Shake Shack Returns to its Roots

Karl Marx will have to wait; the machines will not yet replace us.  The fully-automated ordering system Shake Shack put in place at it’s newish Astor Place location is being terminated to bring back people and cash.

On the most recent earnings call, CEO Randy Garutti discussed the feedback that the chain has received about this unit in particular.  Voices came in clearly via Twitter, Yelp, and direct feedback: guests want the option to pay in cash and want to place their orders with a person.

When Shake Shack opened the Astor Place location in 2017, it was touted as the company’s first foray into self-service kiosks and cashless operations.  The benefits of both are obvious–less labor, lower risk of theft, less waste, and more-accurate ordering.

However, the backlash came in hard and fast from guests who didn’t want to wait on the kiosks and who were inconvenienced by the credit-only policy.  Shake Shack is reinstating a cashier for all open hours and will begin accepting cash with said cashier.  The kiosks will be rolling out to other locations–but not in replacement of the cashiers.

Shake Shack has consistently be posting huge growth.  In 2016, average unit volumes were 3.5x the burger-segment median, at $4.5m.  However, net income was only 6.2%–a far cry from industry elder McDonald’s 20%.

To read more, click here.

Reminder: NYCHG Labor in the Industry Event

Tonight is the night! From 6:00 to 9:00 tonight, come join us and the New York City Hospitality Group at the Institute of Culinary Education for a pre-election “State of the Union” discussion about labor’s impact on the hospitality industry.  From the shortage of line cooks to the rising wages to health care, there are a ton of factors affecting the industry at large.  Topics may include overtime, internships, paid time off, minimum wage, talent pool difficulties, and more.  Discuss the pros, cons, and complications that are affecting restaurants amongst industry colleagues while sipping beer and wine and sampling bites from ICE’s culinary team.

Moderator:
Leah Riegel, Managing Director, Atlantic HR Advisors

Panelists:
Susan Spikes, Vice President, HR & Recruiting, Hill Country Hospitality
Luke Fryer, Owner of Harri & International/National Restaurateur

Stephen Yen, Corporate Executive Chef, Paige Hospitality Group
Tickets are still available here.

Tipping is Going Extinct

Over the past week weeks, a storm of debate has surged over the news that Danny Meyer has opted to eliminate tipping in his fine dining restaurants over the course of the next year. It’s a monumental decision and the change has its advocates and skeptics. In this month’s Enterprise Insight, we’re cutting through the opinion to talk specifically about the benefits and challenges of implementing such a system.

Specifically, we will review what operators need to consider when thinking about this: why, how, and the possible pitfalls.

Why Would You Eliminate Tipping

With our clients, we’ve discussed three key reasons for implementing a more-European system: pay disparity, retention, and rising wages.

The back of house has always been under-compensated in comparison to the dining room. Due to the legal classifications of wages, back of house employees cannot be tipped. Under a tip-included system, the real cost of the meal—menu price plus tip—is built into a single number, and the revenue from that number is accessible to the owner to distribute as he or she sees fit.

This, in turn, can help with retention. Low-wage jobs are historically high-turnover jobs. However, with access to the tip ‘revenue,’ an owner can increase wages accordingly to alleviate this issue.

Lastly, rising wages are driving up labor costs and in some instances, driving away skilled labor. With the minimum wage in New York changing on a industry-by-industry basis, it will only become more difficult to find and retain great team members. Again, a tip-included system allows the operator to offer competitive wage rates.

Additionally, in the front of house, the tipped-minimum is also going up. Come January 1, NYC restaurateurs will be required to pay their servers $7.50 per hour–a 50% increase. However, if the restaurant eliminates tipping, then the team can be paid a salary, or a greater hourly wage plus a bonus drawn from the ‘tipped revenue’, thus alleviating this jump in labor costs.

How Would You Eliminate Tipping

Currently, there are only two viable options: increase prices, or apply an “administrative fee.” Be mindful with an applied “fee:” if you charge a “Service Fee” rather than “administrative,” you cannot disburse that revenue to any one not in a service position.

Neither feels good right now, but we believe that price increases will become the new normal. Here’s why: with an “administrative fee,” tipping isn’t eliminated, it’s removed from the diner’s control. With price increases, it’s truly taken off the table. The diner does not know and cannot argue with the prices because they give no allusion to the portion going to the team.

