Independent restaurants

Consumer pullback and macroeconomic uncertainty dominated the conversation at the National Restaurant Association Show in Chicago last week, as restaurants brace for anticipated impacts of fresh tariffs. 

But so far, 2025’s challenges haven’t been universal. Operators across restaurant sectors and price points have managed to drive same-store sales growth, despite talk of price sensitivity. Perhaps no restaurant sector is seeing stranger consumer signals than full-service dining, where a shift back toward on-premise occasions and group dining may be blunting the impacts of consumer trade down and the rise of digital-first diners. At the same time, many full-service chains are closing stores and even filing for bankruptcy.

Restaurant Dive spoke with operators from different parts of the full-service industry to understand what challenges the sector is facing and how businesses, from urban fine dining concepts to national casual brands, are dealing with a turbulent and contradictory market.

Some fine dining has escaped trade down

Q1 traffic was down compared to the year-ago period at Adalina, a modern Italian restaurant in Chicago, but traffic has trended up in recent weeks, Jonathan Gillespie, a partner at the restaurant said. Gillespie said he thought Adalina has outperformed some of its close competitors in fine dining.

Gillespie attributed some of the restaurant’s resilience to its high price point, which means much of its clientele comes to Adalina for special occasions, rather than impulse dining. 

“A lot of people are being more cautious with how they spend their dollar, and maybe they are going out for special occasions,” Gillespie said. 

At Adalina, reservations have stayed unchanged on the weekend — Thursday to Sunday — but are down the rest of the week, Gillespie said, indicating that diners are saving up for weekend occasions. This aligns with broader observations shared by Technomic at the NRA Show, which indicated consumers across dayparts and sectors were shifting dining out to the weekend.

Gillespie said Adalina has seen other consumer behavior changes, such as a dip in how much consumers are eating. Gillespie said some of that might be attributable to GLP-1 drugs, which suppress the appetite. But when consumers do spend, he said, they opt for premium options — an on-menu reflection of the forces that have largely preserved Adalina’s traffic.

“They might eat less, but they’re eating higher quality. So they’re spending more on organic or on certain specific cuts of beef,” Gillespie said, adding that a similar dynamic is at play with alcoholic beverages. Consumption of that menu category has fallen for a long time, but consumers are prioritizing brand-name liquors.

To capitalize on these trends and preserve its premium positioning, Adalina is emphasizing service and on-premise experience, Gillespie said.

“Not only does the food need to be good, but it needs to be a full, all-encompassing experience with the amount of money people are paying,” Gillespie said. The company is also leaning into new flavors — smoky beverages, spicy foods — to keep pace with changing consumer palates.

Other casual groups are waiting for the shoe to drop

At a price point or two below Adalina, some full-service restaurants are still waiting to see the impact of consumer slowdowns, said Bruce Nelson, a fractional CFO across several restaurant groups in the Minneapolis-Saint Paul, Minnesota metro area.

“We are flat to up about a percent and a half,” Nelson said of the restaurants whose financial operations he oversees. Nelson said that without a dramatic expansion in employee benefits or input costs, he thinks the back half of 2025 might actually be “boring” for some restaurants. 

While some downtown restaurants are struggling, early 2025 has been kind to suburban operations, Nelson said. But that doesn’t mean consumer behavior is static, either.

“We saw butts in chairs go up and [tickets go] about a buck to a buck and a half down, depending on location,” Nelson said. “You’re ordering the pizza or the hamburger and a tap beer instead of the steak and a craft cocktail.”

Consumers still seem to opt for on-premise, polished casual experiences as long as the price points for items remain restrained, Nelson said. This is something of a contrast to trends at Adalina, where consumers are buying premium items at the same time they’re cutting back on overall occasions.

“On the food side we’re just staying very solid,” Nelson said. “We’re not selling huge rib eyes a ton. We’re not selling big filets. But good hanger steaks, good sirloins.”

Casual dining brands look to digital engagement to bring in consumers

Applebee’s is looking to digital channels to help find its way out of a sales slump, said Vicki Hormann, the chain’s executive director of off-premise and customer relations management. Applebee’s hasn’t posted a quarter of positive comps growth since Q2 2023, despite a variety of value plays, including the Dollarita promotion. 

The chain is one of many family dining and casual dining brands that are struggling with tepid sales. Denny’s and IHOP have both seen negative same-store sales growth for several consecutive quarters, and Olive Garden has posted comps growth in only two of the last five quarters.

