customer standpoint, right, you always want to be served up an offer that is catered to you and what your likes and interests have been. And maybe sometimes the extra costs here and there. Or start to feel like, “Okay, maybe this is a little bit more worth it.”

I'm also getting a little hungry having this conversation now.

Jackie: I think you can get free fries somewhere.

Waad: Okay, well, we touched on so much ground right now, and some of this conversation has been a little heavy, so to end things on a little bit of a lighter note, a little bit more opportunistic.

We've been talking a lot about the future of food and dining and technologies that can enable brands to keep up with current challenges. I feel like we can't talk about future of technology without touching on the topic of the metaverse.

Jackie: My favorite.

Waad: While I know some brands have dabbled, do you think that fast-food chains right now have an opportunity in the metaverse? And what do you think that looks like for these brands?

Jackie: I think there's absolutely an opportunity. The funny thing is brands are not going to be serving virtual hamburgers that you can taste anytime soon. That tack isn’t there yet.

Waad: Calorie-free hamburgers for everybody.

Jackie: It would be very exciting. I would personally be into desserts in the metaverse all day long, but that's a different topic.

But I do think there's incredible opportunity, so I think the first thing to recognize is that we are still very much in the hype phase. So it's easy in our circles to think that metaverse is this mass market concept, but it isn't yet. Only about 38% of American consumers are even conceptually familiar with the metaverse, less going there, so I think there is an opportunity really not from an engagement perspective quite as much as from an earned media perspective.

These brands are doing fun things in the metaverse that are getting social media attention, that are getting industry press attention, that are even getting some national news coverage in some cases. So it's a huge opportunity for capitalizing on that novelty factor and earned media, which is always great.

The action I think that has to happen right now is really, first of all, to protect a brand’s assets, so we've seen while there have been some activations in the metaverse that brands have been doing and many of the top brands have done at least one activation now. There's really also this need to just protect assets. And so, even brands who haven't yet shown their faces in the metaverse have taken out a range of trademarks to protect their assets, so you see brands taking out patents that basically allow them to set up a virtual restaurant in the metaverse that will serve food and that will be able to connect to delivery. Like, there are all these patents being filed, which I think is very smart, and it's wise for brands to protect their assets in the virtual world as well as in the physical world.

I think there's also an opportunity for exploration, so we talked a little bit about loyalty a moment ago, and I think loyalty is a huge opportunity to connect in the metaverse. So, as brands are focusing on moving from more transactional loyalty programs where discounts are really the key point you’re earning and burning, and that’s the value driver, they are starting to explore what more like true loyalty-based loyalty programs look like. What does it mean to be a super fan of a brand? What access does that give you? What special things does that give you that might necessarily, might be more valuable than a coupon? And so, I think the metaverse opens up huge opportunities for that exploration.

So, gamification is very natural. If you look at all of the most established metaverse use cases,  it's games. So how do brands start to think about the metaverse as a platform to enable them to gamify the experience more? And some brands have already been having some success with that, using NFTs and set complete games to try to start to take advantage of these kind of Web 3.0 technologies to gamify.

The other piece is new experiences for key audiences. So, I think there are kind of two keys that I think of. One is young families, always a favorite target audience for brands, and that audience has been a bit underserved through the pandemic because play places have closed down.

And there's also increased sensitivity around food quality and increased sensitivity around waste, and toys are delightful for five minutes and then they end up in the trash, right?

So how are there opportunities to leverage the metaverse and Web 3.0 technologies to engage with these young families, I think, is a really interesting and so far untapped opportunity.

The other audiences really desirable is the young digital forward audience, and so we've seen some brands start to do virtual events that would be impossible in the real world, or maybe not impossible, but highly impractical, to tie those experiences to brands. So when you think about the sponsorships that are already super common today, how can we use the metaverse as an extension that actually gives loyal customers the ability to have these experiences in the metaverse that far exceed what they could experience in real life? So I think those are some territories that brands can really start to click into and explore to start to get some value and also understanding of the potential of what the metaverse might bring.

Waad: Yeah, tapping into new audiences I know is a big one. I think that, again, we covered a good bit of ground here, and while a lot of this sounds daunting for brands, I definitely think we covered off on what, really, brands need to start thinking about when it comes to the opportunities right now and what's happening in the world.

And there's a lot of opportunity when it comes to loyalty programs, and it comes to digitally enabling their businesses to mitigate some of the lack of workers that they have in their dining rooms and in their businesses.

So, this was great and again, such a timely topic for brands. And I know this doesn't just affect food and dining brands. This is affecting many industries right now. This is affecting many people right now, so thank you so much, Jackie, for joining me today and discussing.

Jackie: It was a pleasure. Thanks, Waad.

Waad: Thanks for tuning in. Be sure to subscribe to keep up on what's happening in travel and dining.

Jagdish Ghanshani
Jagdish Ghanshani
Managing Partner, Global Client Partner, Travel & Hospitality
Kent Asaki
Kent Asaki
Executive Client Partner, Food & Dining

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