Labor costs continue to weigh on restaurants, according to a new report by Square.
The point-of-sale payments company’s Quarterly Restaurant Report, released Tuesday (May 14) notes that average hourly earnings for restaurant workers have risen by 66% since 2017 compared to 40% for retail workers.
However, these costs aren’t across the board in the food-service sector, the report adds. Payroll has risen at bars and full-service eateries since 2019, while cafes and quick-service restaurants (QSRs) have seen their payroll costs decline.
“Bars and full-service restaurants rely more on higher-skilled employees who perform hard-to-automate tasks, which increases payroll costs,” Ming-Tai Huh, Square’s head of restaurants, said in a news release.
“It’s the exact opposite situation for QSRs and cafes. These sellers can more easily use technology to automate and streamline operations, helping lower operating costs for front and back of house.”
Some of that technology comes from Square itself, with the company last week debuting the Square Kiosk, designed to help operators reduce wait times and boost staffing in other parts of their restaurants while still taking orders.
And restaurants can use some help, as they’re proving to be an outlier at a time when most small businesses are outperforming the larger economy.
Labor costs at restaurants have been rising, and sales are slowing, according to a recent report by Fiserv, which counts the Clover restaurant point-of-sale, data and financing suite among its brands. As noted here earlier this week, that report showed restaurant spending shrinking 3.1% last month compared to March and was off 0.2% from April 2023.
“The reduction in restaurant foot traffic was much less significant, indicating that consumers are still visiting restaurants but ordering less expensive items or choosing lower-cost establishments,” PYMNTS wrote.
That report also included an interview with Mark Hennin, head of Clover Growth at Fiserv, who said that pressures are especially acute for restaurants these days. These eateries are dealing with slim margins with most operators only earning about a nickel to 10 cents on every dollar’s worth of food and drink they sell.
“According to Hennin, those margins — and indeed, the survival rates of the restaurants themselves — can get a boost if technology is deployed in the service of reducing food waste and improving the efficiency of the order-to-table-to-payment flow itself,” PYMNTS wrote.