Appleebee’s efforts to overcome consumer price fatigue relies in part on changing the way it interacts with its loyal customers. The brand is in the process of overhauling its Club Applebee’s loyalty system, Hormann said, transforming it from “a very linear email marketing program” to a modern loyalty program that offers both points-based rewards and specialized engagement.

“Earlier this year, we offered our Club Applebee’s members a ‘try it before you can buy it’ deal with our new Big Cluckin’ Chicken Sandwich,” Hormann said. Outside of strategic promotions, like its Date Night Pass and Superbowl Sweepstakes, Hormann said the brand is looking for strategic linkages between its loyalty program and other brands.

Recently, Applebee’s and Wyndham Hotels linked their loyalty programs to allow consumers to earn rewards points across the platforms and receive free delivery from Applebee’s at Wyndham locations.

At the heart of that partnership, Hormann said, was the observation that Applebee’s and Wyndham’s systems possess a significant geographical overlap.

“Seventy-seven percent of Applebee’s restaurants are within five miles of a Wyndham property,” Hormann said, adding that the brand anticipates the Wyndham tie-in will drive significant engagement among the chain’s guests.

Deals like that, or like Applebee’s 2-for-$25 meal, Hormann said, help the chain improve its value perception with guests facing macroeconomic uncertainty.

Something strange has been happening in the coffee sector lately. Legacy brands like Starbucks are facing considerable consumer pushback over pricing — serious enough in Starbucks’ case to warrant a thorough brand overhaul. But at the same time, up-and-coming chains are thriving. 

“Clearly a lot of the legacy brands are in some challenges,” Nicholas Stone, founder and executive chairman of Bluestone Lane, said during an interview at the National Restaurant Association Show in Chicago last month.  

Consumers look for experiential coffee occasions

One reason for this trend, in Stone’s telling, is that many large chains have pulled back from coffee. Instead, these brands are focusing on refreshers, energy drinks and other beverages — a diagnosis resembling that offered by Starbucks CEO Brian Niccol’s.

Smaller brands like Bluestone, Stone said, offer a more premium, coffee-centric experience. Bluestone has over 50 locations across the country. 

“I don't see that demand for more premium coffee going anywhere,” Stone said. “They offer an affordable luxury experience, and I think that they are benefiting from some trading down that's going on.” 

Stone said consumers are pulling back on full-service dinner or luxury dining and shifting their spending toward coffee-forward and brunch concepts.

Data reflects some of this analysis. Small coffee chains have seen visits grow, according to Placer.ai, and much of that growth has been concentrated in longer 10-plus minute visits, which indicates consumers are looking for something other than speed at many cafes.

Many breakfast brands are taking notice of consumer desire for premium coffee and a differentiated experience, Ashley Peeples, senior vice president of sales and marketing at Royal Cup Coffee & Tea, said at the Show.

“If you’re breakfast centric, eggs, bacon, avocado, coffee is really core to your menu,” Peeples said. “[Consumers] don’t want the same coffee as next door, and they want their experience to be a standout experience.”

Stone, during a panel conversation, said the social ritual of coffee shops is an important and enduring part of Bluestone’s appeal. 

Part of the experience centers around indulgent flavors, said Melissa Mackay, senior vice president of marketing and insights at Westrock Coffee.

“The traditional top three [coffee flavors] of course are always vanilla, mocha and caramel. Swap, in third place, for hazelnut and caramel,” Mackay said. 

One reason for these persistent flavors is the fact that coffee’s taste can be difficult to blend with new trending, global flavors, like Yuzu and Ube, or light flavors like green tea. All of those flavors have become increasingly popular in the refresher beverage category, which often involves a tea-base, Mackay said.

“Coffee is tricky. It leans a little more indulgent flavor-wise,” Mackay said. “That’s when you get into the heavier dairies, or a flavor that can be heavily sweetened. That’s where coffee plays a little bit better.”

Mackay said larger chains have done well at adapting to refreshers, which might explain why smaller brands have leaned into experiential, coffee-forward fare and longer visits as a point of differentiation.

Matcha and cold brew are strong opportunities for coffee shops

While coffee is core to Bluestone Lane’s identity and experience, the brand doesn’t shy from embracing other flavors and drinks that mesh well with its brand. One such flavor is matcha, which Stone said was not new, but continues to be a place where brands can innovate in flavors and in cold platforms.

