Navigating Labour Shortages in the Canadian Restaurant Industry

The Canadian restaurant industry is facing a significant labour shortage, with nearly 100,000 job vacancies across the country [1]. Restaurants of all sizes, from independent eateries to major chains, are feeling the impact [2]. This lack of available workers is forcing many restaurants to reduce their hours, limit their menus, and even close their doors altogether [2]. In this analysis, we will explore the causes of this labour shortage, its impact on the industry, and strategies for navigating this challenging situation.

The Current State of Labour Shortages in the Canadian Restaurant Industry

The Canadian restaurant industry has been grappling with labour shortages for several years, but the situation has worsened in recent months [2]. The COVID-19 pandemic exacerbated the problem, as many restaurant workers were laid off or left the industry altogether [2]. As the economy reopened, restaurants struggled to attract and retain workers, leading to a significant shortage of qualified staff [2].

Several factors contribute to this labour shortage. One significant factor is the changing demographics of the Canadian workforce. The baby boomer generation is retiring, and there are not enough young people entering the workforce to replace them [3]. Additionally, there’s a mismatch between the skills job seekers possess and the skills needed in the industry, highlighting the need for targeted training programs [3]. Another factor is the perception of the restaurant industry as a low-paying, high-stress environment with limited opportunities for growth [3]. Many young people are choosing to pursue careers in other industries that offer better pay, benefits, and work-life balance [3].

While data from 2022 showed some regional variations in employment levels within the accommodation and food services sector, with Ontario and the Hamilton-Niagara Peninsula economic region having a higher concentration of workers in this sector compared to the overall Ontario average [4], more recent data suggests a more widespread impact.

Impact of Labour Shortages on Canadian Restaurants

The labour shortage significantly impacts Canadian restaurants. Many restaurants are operating at reduced capacity due to a lack of staff [5]. On average, restaurants are operating at 80% of their normal capacity due to labour shortages [5]. This is leading to longer wait times for customers, reduced service levels, and decreased revenue [2]. In some cases, restaurants have been forced to close their doors altogether due to the inability to find enough workers [2]. The situation is further complicated by a “trade-down effect,” where consumers, facing economic pressures, are opting for more affordable dining options, impacting the revenue of full-service restaurants [6].

The financial strain on the industry is evident in the rising number of restaurant bankruptcies. In the first eight months of 2024, bankruptcies increased by 45% compared to the same period in 2023 [7]. In fact, 53% of restaurants are operating at a loss or barely breaking even [7].

While the GST and HST holiday provided some temporary relief for restaurants by generating additional sales and allowing them to invest in wages [7], long-term solutions are needed to address the labour shortage and its impact on the industry.

The labour shortage is also driving up wages in the restaurant industry [2]. Restaurants are offering higher wages and better benefits to attract and retain workers [2]. This is increasing labour costs for restaurants, which are already struggling with rising food and operating expenses [7].

In addition to increased wages, the labour shortage is also leading to other challenges for restaurants, such as:

• Reduced hours of operation: Many restaurants are reducing their hours of operation or closing on certain days of the week due to a lack of staff [2].
• Limited menus: Some restaurants are limiting their menus or offering fewer specials due to a shortage of cooks and kitchen staff [2].
• Increased employee burnout: The remaining staff are often overworked and stressed, leading to increased burnout and turnover [2].
• Decreased customer satisfaction: The labour shortage can lead to longer wait times, reduced service levels, and decreased customer satisfaction [2].

The Role of Bookkeeping Services

Amid these challenges, managing finances effectively becomes crucial for restaurants. Bookkeeping services can play a vital role in helping Canadian restaurants navigate this difficult period and optimize their workforce. Here are some ways that bookkeeping services can help:

• Accurate financial reporting: Bookkeeping services can provide restaurants with accurate and up-to-date financial reports [8]. This information can be used to make informed decisions about staffing levels, menu pricing, and other operational aspects [8].
• Payroll management: Bookkeeping services can help restaurants manage their payroll, including calculating wages, taxes, and other deductions [8]. This can help ensure that employees are paid accurately and on time, contributing to a more positive work environment [8].
• Tax compliance: Bookkeeping services can help restaurants comply with all relevant tax laws and regulations 8. This can help restaurants avoid penalties and fines [8].
• Inventory management: Some bookkeeping services also offer inventory management assistance, which can help restaurants track their food and beverage inventory and optimize ordering [8]. This can help reduce costs and improve efficiency, freeing up resources to address staffing challenges [8].
• Cost control: Bookkeeping services can help restaurants identify areas where they can reduce costs and improve efficiency [8]. This can include identifying areas of waste, negotiating better prices with suppliers, and optimizing staffing levels [8].