Pitfalls

Increasing pricing will always cause a certain degree of pushback from guests. Until they’re fully on board with tip-included system, the sticker shock will cause a reaction. However, as more and more of NYC s fine-dining enterprises move to this style, the less resistance operators will face. Whether your establishment plans on keeping or eliminating tipping, it’s important to understand the mechanics, because “tip-included” is bound to become the new normal for a significant portion of the dining scene.

Hire Right or Hire Twice!

“Although restaurant job growth shows no signs of slowing – 2015 will mark the fourth straight year with employment gains of at least 3.5 percent – there are indications that job vacancies are becoming more difficult to fill,” says the National Restaurant Association. Not just in New York, but the US as a whole, foodservice enterprises are struggling to attract and keep their team members. From the National Restaurant Association to the Washington Post, everyone is talking about the labor shortage. Thus, it’s more important than ever to ensure that you’re using the right strategies to attract the right talent. In this month’s Enterprise Insight, we will review three strategies that need to be in your toolbox and put to good use:

Define the Job

The purpose of detailing the job description is two fold: it helps target candidates and ensures a good fit. By really defining what the job is and communicating that, you can get attention from the right applicants. Obviously, you don’t want to hire just any “baker” if you specifically need someone for an artisanal, sourdough-driven bread program. Likewise, if the General Manager position for a café is really to be the assistant to the owner, but the job description doesn’t read as such, the candidate you interview won’t take the position.

Before posting any ads or interviewing any candidates, the best use of your time is to clearly and very specifically define the responsibilities and abilities required for the position. The more descriptive you can get here, the better for both you and the candidate.

Post Strategically

Once you’ve clearly defined the responsibilities and abilities the position requires, you can move on to advertising the opening through the proper channels. Just the way your description is targeted at a particular audience, you need to advertise in the appropriate channel to reach the right audience. Here are the strategies we use with our clients:

  1. Review your options for outlets from both a price and audience perspective, and post accordingly. For example, Good Food Jobs is a great place to advertise a Manager or Director position, but maybe not for cashiers.
  2. Post wide and far. You want to ensure that your opening gets as much awareness as possible if you want the best probability of get the best hire. Here are some outlets we use: Good Food Jobs, Culinary Agents, Harri, Culintro, Chef’s Connection, EasyPairings, Shiftgig, Poached, and Craigslist. Also, be sure to post to the career services of culinary schools across the country. Students in California may very well be looking for jobs in New York!
  3. There are two more outlets that are great, often over-looked options: your social media and existing team.
    1. People that admire, like, and/or respect your brand are definitely following you on Facebook, Twitter, or Instagram. Use that to your advantage and post there.
    2. Secondly, everyone on your team knows people outside of your enterprise that work in the industry, and most people like working with their friends. Consider offering a referral bonus to your team members for bringing in candidates that get, accept, and stay in a position.

Ask the Right Questions

Getting the right people interested in your post and in your enterprise for the interview is only half the battle. Interviews can mislead both employee and employer despite all previous efforts, so it’s the most important step in the process to get right.

When it comes to interviewing, we advise our clients to take great care in executing the following items properly:

  1. Doing Multiple Interviews: it’s important that as many people on your team get to interact with the applicant as possible. At the first stage, this means having at least two people sit down and do a traditional interview with the candidate.
  2. Interview for Technical and Cultural Fit: An applicant might be technically proficient at everything the job requires—but is a total pain to work with! That will inevitably end in disaster. Likewise, someone that’s a great fit for the company but unfit for the position will cause just as much trouble. Thus, it’s important to screen candidates for what they can do and how they behave.
  3. Schedule a Trail: For both front and back of house positions, it’s important to invite the candidates into the enterprise for a trail or stage once they’ve passed the interview phase. This way, you can get a true-to-form example of how they work and how they interact—reinforcing or correcting your impressions from the interview.

The labor shortage is definitely real, and it’s definitely putting real pressure on employers. That’s why it’s more important than ever to keep your hiring practices focused and polished. Remember: define the job, post strategically, and ask the right questions.