Thousands of workers from Sri Lanka on their way to restaurants? This is what Ruti Broudo thinks

Palestinian workers are no longer here, but even the entry of thousands of foreign workers is failing to help restaurateurs. There are few industries in Israel where a labor shortage changes the product itself so quickly. In restaurants, the shortage has long since ceased to be expressed only in a "Help Wanted" ad hanging on the window for a week. It is in the menu, the price, the opening hours, and the way the customer receives the food. Waiters are replaced by screens, orders move to the counter, restaurateurs reduce activity, and skilled cooks have become a resource that businesses compete for at almost any price.

The problem was not born in the war, but October 2023 exacerbated it dramatically. Palestinian workers stopped entering, thousands of Israelis were called up again and again for reserve duty, and at the same time, the long-standing trend of young people moving away from kitchen, cleaning, and service jobs continued. In an industry where profit margins are already thin, every missing worker quickly rolls over into the bill.

Within this reality, a struggle has been going on for nearly three years that has become a personal project for restaurateur Ilan Zagdon. Zagdon, among other things a co-owner of the Saba Jabato cafe in Beersheba, is the one who initiated and is leading the move to expand quotas for foreign workers for the industry and to reduce the costs imposed on restaurateurs who employ them.

He now claims that he has managed to promote a plan with Finance Minister Bezalel Smotrich that could bring about 3,000 additional workers from Sri Lanka to the industry, alongside significant relief in the costs of employing them, especially for small businesses.

However, at this point, a significant caveat is required: the plan is still awaiting final approvals, and at this stage, there is no certainty that it will indeed be implemented in full, when the workers will arrive, and what the final outline of the relief will be.

Zagdon himself understands well that the road is not yet over, but for him, the very reaching of this stage is the result of an almost obsessive struggle.

"We started the struggle in 2023 because they took my Palestinian workers," he says. "We went through more than 100 committees, ministers, and Knesset members. When I went on the journey and asked restaurateurs to join me, 99.9% of them told me: 'Ilan, it's a waste, you won't succeed.' That was my fuel."

Someone who accompanied him in part of the struggle was restaurateur Ruti Broudo, who, according to him, participated with him in committees and protests. However, Zagdon managed the leadership, contacts, and work with decision-makers himself. "Zagdon started the struggle, and I must give him credit - he is a man who does not let go," Broudo tells Globes.

Broudo also said:

"When Zagdon feels that an injustice is being done or that there is a lack of fairness towards the field, he fights for it. He sits on people, and I didn't have the capabilities to do it like him. I joined him at important conferences. I pity Smotrich if this doesn't happen. Zagdon will squeeze the juice out of him until he gets the right thing for our field."

"I ate Smotrich's head every day"

On the eve of the war, according to Zagdon, about 2,000 Palestinian workers worked in the restaurant industry with a permit and thousands more without a permit. After their entry was stopped, a quota of about 2,000 foreign workers was approved for the industry, and later Zagdon managed to promote an additional allocation of about 1,000 workers through the trade and services track, with the assistance of the Director General of the Ministry of Economy, Moti Gamish.

However, from his point of view, the number of workers was only half the problem. The other half is the costs associated with employing a foreign worker, which include fees, payment for housing, social contributions (pension, national insurance, etc.), and other payments. For a large group of restaurateurs with financial breathing room, these are costs that can be absorbed. However, for a neighborhood restaurant or a small cafe, a few foreign workers can generate an expense of tens of thousands of shekels even before the first salary is paid.

At this stage, Zagdon focused on trying to build a mechanism that would allow even small businesses to use the quotas. According to him, he went directly to the Finance Minister. "I ate his head every day," he tells Globes. "There wasn't a day, except for Saturday, that he and his team didn't receive a message from me."

According to him, Smotrich asked him to build a work plan that would focus on small businesses. Zagdon claims that after he presented it, the minister expressed support for its promotion and even said that there is a budgetary source that can be directed to it.

Zagdon talks about a source in the amount of about half a billion shekels, which is supposed to help, among other things, in reducing the burden of fees. Apparently, this is a budget that became available following the cancellation of the reform that the minister tried to promote in expanding the VAT exemption on personal imports.

Here too, the plan has not yet become a final decision, and the industry has already learned well the gap between a quota that is announced and a worker who actually arrives at the restaurant.

The workers who are supposed to arrive as part of the expansion are recruited through a bilateral agreement with Sri Lanka. Zagdon says that he also appealed to officials in the country to improve the workers' suitability for the industry.

"I asked the government of Sri Lanka to prepare videos and training for work in kitchens and restaurants myself," he says. "I do Zooms with them to teach how they work here."

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The first industry to be hit - and the last to recover

However, even within the industry, not everyone is impressed by the scope of the mentioned addition. Bernardo Belhovich, one of the owners of the Gan Sipur cafe chain and the Silo restaurant in Holon, says that the gap between the need on the ground and the quotas offered by the state is still huge. "The situation is a catastrophe," he warns in a conversation with Globes. "We are built in kitchens and on the floor on people who ground reserve duty. I don't employ Palestinians, but for those who employed them, the tap was simply closed."

