As restaurants look ahead to the challenge of higher wages, quick-service operators already face a labor productivity deficit. The foodservice industry’s overall labor productivity—output per hour—rose just 0.3% from 2013 to 2014, compared with 2.6% for wholesale trade and a 1.9% increase for retail trade, according to new data from the Bureau of Labor Statistics.
But the overall foodservice number is skewed by a 4.7% decline in productivity for the “Special Food Services” category, which primarily includes caterers. Labor productivity just for full-service restaurants (FSR) rose 2.5% in 2014 (higher than the overall retail trade sector), but declined 0.8% for limited-service restaurants (LSR).
LSRs’ productivity decline is the result of a 2.6% increase in output that did not keep pace with a 3.4% increase in hours (i.e., annual hours worked by all employed persons in the sector). Labor compensation (payroll plus supplemental payments) rose 5.8% at both FSRs and LSRs. For overall the retail trade, compensation rose 4.8% last year.
Unit labor costs (the cost of labor required to produce one unit of output) rose 0.9% for FSRs and 3.0% for LSRs, which was more than triple the 0.8% average for all retail trade sectors.
The 2014 foodservice productivity data isn’t an outlier. Between 1987 and 2014, labor productivity increased at an annual rate of 0.4% for foodservice, compared with 3.1% for wholesale trade and 2.8% for retail trade.