By utilizing bookkeeping services, restaurants can gain a clearer picture of their financial health, make informed decisions, and potentially free up resources to invest in strategies that attract and retain employees.

Government Policies and Their Impact on the Labour Shortage

Government policies play a significant role in shaping the labour market, and recent changes to the Temporary Foreign Worker (TFW) program and student visa rules in Canada have implications for the restaurant industry. These changes, aimed at addressing unemployment rates, may inadvertently exacerbate the labour shortage in the restaurant sector [2].

Here’s a summary of the key changes:

• Reduced TFW numbers: The government is reducing the number of TFWs to help lower overall unemployment [2].
• Capping low-wage TFWs: There are caps on low-wage TFWs in sectors with high unemployment, except in healthcare and agriculture [2].
• Employer restrictions: Employers can only hire up to 10% of their workforce as TFWs and can only offer one-year contracts for low-wage TFWs [2].
• Changes to student visas: International students are now limited to working 24 hours per week off-campus, down from unlimited hours [2].

These changes could limit the availability of foreign workers, a significant source of labour for the restaurant industry. This, in turn, could put further pressure on restaurants already struggling to find and retain staff.

Leveraging Technology to Address Labour Shortages

Technology can be a valuable tool for Canadian restaurants looking to improve efficiency and productivity in the face of labour shortages. Here are some ways that technology can be used:

• Online ordering: Online ordering systems can help restaurants reduce the need for front-of-house staff [10]. Customers can place their orders online, which can then be sent directly to the kitchen [10]. This can free up staff to focus on other tasks, such as serving customers and clearing tables [10]. Online ordering can also reduce wait times, improve order accuracy, and potentially increase order volume by offering convenience to customers.
• Automated kiosks: Automated kiosks can be used for ordering, payment, and other tasks [10]. This can help reduce the need for cashiers and other front-of-house staff [10], allowing for more efficient use of limited staff resources.
• Scheduling software: Scheduling software can help restaurants optimize their staffing levels and reduce labour costs [11]. This can help ensure that the right number of employees are scheduled for each shift, based on anticipated demand [11]. By analyzing historical data and sales patterns, scheduling software can help avoid overstaffing and minimize unnecessary labour costs. It’s important to note, however, that overstaffing can sometimes lead to decreased tips for employees, so finding the right balance is crucial [12].
• Point of Sale (POS) systems: POS systems can help restaurants track sales, inventory, and other data [13]. This data can be used to make informed decisions about staffing levels, menu offerings, and other operational aspects [13]. By providing real-time insights into sales and inventory, POS systems can help optimize operations and identify areas for improvement.
• Table management systems: Table management systems can help restaurants optimize seating arrangements and reduce wait times for customers [14]. This can help improve customer satisfaction and increase efficiency [14]. By efficiently managing table turnover and minimizing wait times, restaurants can improve the customer experience and potentially serve more customers with limited staff.
• Inventory management software: Inventory management software can help restaurants track their food and beverage inventory, reduce waste, and optimize ordering [15]. This can help reduce costs and improve efficiency [15]. By minimizing spoilage and ensuring that the right amount of ingredients is on hand, restaurants can reduce food costs and improve their bottom line.

Strategies for Optimizing Staffing and Reducing Labour Costs

Despite the challenges, there are several strategies that Canadian restaurants can implement to optimize staffing and reduce labour costs. These include:

• Offering competitive wages and benefits: Restaurants need to offer competitive wages and benefits to attract and retain workers in today’s tight labour market [16]. This may include offering health insurance, paid time off, and other perks [17].
• Investing in employee training and development: Providing comprehensive training and development opportunities can help restaurants retain employees and improve their skills [16]. This can include offering training on customer service, food safety, and other relevant topics [18]. Employee training can have a significant impact on productivity, customer satisfaction, and employee retention rates [19]. Restaurants Canada is also advocating for a matching and training program to connect newcomers with jobs in the food service industry, which could provide a pipeline of qualified workers [20].
• Creating a positive work environment: A positive and inclusive work environment can help attract and retain talent [16]. This includes promoting open communication, recognizing and celebrating achievements, and encouraging teamwork [16].
• Streamlining operations: Restaurants can streamline their operations to reduce the need for labour [13]. This can include implementing online ordering systems, automated kiosks, and other technology solutions [2].
• Optimizing scheduling: Using scheduling software can help restaurants optimize their staffing levels and reduce overtime costs [11]. This can help ensure that the right number of employees are scheduled for each shift, based on anticipated demand [11].
• Cross-training employees: Cross-training employees can help restaurants fill staffing gaps and reduce the need for additional hires [13]. This can also help employees develop new skills and increase their job satisfaction [17].
• Attracting Canadian workers: In addition to the strategies mentioned above, Restaurants Canada is calling on the government to work with the food service industry on strategies to attract more Canadian workers, especially youth [7]. This highlights the need for a multi-pronged approach to address the labour shortage.