“We’ve had matcha on our menu for eight-plus years now, it just seems the innovation in matcha is unrelenting,” Stone said. “The amount of different flavors with matcha is crazy. We’re running three at the moment.”

Bluestone Lane is seeing strong performance with white chocolate, banana cream and strawberry cheesecake matchas, which Stone said are not as sugary as one might expect. Bluestone Lane’s matcha drinks are often iced, in keeping with longstanding consumer trends toward cold beverages. 

Peeples said he doesn’t expect cold brew to become less influential — younger consumers who have grown up in a coffee market dominated by cold brew are starting to come of age. There’s been some erosion in hot coffee demand in the morning daypart, Peeples said, offset by afternoon demand for cold brew. 

This could lead to more demand for upscale cold brew items at restaurants in lunch, snack and even dinner dayparts, Peeples said. Operators could keep up with that demand by ensuring they have the ability to add flavors to cold brew.

“That same person in a younger generation that's not drinking hot coffee is also, a lot of times, not drinking a carbonated beverage,” Peeples said. “So if you don't have an option like cold coffee, which is what they want, they're drinking water.”

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In the wake of COVID-19, pivoting has taken on a whole new meaning, and few restaurants represent success in this "new normal" like Bywater in Warren, RI. For their cozy, upscale casual restaurant, takeout was "a steep learning curve," said co-owner Katie O'Donnell. "It was a lot of trial and error. The reason Online Ordering has taken off for us is we've tried to stay a step ahead."

Bywater's best practices for pivoting your restaurant in a pandemic:

• Use email and social media to establish trust with your customers and guests. 

• Keep your menu and offerings interesting: partner with other restaurants, chefs, and businesses to keep your customers ordering every week.

• Pay attention to your Pmix (product mix) on a daily basis, people want different food on different days of the week.

Building and optimizing an online ordering menu

When setting up their first online ordering menu, Katie looked at her Upserve Menu Magic Quadrant. "We went into Upserve to pull our best sellers that we knew people would come back for," she noted. "We set up our online menu so we could keep labor costs low, streamline our menu, and sell the crap out of everything to keep revenue high and costs down."

As the pandemic dragged on, Katie kept an eye on her Pmix to make sure they were constantly iterating on their menu to improve revenues. She noticed that guests preferred to buy cocktail mixers at a lower price point vs. to-go cocktails which had a smaller revenue margin. "People have vodka in their house," she said with a laugh. "So even though we can sell the whole cocktail, it made more sense financially to just sell the mixer. The profit margin is so different when you have to think about packaging."

She's also constantly testing the order and organization of her Upserve Online Ordering menu. "We run the Pmix in Upserve every night to see what's selling and look at the graphs," Katie said. "We refine the graph to just show the top five things and break it down, so I'm using the Upserve Menu Quadrant more than I ever used to."

Katie has found that they need to be more nimble because take out is different than dine-in in terms of attention span. "You get more direct feedback with to-go, especially with a pared-down menu," she said. "If you don't have the thing they want, you won't make the sale. They'll click over to a different restaurant."

Katie and her staff are using Upserve analytics to take a hard look at who their regulars are, who the highest spenders are, and how to keep both engaged through a mix of hard data and anecdotal feedback. One insight she has uncovered is that they may be switching up their menu too quickly. "We keep underestimating how popular things will be," she said. "Last week we took our fish and chips off the menu and we had a 40% drop in sales and non-stop calls about it. People want what they want! So we brought it back and sales were back up. If we were open for dine-in we'd never run a single menu item for this long."

No restaurant owner would choose to be in this predicament, but focusing purely on Online Ordering has shifted how Katie plans to run dine-in at Bywater going forward. "We're so focused on changing it up, that we've overlooked the long-term audience for certain dishes or specials," she said. "Now, only when sales start to drop organically do we take things off the menu."

Diversifying revenue and finding new customers

Looking at models from restaurants like Canlis, Bywater put together a box of local produce, wine, and treats that could be tacked-on to a to-go order. They sold out of their first run and made $13,000 in the first week – all money that stayed in her small community of business owners. 

"The first CSA boxes were huge," Katie said. "We let it be an organic, social media-driven thing which was good because we reached our bandwidth in terms of what we could produce." They quickly pivoted to special occasion boxes for Mother's Day, which quickly sold out and generated press and buzz for the restaurant. Now, they're formulating a subscription box service that would provide a curated box every month with different partners. 

