Why Restaurant Industry is Bleeding with Entry Level Workforce

The restaurant industry's struggle with high turnover among its frontline and mid-level employees is becoming increasingly problematic. In 2023, this issue reached its zenith, marking a three-year high in attrition rates during a period of significant sector expansion. This expansion is shadowed by the challenges of long working hours and limited opportunities for career progression, factors that have contributed to the turnover crisis that began unfolding three years prior.

BetterPlace, in its detailed analysis, pinpointed quick service restaurants (QSRs) as the segment suffering the most from frontline worker attrition. The firm's fiscal year 2022 report uncovered that the monthly attrition rate in these sectors stood at an alarming 19%, suggesting that nearly one in every five employees opts to leave each month. The surge in demand for the services and products offered by these industries, both during and in the aftermath of the pandemic, necessitates a large and readily available workforce. The report emphasizes that the demanding nature of the jobs and the ease with which workers can be replaced are principal reasons behind the high attrition rates.

Challenges in the Restaurant Industry

Pravin Agarwala, co-founder and group CEO at BetterPlace, underscores the critical role of India’s frontline workforce in driving the country's economic growth across various sectors. “With the economy on a path to normalization, there's been a noticeable increase in the demand for frontline workers, leading to the creation of millions of jobs. According to Agarwala, the job market is expected to expand significantly, potentially creating up to 50 million jobs by the end of this decade,” he added.

The restaurant industry, however, is facing challenges in attracting the new generation of workers. Kabir Suri, president of the National Restaurants Association of India, highlights the decline in interest among young individuals, attributing it to the demanding and physically intensive nature of the work. This has resulted in a noticeable decrease in the number of students enrolling in professional hotel management courses.

The attrition rate within the restaurant sector reached a record 60% in 2023, as noted by Kartik Narayan, chief executive (staffing) at TeamLease Services. This represents a significant increase from the 50-55% average observed in previous years. “Factors contributing to this high turnover include erratic working hours and a stressful work environment. The sector's growth has also led to a competitive talent market, with businesses vying for mid-level and frontline staff through higher salaries and enhanced job benefits,” he commented.

Need for New Workforce Strategies

Recent trends in investment and funding have shown a resurgence, with both new local ventures and international chains being attracted by India’s young demographic. This has led to a proliferation of job opportunities, contributing to a faster turnover rate as employees seek better compensation packages.

A report by consulting firm Wazir Advisors forecasts substantial growth for India's organized food services market, projecting an increase to $78.8 billion by 2026 from $57.2 billion currently. Factors such as a higher frequency of dining out, increased disposable incomes, and urbanization are driving this growth. Despite facing slowed expansion due to heightened competition, QSR chains are aggressively pursuing expansion strategies. ICRA estimates suggest that these chains are set to open 2,300 new stores with an investment of Rs 5,800 crore between 2022-23 and 2024-25, underscoring the industry's resilience and its adaptability to changing market dynamics.

Moreover, the industry's landscape is being reshaped by technological advancements and changing consumer preferences. Digital ordering systems, contactless deliveries, and an emphasis on health and safety standards have become paramount. Restaurants are now tasked with not only managing the operational challenges posed by high attrition rates but also adapting to a rapidly evolving market where consumer expectations are higher than ever. To retain employees, businesses are increasingly focusing on creating a positive work culture, offering competitive salaries, and providing opportunities for growth and development. These strategies are crucial for addressing the root causes of attrition and ensuring the sustainability of the workforce in this vital sector.

Solutions and Future Directions

To mitigate the high attrition rates within the restaurant industry and safeguard jobs, a multifaceted approach involving both industry leaders and government intervention is essential. Businesses can take proactive steps by investing in employee training programs, offering clear paths for career advancement, and enhancing workplace conditions to make the sector more appealing to potential and current employees. Implementing flexible working hours, providing mental health support, and recognizing and rewarding employee contributions can also play a significant role in employee retention.

On the government's part, support can come in various forms to stabilize and grow the hospitality sector, thus preserving jobs. Policymakers could consider offering tax incentives or grants to businesses that commit to employee development and retention strategies. Additionally, government-funded vocational training programs tailored to the hospitality industry can equip individuals with the skills needed for long-term career success within the sector. Such initiatives not only benefit potential employees but also help businesses by increasing the pool of skilled labor. 

The government can also facilitate partnerships between the private sector and educational institutions to update curriculum and training programs, ensuring they are in line with industry needs. This collaborative approach between the industry and government can lead to a more robust, resilient, and attractive restaurant and hospitality sector, ultimately resulting in lower attrition rates and more secure employment for frontline and mid-level workers.