Creating a Positive Work Environment to Attract and Retain Talent

In addition to offering competitive wages and benefits, creating a positive work environment is essential for attracting and retaining talent in the Canadian restaurant industry. Here are some key strategies:

• Foster a culture of respect and appreciation: Create a workplace where employees feel valued, respected, and appreciated [21]. This can include recognizing and rewarding good performance, providing opportunities for growth and development, and promoting open communication [21].
• Offer flexible work arrangements: When possible, offer flexible work arrangements, such as flexible scheduling, to accommodate employees’ needs and improve work-life balance [16].
• Promote teamwork and collaboration: Encourage teamwork and collaboration among employees 16. This can help create a more positive and supportive work environment [16].
• Provide opportunities for growth and development: Offer opportunities for employees to learn new skills and advance their careers [17]. This can include providing training, mentoring, and opportunities for promotion [17].
• Create a safe and healthy work environment: Ensure that the workplace is safe and healthy for all employees [18]. This includes complying with all relevant health and safety regulations and providing a comfortable and supportive work environment [18].

Conclusion

The Canadian restaurant industry is facing a significant labour shortage that is impacting restaurants of all sizes. This shortage, driven by factors such as an aging workforce, changing career preferences, and skills gaps, has led to reduced operating capacity, increased costs, and financial strain on businesses. While government initiatives like the GST and HST holiday have offered temporary relief, a long-term, collaborative approach is needed to address the issue effectively.

Restaurants can take proactive steps to navigate this challenging situation by implementing strategies such as offering competitive wages and benefits, investing in employee training and development, creating a positive work environment, streamlining operations, and leveraging technology. These strategies can help optimize staffing levels, reduce labour costs, and improve efficiency.

Furthermore, utilizing bookkeeping services can provide restaurants with valuable financial insights and support, enabling them to make informed decisions, manage costs, and ensure compliance with regulations. By actively addressing the labour shortage and its financial implications, Canadian restaurants can position themselves for success in the years to come.

However, the long-term implications of this labour shortage are significant. If not addressed effectively, it could lead to a decline in the quality of service, increased prices for consumers, and ultimately, a contraction of the industry. A collaborative approach involving the industry, government, and educational institutions is crucial to develop comprehensive solutions. This includes attracting more young people to the industry, providing targeted training programs to address skills gaps, and creating pathways for newcomers to enter the workforce. By working together, stakeholders can ensure the continued vibrancy and success of the Canadian restaurant industry.

Works Cited

1. The food service sector is grappling with nearly 100000 job vacancies,  Restaurants Canada
2. 2024 Restaurant Labor Market Insights – Push Operations
3. Looking for skilled food and beverage labour? Start thinking long term | FCC
4. Accommodation and Food Services (NAICS 72): Ontario, 2023-2025 – Job Bank
5. Restaurants Canada
6. Resilient restaurateurs have tools to thrive through tough times – Canadian Western Bank
7. Restaurants Canada calling for federal government action on labour shortages – Retail Insider
8. Accountific – Bookkeeping For Food Business Owners
9. Bookkeeping For Food Business Owners
10. 15 Ways to Improve Productivity in a Restaurant – 7shifts
11. Do More With Less: Managing Labor Costs in the Food and Beverage Industry – Square
12. How to Lower Restaurant Labor Costs in 2024 – Toast
13. Top tips for minimizing restaurant expenses – Restobiz
14. 25 Strategies to Improve Efficiency at Your Restaurant – Eat App
15. How to Reduce Operating Costs & Expenses at Your Restaurant – TouchBistro
16. 6 Strategies for Restaurants to Attract and Retain Staff – Horizon Hospitality
17. Restaurant Employee Retention: 6 Strategies That Work – 5-Out
18. Hiring and Retaining Food Business Staff: 5 Strategies to Implement – Food Safety Blog
19. How to Improve Efficiency and Productivity in a Restaurant – Incentivio
20. Restaurants Canada statement on federal government’s Fall – GlobeNewswire
21. Keep your restaurant’s top talent with a new approach to company culture – Restobiz

David Monteith, founder of Accountific, is a seasoned digital entrepreneur and a Xero Silver Partner Advisor. Leveraging over three decades of business management and financial expertise, David specializes in providing tailored Xero solutions for food and beverage businesses. His deep understanding of this industry, combined with his proficiency in Xero, allows him to streamline accounting processes, deliver valuable financial insights, and drive greater success for his clients.