Katie suggests restaurants trying on this tactic focus on an on-brand theme for each box and then work around that theme to fill it. For their Father's Day box, Bywater went for a grilling theme. They worked with a local butcher to provide prime cuts of meat, packaged alongside classic Bywater sauces. "What great wine goes with that? Is there a book about grilling that fits? It all builds around what we would do at Bywater," she says, ideally making the boxes an extension of their dine-in experience. They also promote the boxes with social media components: a video from a local pasta maker, preparation suggestions for the vegetables, or even a live wine tasting on Instagram. 

"We're trying to recreate normalcy but have fun with the fact that it's not normal," she said. "If people want Bywater in their lives, but takeout gets boring, the boxes create a way to bring Bywater in peoples' homes."  

Dining out with kids often involves bargaining — “eat this and you get dessert,” or “you liked it last week, remember?” Most kids’ menus stick to the basics, focusing on price, portions, recognizable dishes and attention to allergy sensitivities. But today’s media-savvy kids, raised on food trends like Dubai chocolate cups, are pushing restaurants to offer more adventurous, yet still kid-friendly dishes without breaking the bank.

Celebrity chef Marcus Samuelsson, for example, designed the Marcus Live Bar & Grille menu at indoor waterpark American Dream with young diners in mind. The “Kid’s Feast” section features comfort food favorites — nuggets, pizza, hot dogs, spaghetti — served with the same care and presentation as the adult menu. Yet it costs just a fraction ($13 a plate or less) of adult menu items, giving kids a chance to feel part of the full culinary experience without pinching parents’ wallets.

“Children are increasingly exposed to a variety of cuisines from a young age thanks to community diversity, travel, and media,” says Matt King, president and COO of Legal Sea Foods. 

The restaurant chain has accommodated this trend by developing “more sophisticated” kids items, such as grilled salmon and fresh sides.

“Customization and flexibility also rank high, as parents seek out menus that allow for dietary preferences and portion sizes that work for their children, without stretching their budgets,” King said.

Successful kids menus need to reflect the “evolving tastes” of modern families, said Mark Weiss, senior vice president of Food & Beverage Design at Loews Hotels & Co.  

“Parents are looking for balance and want meals that feel fun and approachable for kids, but that also align with how they, themselves, eat,” Weis said. “That means prioritizing fresh ingredients, responsible sourcing, and thoughtful portions over defaulting to overly processed or generic options.” 

Weiss said he’s noticed significant shifts in the needs of families when it comes to kids’ menus. All of the food on Loews’ menus are made with non-GMO, organic ingredients with no growth hormones. There’s even an “Adventurous Eaters” section on the menus.

 “Parents today are absolutely looking for value, but not at the expense of quality, health, or variety,” Weiss said. They're expecting thoughtful, well-balanced options that reflect what they’re eating at home, or mirror exactly what they are ordering themselves, just in a mini version.” 

Thompson Restaurants likes to have a balance with its menu design with items that appeal to both kids and adults,said Alex Berentzen, COO of Thompson Restaurants.

Matchbox, a brand owned by Thompson Restaurants, offers smaller portions of adult menu items on its kids menu to elevate the experience. Sister brand Big Buns sells grilled tenders alongside fried tenders to provide health-conscious options, and both brands “allow for customization to help with those picky eaters,” Berentzen said.

Jason Stoneburner, chef-owner of Stoneburner, Sunny Hill, and Stoup Brewing venues in Seattle, Washington, points out that restaurants rely heavily on beverage tickets when it comes to revenue, so the overhead on every section of the menu has to add up. 

“I always consider the price point and try to keep it at or below cost. There aren't any real margins on kids menus so the appeal is designed to make it easier for the adults,” Stoneburner said. “I make no concessions for kids menus — same organic flour for pasta and pizza, we even sneak some funky cheeses that make an appearance on the regular menu.”

Kids don’t always want the same thing

Children’s menus don’t always have to center around chicken tenders and pizza. Stoneburner said his restaurant’s fried cauliflower or cauliflower wings are popular and kids eat them like chicken nuggets.

“A menu that assumes all kids only want plain pasta or chicken fingers misses an opportunity to engage them,” Weis said “It’s also important to give kids their own dedicated section of a menu, but don’t stop there. When a child expresses interest in something from the main menu, the worst thing a server or kitchen can do is simply say no.”

The trick is not to overthink it. 

“Offer a range of choices, from traditional kid favorites to more nutritious, globally-inspired options,” advises King. 

