Hiring Woes Mean Restaurants Have A Long Road To Travel Before Full Recovery

Restaurants are already on the way back, and as conventions return and coronavirus restrictions ease even further, by the end of this summer business could be booming. But even though many landlords can look forward to soon collecting full rental payments from restaurants, the industry is still under threat. The shutdown of indoor dining left a mark, cutting down income for months, and owners with little or no cash on hand must now pivot their restaurants away from the carryout operations that kept them alive, accumulate supplies and above all, hire enough staff to serve all those returning customers.

“A number of our restaurants are woefully understaffed,” 4 Star Restaurant Group owner Doug Dunlay said.

Restaurants need everyone from experienced cooks, hosts, managers and sous chefs to lower-skill jobs like dishwashers if they expect to handle summer crowds, he added. But the yearlong layoff forced many workers to leave the industry, possibly for good, and either seek out jobs in sectors that expanded in 2020, or move back in with their parents to wait out the pandemic.

“So many people left the industry, or left Chicago, and they just haven’t come back.”

When 4 Star placed an ad for a manager position last fall, it received between 50 and 70 inquiries, but today a similar ad gets only four or five responses, frequently from unqualified applicants, Dunlay said. The company has tried paying $250 bonuses to staff that recruits new employees, scoured college job postings and even reached out to high-schoolers just entering the workforce. But shortages remain.

“I’ve been in the business since 1994, and this is the worst I’ve ever seen it,” he said.

But the city only boosted indoor dining capacity from 50% to 75% in mid-May, so companies such as 4 Star have been able to get by with reduced staff, many of whom have gotten a lot of overtime pay. Crunch time for the restaurant industry will come after the Fourth of July, when indoor dining, tourists and conventions return. If restaurants can’t hire enough people, the industry’s thin profit margins may get even thinner, and thousands of businesses that made it all the way through the crisis will still be at risk of failure.

Illinois Restaurant Association President Sam Toia said the state could still lose about 5,000 of its 25,000 restaurants. It’s difficult to estimate how many in Chicago have already closed, as city officials won’t know until the licenses lapse and are not renewed. But about 86% of restaurants reported zero profits in 2021, and none had sales from indoor dining in the winter, so even a strong revival this year may not make up for all that lost revenue.

One of the biggest hurdles comes from the nature of the restaurant business, Toia added. Between 95% and 97% of a typical location’s revenue goes toward buying food supplies, labor costs and other expenses.

“And that’s during the good times, so obviously many restaurants are behind in their rent.”     

The restaurant industry still needs someone to throw it a lifeline, he said. Although Congress in March passed the American Rescue Plan Act of 2021, a $1.9 trillion economic stimulus package that included $28.6B in restaurant relief, helping the hundreds of thousands of restaurants in need will quickly exhaust those funds. Toia and other industry lobbyists are pushing for Congress to replenish the restaurant fund with billions more.

“We’re still going to lose restaurants, but if we get the restaurant relief fund replenished, we can probably hold the number of losses to 14%, rather than 20%,” Toia said.

Leaders in the Senate and House of Representatives, including U.S. Sen. Chuck Schumer and Speaker of the House Nancy Pelosi, gave support to the idea, Toia added. Illinois Sens. Richard Durbin and Tammy Duckworth also support more funds for restaurants.

“We need to get some Republicans on board,” Toia said.

Prior to Covid-19, 4 Star had nine restaurants in the Chicago region, including D.O.C. Wine Bar in suburban Lombard, The Windsor in Chicago’s Streeterville neighborhood, Remington’s in the Loop and two Smoke Daddy restaurants in Chicago. Dunlay was forced to permanently shutter the Lombard and Streeterville locations, but the others survived.

The restaurants cut expenses by eliminating between one-quarter and one-third of the items on their menus, including the dishes that required a lot of prep time, cutting down on the number of positions needed, Dunlay said. The company also established carryout operations and negotiated with landlords several times to secure rent reductions or forbearances as they opened and shut locations due to changing Covid-19 restrictions.     

