Commentary: Singapore’s restaurants are chronically shorthanded - here’s how they can cope

SINGAPORE: Restaurants in Singapore often have two different displays at the front of their establishment: Their menu and a now-hiring sign. Labour shortages have been a plague for food and beverage (F&B) sector for years, with the perception that restaurant work is physically demanding with long hours, poor work-life balance and low wages.

COVID-19 dining restrictions caused layoffs across restaurants in Singapore. Among the service sectors, the F&B sector saw the largest drop in employment, logging a loss of 21,100 employees from the fourth quarter of 2019 to the third quarter of 2021. Those who did work in restaurants looked elsewhere for work that was more stable and offered a higher salary; many haven’t returned.

With Singapore’s overall unemployment in 2023 ending at a low rate of 1.9 per cent, finding individuals who want to work in restaurants is becoming even more challenging.

Restaurant owners have increased starting wages or offered signing bonuses to entice potential employees, but have seen a lukewarm response. Retaining staff is a challenge no thanks to the gruelling nature of F&B work and its uncompetitive pay.

While it is easy to say that restaurant owners should simply raise salaries more, the average net profit margin of a restaurant is between 3 and 6 per cent. Most restaurant owners do not have the financial capacity to make the kind of increases that would make the necessary difference.

Restaurant owners are left with only a few options: Hike menu prices, implement new technology, or turn to alternate revenue streams.

SERVERS HAVE BECOME FOOD RUNNERS

The restaurant industry is highly competitive. A sole operator increasing menu prices to pay their employees more will undoubtedly cause a decrease in patrons.

Some owners are hence turning towards new technologies to ease manpower shortages. Mobile ordering gained popularity during COVID-19, where patrons scan QR codes to access menus, place their order and pay using their smartphones. Mobile ordering allows the restaurant to have fewer employees per shift, as they are no longer servers but primarily food runners.

Traditionally, servers spend more time at each table talking to the patrons and offer more in terms of item recommendations and up-selling. By contrast, food runners can cover more tables, because they mainly transfer dishes from the kitchen to the table, requiring less time per table and fewer hands on deck.

By employing more food runners, restaurants reduce the number of employees they need, and can raise their salaries without affecting net profits. This change is only suitable for more casual restaurants and is to be weighed against the added revenue a good waiter can earn by suggesting a second glass of wine or a dessert.

Further, patrons dining at fine-dining restaurants may not be receptive to ordering from their mobile devices.

THE RISE OF CLOUD KITCHENS

Alternately, restaurants can create other revenue sources to increase staff salaries and keep profit margins stable. While a common alternative revenue stream is to include a retail portion in the restaurant without retrofitting the floor plan, allocating space for retail can be almost impossible for restaurants already in operation.

Another option for restaurants is to open a restaurant without a physical storefront. Cloud kitchens, also known as ghost or virtual kitchens, are becoming incredibly popular due to the growing presence of food delivery services.

According to Allied Market Research, the cloud kitchen industry’s value is expected to increase from to US$29.4 billion in 2020 to US$112.7 billion by 2030, with a compound annual growth rate of 13 per cent from 2021 to 2030.

In Singapore, food delivery services such as GrabFood, Deliveroo and Foodpanda have already set up ghost kitchens across Singapore, with each kitchen offering items from multiple eateries. While a restaurant retains its original concept for dine-in customers, they can offer a second version or a different concept solely for delivery platforms.

Cloud kitchens not only provide an alluring alternate revenue stream, but expand the geographical reach of a restaurant. They have less of a start-up cost compared to opening a new physical branch.

Singapore’s culinary scene can only remain vibrant if employees earn a competitive wage and have good work-life balance. Restaurants must continue exploring technological solutions to entice F&B employees into the industry.

Dr Guy Llewellyn is Assistant Professor at EHL Hospitality Business School.