Survey Finds Labor Shortages and Increased Costs Putting a Strain on Iowa Restaurant Operators

Tuesday, July 19, 2022- Des Moines, IA – Finding qualified workforce continues to stifle recovery for many Iowa restaurants and bars, according to survey data from the Iowa Restaurant Association. More than half of respondents (52%) ranked finding qualified workforce as their greatest challenge—with more than one third operating 30% below their needed staffing levels. The increased cost of labor and the increased cost of goods were a close second on the list of challenges.

“We are in uncharted waters as an industry,” said Jessica Dunker, president and CEO of the Iowa Restaurant Association. “We can’t find staff at the same time the industry is facing simultaneous 15% increases in the cost of labor and the cost of goods. Menu prices can’t be raised high enough or fast enough to keep up. There’s a threshold for what people will pay for a sandwich or pizza.”   

Restaurant owners are doing what they can to keep pace. 80% say they’re stretching existing staff by giving team members more hours and expanded duties. However, 39% are also closing their establishments one or more extra days per week to give workers a break and 28% have not yet returned to pre-COVID capacity levels. 

Restaurants Ramp Up Pay & Benefits

65% of surveyed owners and operators believe the primary reason they are struggling to hire back staff is that many talented workers took positions in other industries. 59% feel that people dropping out of the workforce altogether is also a major factor.

While all types of positions from entry-level to management have been tough to fill, 47% say kitchen staff are the hardest to find. 

Wages are up in rural and urban areas alike. Statewide operators report average entry-level hourly starting wages between $12-$15. Tipped employees are faring even better. Respondents said tipped employees statewide average $25 per hour—with variations based on the location and format of the restaurant.

Many operators are now offering full time employees benefits including 38% paid vacation, 29% health insurance and 17% 401K or other retirement benefits. Part-time employees are most likely to receive free or discounted meals as a benefit, but 18% of operators also offer part time employees paid vacation.

Higher Revenue, Lower Profits

Higher pay and benefits are eating into what were already slim margins. More than 80% of operators said their profit margins were lower than 2019. 43% said even though their revenue is higher than before COVID, their profit margin is lower. “Many operators can’t regain their footing,” said Dunker. “It’s worrisome, if a restaurant closes now, the chances of another operator moving in are declining. For rural areas, we might start to see may restaurant food deserts.” 

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