“We had to go back to some landlords again and say, ‘Thanks for helping out, but we’ve got to do this again,’” he said. “And every time we yo-yoed like that, we lost more staff.”

It was tough to keep the restaurants up and running.

Remington’s, the company’s downtown restaurant at 20 South Michigan Ave. near Millennium Park, took in about $170K per week in 2019, but since its reopening this spring it has been bringing in about $75K, according to Dunlay.

“There is just nobody downtown, all the buildings are at 5% occupancy, there are no conventions and there are no power lunches,” he said.

But the restaurants out in the neighborhoods are doing much better. These locations, including Smoke Daddy in Wicker Park and Crosby’s Kitchen, Ella Elli, and Tuco and Blondie in Lakeview, all have outdoor seating, and diners kept showing up.

“It’s been a real lifesaver,” he said. “It made us feel like it was 2019 again.”

4 Star launched a new restaurant, The Perch Kitchen and Tap, at 1932 West Division St. in Wicker Park, last summer even as Covid-19 was infecting thousands of residents each month. Its outdoor terrace proved popular, according to Dunlay.

“We were nervous as we poured money into the place while the world wasn’t getting any better, but it performed well, partly because people weren’t going downtown and our neighbors in Wicker Park really embraced us.”

The company’s neighborhood restaurants are mostly back to paying full rent, and Dunlay said he expects the Remington to go back to paying its full rent by July 1.

Covid-19 may bring some permanent changes to how restaurants operate in Chicago.

Eldridge Williams, proprietor of The Delta at 1745 West North Ave. in Wicker Park, said when he reopened in March, he cut down from seven to five days a week. And with the city restricting late hours, the restaurant and bar were only open seven or eight hours a day. That’s cut labor costs, and with new staff so hard to find, the Delta may keep its new schedule even after all restrictions lift.

“To open back up seven days a week, I’d need to bring in another full-time manager, and from a morale perspective, we no longer have to work into the wee hours of the morning, so my staff has been happier,” Williams said. “The result is better service and a better experience for our guests. Keeping open for longer hours is a high risk for low rewards.”

“Our staff is also still feeling vulnerable right now, and as an owner I have a responsibility to not make any knee-jerk decisions,” he added.

Williams, a Memphis native who opened The Delta in 2017 to showcase the cuisine of the Mississippi River Delta region, came to an agreement with the landlord to pay about 70% of the monthly rent. But diners have flocked back, especially in the past few weeks as vaccinations spread, and he said the restaurant will soon return to paying 100%.

“Honestly, it feels almost normal now,” he said. “I’ve seen people relax much more, and the Delta has become a familiar watering hole for locals who are comfortable with our staff.”    

A turnaround for all surviving restaurants may be on the way, as long as the coronavirus continues to retreat. Daily infections in Chicago fell last week to an average of 249, down from nearly 2,000 per day in early December, according to the Chicago Department of Public Health. More than 60% of city residents have received at least their first vaccine dose, and that puts Chicago on track to reach 70% by July 4, followed by a full reopening of its businesses.

But restaurants will need to staff up to take full advantage. And the usual labor pools may be dry.

“Chicago is the extension of college for a lot of kids,” Dunlay said. “They come here, get jobs as bartenders or wait tables, and extend their college experience and have fun before they start their real careers.”

The coronavirus disrupted that pipeline, he added. And the experienced restaurant workers, including many immigrants, who took the line cook positions and other kitchen jobs in the back of restaurants also disappeared.  

“Many of our cooks found they could find jobs with Amazon or other places where they were guaranteed an income,” Dunlay said.

“Immigrants have always been the backbone of the restaurant industry, especially in Chicago,” Toia said.

“It’s going to be difficult for a year, or two years, but there will be a new group of kids moving to Chicago, and hopefully, new immigrants coming here to take the kitchen jobs,” Dunlay added. “The strong will survive, and the pendulum will swing back.”