No chips, no tips: How the computer chip shortage threatens thousands of restaurant service jobs

·7 min read

A lack of chips, computer not tortilla, is wreaking havoc on the already beleaguered restaurant and bar industry, the latest victim to a worldwide shortage that has disrupted manufacturing of everything from smartphones to cars.

Computer chips are used in the systems that restaurants rely on to record customer meal orders and relay them to the kitchen. The chip shortage is creating headaches for existing restaurants and creating big barriers to entry for new restaurants.

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Called "point of sale" or POS machines, these systems connect servers' handheld ordering devices to terminals and printers in the kitchen and dining room. At a moment when just about every restaurant in the country is short-staffed, not having enough handheld machines or terminals adds another layer of problems.

Here's an example. With summer weather prompting every restaurant to maximize outdoor space, servers who lack these ordering devices have to rush back indoors to put in orders or add another round of drinks - with time ticking.

"We're scratching our heads. We're back. We had 300,000 people here [in Las Vegas] this weekend," says Doug Taylor, pastry chef for Jerry's Nugget Casino. Diners are raring to go, but the computer chip shortage is slowing things down.

"It's backing up the flow of traffic, if you're not able to process as many people as quickly," Taylor says. "We were in a lull for a year, and now that everything is open 100%, it's a giant bottleneck."

The companies that make the equipment are scrambling to come up with workarounds like online payment and scannable tabletop codes that allow customers to order from their phones. For an industry that has already been decimated and rebuilt during the pandemic, the chip shortage could change the dining-out landscape, erasing thousands of server and bartender jobs forever.

While leisure and hospitality jobs increased by 292,000 in May, according to the Bureau of Labor Statistics, the industry is still down more than two million from its pre-pandemic levels. At the same time, worker shortages have hit restaurants particularly hard, with former staffers changing careers, dealing with child-care challenges or avoiding such public-facing jobs amid health concerns.

Many of those jobs could go unfulfilled if customers start shouldering more of the work of placing orders and orchestrating payments themselves. Thanks to automation, artificial intelligence and robots, hospitality jobs could look a lot different with "contactless" ordering and payment becoming the norm.

Tiny silicon (inedible) wafers are the brains behind most modern electronics, from refrigerators and smart toasters to washing machines and these restaurant ordering systems. The pandemic interrupted the supply chain for chips at time when demand for a lot of the goods that use them, especially cars, reached new heights.

PAX is one of the largest companies that make chip-dependent equipment for restaurants, with 60 million restaurant terminals that take food orders and payments globally. They also make the handheld ordering devices that waiters use. Clint Jones, PAX senior vice president of sales and operations, says that the company got through most of the pandemic with only minor hiccups from their factory in China, but that began to change in April and May.

"The chips were not getting delivered, as well as other electronic components," he says. "The shortage is pervasive. I can't imagine opening a small restaurant at this time - there are a lot of things going against you, and you're swimming upstream."

The chip shortage is troubling restaurants large and small. Stone Brewing runs two huge bistros in San Diego and a third in Napa, as well as six taprooms in Southern California and Virginia. When the 1,000-seat bistro in San Diego got a new POS system a few weeks ago, it got 14 terminals and 30 handheld units for servers, which may sound like a lot, says Gregg Frazer, vice president of hospitality, but it isn't nearly enough. He says he could use another 14 handhelds, at least. "We've gone to order more and we can't get more. It's undoubtedly had an impact."

Many restaurant managers are being caught unaware that the chip shortage affects them. Alex Levin, pastry chef and director of strategic business initiatives for the Schlow Restaurant Group based in Washington, D.C., says his restaurants use terminals and handhelds from a company called Toast, which has been walloped.

"The general manager at Alta Strata [in Washington, D.C.] said he needed to replace two of his handhelds. That's normally easy to do. It's just 'click, click' on the Toast website," Levin says. "When I did that, I saw that everything was sold out. Kitchen display screens, terminals or handheld devices - they're unavailable right now. And they just don't have a firm answer about when they'll have a stock of these items."

Toast did not respond to requests for comment.

The chip shortage is not just causing slowdowns for restaurant equipment, it's also leading to price increases. Chon Nguyen, chief executive for Newgentek, which installs and oversees technology for large restaurant chains, says he got notification last week from one of his suppliers that prices are increasing 15%, due to higher cost of "components on the assembly side, along with shipping challenges like air capacity and port congestion," Nguyen says.

More restaurants are turning to new ways of menu ordering. The company GoTab offers a platform that allows customers to scan a QR code (QR stands for "quick response") at their table and a menu pops up on their phones, from which they can order and pay. No ordering from a server or bartender, just a food runner to bring the order.

GoTab chief executive Tim McLaughlin says his company has gotten new deals from restaurant groups because other POS companies have equipment back-orders and his company circumvents the problem with a QR code system, minimizing the central role of servers.

"Servers are great when they're available, and they're not, if they're not," McLaughlin says. GoTab services venues from 80,000-seat racetracks and big breweries to hip independent restaurants like Barcelona Wine Bar in Washington, D.C.

Indeed, digital menus, generally, are becoming more common. Half of full-service restaurants nationwide added digital menus last year and 40% of all food businesses added contactless or mobile payment, according to the National Restaurant Association.

The digital technology increases restaurants' efficiency and accuracy, freeing staff members up to focus on the more human elements of hospitality - here's what to pair with that pappardelle; if you're tired of sauvignon blanc, try this.

Yet, the technology also makes it easier for restaurants to hire fewer workers, especially tempting at a moment when workers are difficult to find and union groups are pushing for higher minimum wages and better benefits.

"There's currently a shortage of people who want to do this work," says Alex Susskind, associate dean for academic affairs at Cornell's School of Hotel Administration. Still, he says, plenty of people are not yet comfortable with contactless ordering, saying it takes away from the restaurant experience.

"It would be a mistake for restaurateurs to try to replace service," he says. "It's a slippery slope. Next, you'll be cooking your own food."

Some restaurateurs are embracing this new paradigm as the inevitable next stage of the industry. Josh Phillips, who recently opened the full-service Las Gemelas Cocina Mexicana and Las Gemelas, a fast-casual taqueria, in Washington, D.C., says cellphone ordering and paying takes the transaction part out of the experience. A server's job becomes entirely about talking to guests and explaining the menu. And when you are done with a meal, "you get up and leave as if you're at a friend's house."

"Two years before the pandemic, I [would have] said you're crazy if you think I'm going to make my guests do this," Phillips says about contactless ordering and payment. "The pandemic made everyone open to change. What would have been a painful transition became something else because everyone was looking for solutions."

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