According to him, "This is an industry that supports 250,000 people in the country and receives 2,000 permits for foreign workers, of which about 1,200 were approved or implemented. It's a joke. It's not even a band-aid." Belhovich also claims that an addition of another 2,000 or 3,000 workers does not change the picture significantly. "We asked in the committees for 12 or 14 thousand people. Right now we are talking about barely a fifth of what we asked for," he describes.

From Belhovich's point of view, manpower has already become a growth barrier and prevents him from expanding his successful cafe chain, which was recently partially acquired by the Green Lantern fund of businessman Richie Hunter at a valuation of about 150 million shekels. "We are in an industry that is the first to be hit and the last to recover. In every security event, we are the first to be cut," he says. "One of the things that affects the expansion of good businesses today is manpower. In the end, what is the economy? They talk to us in big terms, but these are the small businesses that create leisure, domestic tourism, and foreign tourism. One restaurant of mine provides work for dozens of people."

He insists that the debate is no longer between Israeli and foreign workers. "We are not asking for discounts. There is no unemployment in Israel, it's not that someone gets a job at the expense of someone else. There are no workers," explains Belhovich and also points to what he defines as a regulatory absurdity, that when work in a restaurant inside a hotel can be considered preferred work, almost identical work in an independent restaurant does not receive the same status.

18 thousand shekels for a cook: "The main thing is that they come to work"

Even in the restaurants themselves, it is already difficult to separate the manpower problem from the rise in prices. Tal Rashevsky, the restaurateur behind Oscar's in Nahalat Binyamin, the hot spot that sells schnitzel and mashed potatoes, and the pasta restaurant LAVA in Beit HaBad Alley in Tel Aviv, describes a labor market where restaurateurs are required to compete for every skilled worker.

"The Israeli worker, and especially the Tel Avivian, was born with a CEO mindset," he claims. "It's not despicable or bad. Young people want to have fun and spend money, and in Tel Aviv, it is also expensive and exhausting to live. The young guys see that there is no future for them in this field, especially as employees and certainly if they don't earn well."

From his point of view, the distress has already changed the operating model. "I felt that it was easier for me not to manage them, not to teach them, and then discover that they are running away from me after two days. Cooks I must have, but waiters I don't have to have," declares Rashevsky.

And the salary is accordingly. "I pay a lot of money to an Israeli worker who wants 70 shekels an hour and more. In the end, it rolls over to a schnitzel for 90 shekels and then they say it's expensive, but out of this amount, very little money goes into my pocket." To cooks, according to him, he pays 17-18 thousand shekels a month. "We fight for them, give them percentages of the profits and what not. The main thing is that they come to work."

Zagdon also describes similar numbers. According to him, a sushi expert can already reach a salary of about 30 thousand shekels a month. He estimates that the industry is missing a total of about 20 thousand workers, including thousands of dishwashers and cleaners, cooks, line workers, and skilled professionals.

The solution to the shortage: ordering at the register and self-collection

One of the prominent results of the crisis is the gradual disappearance of traditional service from some restaurants. More businesses are moving to ordering at the register, self-collection, screens, and automation. For restaurateurs, this is sometimes the only way to open the door without keeping a large staff of waiters. For someone who built the business around hospitality, this is not a small concession.

"Self-service hurts the experience, but not entirely," says Rashevsky. "There is an audience that wants high-level hospitality, and whoever wants this service does not come to Oscar's. If so, then he will sit at the bar and there I have good service."

Chef Ran Shmueli, one of the owners of the Claro restaurant, who announced last week that he sold it and serves mainly as a partner in the Maarava event hall in Kibbutz Ga'ash, is less resigned to the trend. "No one will go for a romantic evening to a self-service restaurant," he says. "No one will celebrate a birthday there. It is clear that it hurts the quality of hospitality."

Shmueli has been in the industry for four decades and, according to him, it is hard for him to see how the attitude towards the restaurant industry by the state has changed over the years. "I saw with my own eyes how the attitude towards the industry is deteriorating. The industry today is very orderly, unlike before. It employs a lot of people and it is possible to make a good living from it. But convincing the decision-makers again and again has become unbearable."

According to him, the wage already illustrates the intensity of the shortage. "A dishwasher can earn 90 shekels an hour today, and waiters between 120 and 140 shekels. I don't see an ad for dishwashers that is published and then Israeli guys who want the job stand in line." About Zagdon's move, he says: "He did a very great service to the industry."

Reducing fees and changes in employment costs

Shmueli already employs foreign workers in Maarava. He traveled to Thailand himself to recruit. "I chose people, first of all, to be human beings," he says. "We treat them with the utmost respect, pay them more, and house them in apartments that we ourselves would be willing to live in."

For Zagdon, this is exactly the moment he has been trying to reach since 2023. "The thing that drives me the most is that they are hurting the helpless," he says. "We as restaurateurs have become helpless. The best restaurateurs in Israel have become dishwashers."

From the office of Finance Minister Bezalel Smotrich, it was stated: "Following the need that has arisen, we have been working for many months on a reform in the world of foreign workers. The reform will bring a significant improvement in the business world, and we are working on its implementation as soon as possible."