While menu design is about creating a balance between what chefs think people want to eat and what chefs are excited to make, it’s a little different for kids menus, said Zach Pollack, chef-owner of Cosetta in Santa Monica, California. 

“When it comes to kids menus, it's gotta be 100% about what kids want to eat,” Pollack said. “Sometimes you just have to leave your ego at the door and make the damn chicken tender.” 

At some restaurants, giving back to kids inspires repeat business. 

“Consider incorporating a charitable partnership component. For example, at Legal Sea Foods, a portion of the proceeds from every kids’ meal is donated to Boston Children’s Hospital, which reflects our commitment to giving back and resonates with families who want their dining dollars to make a positive impact,” King said.

Though there will be no live performances of “Smelly Cat,” Starbucks and other fast casual chains are undergoing interior renovations that resemble more homey, Friends-style coffee house vibes, but with contemporary tech. 

The reason?  Features such as softer lighting, increased accessibility to outlets, and more ergonomic furniture draw more customers — particularly those in the valuable Millennial and Gen Z age brackets — and fill the spaces so they look busier. The objective is to encourage customers to stay longer and increase their spend per visit compared to grab-and-go models. 

This trend is encroaching on full-service dining’s value proposition. And while many casual dining restaurants have focused on bolstering their off-premise service over the past few years, it’s also important for these businesses to evaluate their on-premise ambiance. If casual brands don’t invest in the contemporary, experiential offerings diners crave, they could eventually risk ceding traffic to fast casual competitors.

Controlling costs and optimizing layouts

In the wake of the COVID-19 pandemic, many brands shrank their average footprints because of lower demand for seating and higher demand for takeout. Now, chains looking to reverse that move face expenses associated with expansion.

“The trick is to continue to minimize costs — which is at the heart of fast casual financial success — while providing the added experience of enjoyable in-house dining,” said Steve Zagor, Columbia Business School faculty member and principal of Steve Zagor & Associates consulting. A space that’s too small, with limited seating options, will scare off repeat customers concerned they’ll have no place to sit during a preferred dining window.

Dr. Stephani Robson, a retired Cornell faculty member who is now a restaurant optimization consultant, says full-service dining rooms should strike a balance between attractiveness and table turnover. One solution is to shy away from those once-trendy large communal tables. 

“Instead, have a mix of counter seating — none that face the wall — no one likes that — and lots of tables for two that can be combined for larger groups,” Robson said. “Any counters should face large windows with a view of the street or face an open kitchen. If climate permits, offer outdoor seating, ideally in a private back patio or courtyard, rather than on the street.”

Mixing local color with digital-forward design

A major bonus, Robson said, is a space with Instagram and TikTok-worthy “engaging and playful design features.” 

“You want these guests to notice and take images of the design and post them,” she said.  

A good example of this strategy, according to Robson, is Curry Boys BBQ in Nashville, which mixes Southeast Asian ornamental flourishes with down-home BBQ chic. Zagor said that adding community-specific design themes — landmarks, mascots, celebrities/personalities — that are unique to the space will inspire more on-site social posting.

Rick Camac, a managing partner at RDC hospitality consultants, emphasized that design is not only about social media thirst traps. Background music at a reasonable acoustic level that allows easier customer interaction needs to be “less formal and age appropriate.” In other words, lose the house music and make it feel more like a home, with attention to playlists.

Nickel Lowman, head of marketing and business development at SCA Design Architecture firm, says that on a cashflow level, more restaurants should implement digital rewards features that encourage repeat visits. 

“Targeted digital marketing, rewards programs and social media encounters give you an upper hand on influencer marketing,” Lowman said. “Put a physical cookie in their hand as a grab and go item [when they leave], as well as a digital cookie on their phone [with a rewards app]. It will remind them to return or trigger them to make a trending impulse purchase.” 

Lowman is also a fan of enabling personal devices to pay for checks at the table to avoid having to flag down a server, which also expedites table turn-over rate.

There are several design elements to consider retiring or avoiding altogether when redesigning dining spots. Lowman said to “avoid locked restrooms, and the need to interrupt staff to ask for a commode code. Gender neutral and family restrooms help prevent a line at ladies’ rooms.”

Camac emphasized that every restaurant should consider using the services of a professional lighting designer. He thinks the age of austere, hard-to-clean white tablecloths is over, with warmer, colorful designs that are also kid-friendly coming into play.

