The Impact the New Labor Department Rules Will Have on Restaurants

As an operator, you know that labor costs take a major bite out of your entire revenue. According to the National Restaurant Association, labor costs account for at least 30% of a restaurant’s sales.

The profit margins have always been slim and they are about to get even leaner.

New employer mandates are going to evidently going to make labor costs even more expensive. Not only is there the issue of the minimum wage spike, but come December the U.S. Labor Department is increasing the overtime pay for managers.

This means that the salary threshold for overtime-exempt employees is more than doubled.

Not to mention, the average hourly pay of nonsupervisory employees has increase by 8.1% in restaurants, according to Bureau of Labor Statistics (BLS) data.

So how are restaurants going to offset this new expense? By eliminating positions, reducing staff hours, adopting more technology and by expanding less. This is bad news for the entire industry.

With the inevitable increase in labor costs, operators will be forced to cut corners. Not to mention, menu prices are bound to increase as well.

This will all have an impact on guests.

According to BLS data, restaurant menu prices rose by 2.8% from July 2015 to July 2016, while grocery stores’ prices actually fell by 1.6%. As menu prices increase, will more consumers gravitate to grocery stores than restaurants?

Will self- serve ordering kiosks, which have proven to be successful at restaurant chains like Panera, start to replace workers?

Many argue that ordering technology like table-top tablets and kiosks “cheapen” the diner’s experience and could never replace front-counter service from an employee. But, will restaurants be forced to turn to these systems to help mitigate rising labor costs?

We want to know how your restaurant plans to offset the new added expense! Tweet us @foodable now.  

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