Robson adds that the Gen Z and millennial crowd is turned off by heavy alcohol marketing. “Windows and back bars full of beer or booze-branded lighting/signage are not appealing to this segment,” she says.

In-house dining doesn’t have to be formal. When designed with intention, casual spaces can foster comfort, community and memorable experiences that keep guests coming back

When restaurateur Robert Micheli moved from Miami Beach to Washington, D.C., in March 2020, he was excited to take over the helm as general manager of Dirty Habit, a 10,000-square-foot restaurant attached to Kimpton Hotel Monaco in the city's Penn Quarter. He previously ran various restaurant operations, including Katsuya by Starck, for over five years, but this would be his biggest restaurant by square footage yet.

Pre-pandemic, the restaurant, which is located across from Capital One Arena, often served 500 hockey fans beer on its 7,000-square-foot patio after games. But Micheli didn't get a chance to see the restaurant function at full capacity. Shortly after he arrived in the District, Mayor Muriel Bowser ordered indoor dining rooms to shut down.

"When you take over a new business, as a general manager or restaurateur, there's always so many projects to get done. And you always say, 'Man, if I could just have a week where we weren't open then I could clean the storage rooms,'" Micheli said. "Well, I got nine months of it."

During the District's dining room closures, he developed new operations and procedures, such as changing the restaurant's orientation process and training program based on employee feedback.

When the restaurant reopened on Valentine's Day this year, everything was in place to create a relatively seamless transition under new management. This preparation paid off when patrons flocked to the dining room, even with capacity limited. 

"Guests and customers are very excited as restrictions are letting up. And we're also seeing that the amount of people coming out is growing week over week," Micheli said. "We're just not able to staff that quickly."

As of early April, the restaurant had only about 10 full-time, front-of-house employees on payroll, down from a maximum of 65 to 70. The back-of-house, which functioned with about 80 staff members pre-pandemic, currently has seven employees, Micheli said. 

The struggle to bring back and hire full-time staff is a challenge restaurants across segments face as the economy reopens, but the labor shortage is hitting full-service establishments particularly hard. In Baltimore, Atlas Restaurant Group, which currently employs 1,200 people across its 18 properties, is short 100 employees, Founder and President Alex Smith said.

A Western Pennsylvania restaurant has posted a "Now Hiring" sign on its window for six months, only to receive two job applicants. Restaurants in Wisconsin are seeing that even if they have a lot of applicants, only half show up for interviews. 

Foodservice job demand is low in major restaurant cities, too. In New York City, Rick Camac, dean of restaurant and hospitality management at the Institute of Culinary Education, emailed 200 of his closest industry contacts that he was looking for candidates to fill a management position and host role at restaurants he consults with. Camac, who also owns a restaurant in New York City, often helps clients find workers. This time, however, he received zero leads and no resumes.

Though the restaurant industry lost 2.5 million jobs during 2020, hundreds of thousands of jobs have opened up amid relaxed dining room restrictions and a swell of diners hungry for a taste of pre-pandemic life. During Q1 2021, restaurants gained 442,000 jobs, but the industry still has a long way to go to break even. Some restaurants are facing a new vicious cycle as well. With so few employees available, they have to reduce hours and some have decided to close on certain days, which will only reduce revenue.

"It's not like you flick on a switch and all of a sudden you're ready to handle, you know, 50% capacity as opposed to 35% or 25%," said Camac. "Yes, we're all welcoming and look forward to getting back to higher and higher percentages, but you need to see more ramp up time."

Unemployment benefits, COVID-19 fears are keeping workers at home

One of the biggest stumbling blocks for restaurants is searching for qualified talent. Many of these sought-after employees have moved away, experts say.

In highly populated metropolitan areas, like New York City, many long-time restaurant workers have moved to areas with more affordable costs of living. That's what happened to many of Dirty Habit's employees, Micheli said. Many moved outside of Washington, D.C., to areas like Philadelphia, Baltimore or Richmond, Virginia — making it too difficult to commute to the District, Micheli said. Some of Dirty Habit's staff also took positions with restaurants that were able to open up sooner, he said.  

The boost in unemployment benefits, on top of stimulus checks, have made it more worthwhile to stay unemployed than rejoin the workforce, experts shared.

"A lot of people can make as much money unemployed as they can working in a restaurant," said Jason Berry, founder and principal of Knead Hospitality & Design in Washington, D.C. "It's a really hard time finding employees. Now that everybody's coming back, everybody's hiring at the same time."

Many unemployed workers are making between $700 and $1,000 each week, with the addition of the $300 bonus offered by the federal government, Berry said. 

Despite the fact that over a third of the nation's population is fully vaccinated, according to the Centers for Disease Control and Prevention, workers still remain reluctant to return. Many are also waiting to be fully vaccinated themselves, Micheli said. 

"The delay in rollout has affected people being able to come back in certain counties that aren't as quick to give vaccinations to everybody [and] has also slowed down my rehiring process," Micheli said. 

The combination of higher income on unemployment and better safety at home is a disincentive for restaurant employees to return to work, SevenRooms CEO Joel Montaniel said. 

The industry's instability over the past year hasn't helped retention either, Montaniel said. COVID-19 restrictions would loosen and restaurants would bring back employees, only to lay them off again when indoor dining capacity would contract. After about two or three cycles of this, many workers have had enough, Montaniel said.

"Many of the people who aren't coming back are looking for other lines of work," Montaniel said.

The growing talent gap

An exodus of restaurant staff with 10-plus years of experience has left behind a learning gap, Montaniel said. These servers have trained a lot of staff members.

"We can't get people in quick enough. We can't get them properly trained. They're, in some cases, not as good as their predecessors because their predecessors have more experience," Camac said. "We're bringing in some people who are pure entry level and we're trying to teach them the business of hospitality and without enough time to do adequate training."

With a lack of proper staffing and training, service may suffer.

"You have less people paying attention to the guests. … The attentiveness could go down if you don't have as many people on the floor," Montaniel said.

The ripple effect is even worse in restaurant kitchens.

Landed, a mobile app that connects hourly food and retail workers with employees using AI-based technology, has seen three times the number of applicants interested in roles like cashier, host, server and carside/curbside expeditor roles, compared to back-of-house positions, Founder and CEO Vivian Wang said. On Landed, there are four times more kitchen positions available than front-of-house roles.  

This is a problem for restaurants experiencing increased order volumes as indoor dining capacity limits broaden across the country and takeout demand remains high, Wang said. 

"[The back-of-house is] understaffed and it places more strain on existing staff," Wang said. 

Kitchen staff members are wearing multiple hats and working stations they're just not fully trained for, Camac said. The additional work and strain has resulted in many of these employees turning toward front-of-house roles that are seen as more desirable and less strenuous, Wang said. 

Dirty Habit now has to closely manage its bookings and control how many seats are available on reservation platforms to accommodate its smaller team, Micheli said. The restaurant is also only open four days a week, serving dinners Thursday, Friday and Saturday nights, as well as brunch on Saturday and Sunday. 

"We would love to [serve] 500 people every single night, but especially COVID-wise, you just can't do that because you have to have distance between tables," Micheli said. "So that automatically knocks down the number of guests that you're able to accommodate."

Dirty Habit can currently service about 150 guests a night and could potentially push that number to 175 if it added an extra hour to service, but that extra hour comes with risk.

"I don't want to stretch anyone so thin that tomorrow they say, 'I can't do this anymore.' So we have to pace ourselves," Micheli said. "We have to make sure that we're really being aware of how hard we're pushing ourselves while still making the money we need to make to stay open."

Restaurants raise pay, offer hiring bonuses to attract workers

Finding staff to fill in these gaps has pushed operators to ramp up recruitment efforts, pay more than the minimum wage and lean into technology.

While Micheli said he prefers personal referrals to find qualified staff, he has also hosted recruiting events on Tuesdays and Wednesdays from 1 p.m. to 3 p.m. Anyone can stop by Dirty Habit with their resume and have an interview with Micheli or another leadership team member. The company is looking for bartenders and servers specifically because it is planning to open its patio for Cinco de Mayo. 

Atlas Restaurant Group has been hosting a series of hiring events around the Baltimore area to try and attract workers who don't have a background in the hospitality industry, Smith said. Unfortunately, a lot of hospitality career workers have left and found jobs outside of the sector because of the instability over the past year, Smith said. 

"What we need to do is go out and … create a passion for our industry again and let people know we really can make a great living in the hospitality industry and have a great career," Smith said. 

The restaurant group is taking on more entry-level people to train them from the ground up. During one recruitment event, Atlas hired 12 entry-level people, Smith said. While it won't staff all of these new employees at one restaurant, it will spread them across its 20 properties and assign them to coaches and a leadership team to train them, Smith said. 

"We're doing it slowly. I think every couple of months, our idea is to bring 12 to 15 new people who are new to the hospitality industry and teach them skills that can allow them to move up in our corporation," Smith said. 

Increasing pay is an obvious draw for these candidates, Wang said. For example, wages for back-of-house line cooks has gone up almost 20%, Wang said. Some operators are offering additional dollars to get their teams vaccinated, which can help overcome hesitancy to come back to work, Montaniel said. 

Dirty Habit is offering pay higher than the local minimum wage, Micheli said. At Atlas Restaurant Group, Smith said hourly employees are making a minimum of 10% to 15% more than they were in 2019. Front-of-house staff under tip credits are earning more too because customers are tipping more generously, Smith said. Knead Hospitality has been offering hiring bonuses to entice new workers, Berry said.

Flexible hours are also becoming more important at these restaurants.

"I'm not going to let someone go because they need to go to a birthday party that was scheduled before they got rehired," Micheli said. "We have to live in this world of push and pull all over the place so my understanding and compromise level has definitely gone up." 

But not all restaurants can afford to pay more. Many can offer pre-pandemic wages, but can't go higher than that, Montaniel said. 

While the Restaurant Revitalization Fund will help with payroll, restaurants will likely need more financial assistance to offer higher wages to attract more workers, Montaniel said. The Small Business Administration has already said the $28.6 billion program won't have enough funds available to help all eligible restaurants. 

The Paycheck Protection Program helped a lot, but it wasn't specific to restaurants and many didn't get funds through this program, Montaniel said. Restaurants also could use the funds toward operating expenses like rent and other expenses such as safety equipment and to-go packaging so there was less left over to spend on increasing employee pay, Montenial said.

The labor shortage has also pushed restaurants to invest in technology that can bridge their staffing gaps. A South Florida restaurant spent $30,000 on robots to help greet customers, show them to their seats and deliver food to tables. The robot can even sing "Happy Birthday" in four languages. 

Dirty Habit uses Bebot, which is a QR code program used in the adjacent Kimpton Hotel, Micheli said. Instead of having to call the restaurant, which can take time away from busy staff, guests at the hotel are able to order their meals through a QR code in their rooms and can pick up their food when it is ready, which helps control the amount of hotel guests coming into the restaurant.

Contactless ordering and payment is becoming more popular, especially since it can allow customers to pay at the table without needing a server, Montaniel said.

Meanwhile, business is booming

Despite the labor challenges, diners are returning in droves, and some nights at Atlas Restaurant Group's locations have felt like the pandemic didn't happen, Smith said.

"It's a lot like The Avengers. Everybody disappeared for a year and then all of a sudden it's like boom everything is back open and there's thousands of people coming out. It's been crazy," Smith said.

Smith anticipates that by fall, business will be pretty much back to normal. 

Because everyone is so excited to be out in public, tables are sitting longer as well, Micheli said. Before the pandemic, a table of two would sit for maybe an hour-and-a-half to an hour and forty-five minutes. Now they're sitting for two hours to two-and-a-half hours. One table over Easter weekend sat for almost three-and-a-half hours. 

Dirty Habit's staff is trained to gently try to get these lingering guests to move on or offer a drink for them to sit elsewhere, but "if they're not going to move, they're not going to move, and then you just have to work out your next tables around that," Micheli said.

While the lack of staff has limited Dirty Habit's dining room, it could cause even more problems during the upcoming wedding season. Dirty Habit reopened in October for micro-weddings and private events and was booking between six and eight private events a month, Micheli said. For that staffing model, the restaurant just allocated existing staff as needed and that worked out well, but that might not necessarily work for larger weddings, he said. 

"In a hotel, you have banquets and restaurants. How do you staff both of those?" Micheli said.

Weddings require one server for 10 people and one bartender for 20 to 25 people, Micheli said. For a 500-person wedding, Dirty Habit would need at least 50 servers and at least 20 bartenders. And time is running out. The restaurant is likely to have its first wedding on May 15, Micheli said.

There is also more opportunity to attract additional business. Washington, D.C., eased restrictions on live entertainment starting May 1, and Dirty Habit is considering offering live music outside or hosting drag brunches, Micheli said. The District also allowed restaurants to return to full dining capacity on May 21. 

"We're excited to see the activations of the property in general coming back. Our name is Dirty Habit. We have fun. We want people to have fun," Micheli said.

While Micheli is optimistic about the restaurant's potential, one thing will remain the same for a long time. 

"We're hiring. We're hiring. We're hiring," he said.