Cracking the Code on High Restaurant Turnover Rates
The restaurant industry has long been plagued by high employee turnover. In August 2019, it was reported that fast-food restaurants were losing 100% of their workforce every year. They’re also leaving more quickly. According to Black Box Workforce Intelligence™ data, half of the hourly front-of-house workers left within 90 days in 2018, compared to 43% in 2017. The numbers are similar for hourly back-of-house staff.
The industry’s labor challenges will persist through the economic recovery and beyond. Our most current research shows that industry turnover is approaching pre-COVID levels across segments and positions. Turnover rates and their causes vary by role, the type of restaurant, and geographical region. Read on to learn how to calculate your turnover rate, understand what’s driving it, and explore solutions.
How to measure restaurant turnover rates
There’s a simple equation for calculating employee turnover. Take the number of separations during a month divided by the average number of employees, and multiply that by 100:
Turnover Rate = # of Separations / Avg. # of Employees x 100.
As you calculate this equation, you need to determine which data (such as temporary or furloughed workers, or those who are on leave) to include. Once you know your turnover rate, you can then measure the cost, which often extends beyond the direct costs of hiring and training.
What’s driving the high turnover rate in the restaurant industry?
There’s no single reason why employees quit. High turnover is driven by several factors:
Lack of training and development opportunities
A majority of workers in the food and beverage industry say they only received training after initial onboarding, meaning they don’t receive continuous education opportunities. When asked what training they would like, the top response was training to be promoted. Many workers in the restaurant industry see their jobs as a stepping stone to something with higher pay and more responsibilities. Without opportunities for training and development, they jump ship.
Better opportunities elsewhere
Restaurant operators are competing for employees in a shallow talent pool, which workers use to their advantage. Many are choosing other restaurants that offer better pay and higher odds of growing within the company. And sometimes those opportunities come from outside the industry. The Brookings Institute studied the frequency of industry transitions between December 2019 and November 2020. Workers in the leisure and hospitality industry were most likely to change their employment status or change their industry in that period.
To see which strategies other restaurants are using, along with other trends in the restaurant sector, sign up for the Restaurant Industry Performance Pulse, a weekly report filled with the latest insights impacting the industry.
Strategies to reduce turnover
Turnover comes with high costs – financial and reputational. Not only do you bear the costs of hiring and training new employees, but staff and guest satisfaction suffer when you don’t have enough workers to meet demand. Try these strategies to reduce your turnover and prevent these unnecessary costs.
Increase pay and compensation
Some restaurants are increasing wages to attract employees. The challenge is making those increased wages work without cutting into revenue or increasing the cost of menu items too much. According to an operator poll during our Q3 State of the Industry webinar, of restaurants that have increased menu prices, the majority have increased prices by less than 2%. Around 20% of operators have increased prices by more than 5%.
Clients subscribed to both Black Box Workforce Intelligence™ and Black Box Financial Intelligence™ have a clear picture of how their labor costs stack up against their earnings by tracking sales per labor hour.
Improve employee engagement
Disengagement is a serious problem for many employees, not just those who work in restaurants. More than half of American workers say they’re not engaged or committed to their work. When employees are disengaged from the company’s mission (and their role in achieving it) the work days seem longer, dealing with frustrating customers and situations is more difficult and the grass starts to look greener on the other side.
On the other hand, organizations with an engaged workforce have higher-performing, more loyal employees. Ninety-two percent of employees who strongly agree with a company’s mission and purpose say they plan to stay with their employer for the next year, according to Black Box Intelligence data from 2019. Their loyalty and engagement translate to more referrals, which is one of the best sources of finding new employees.
Collect data from your employees and the industry as a whole
The best source for understanding the cause of turnover at your business is your workforce. When possible, perform exit interviews and track trends in outgoing employee responses. You should also keep up with what your competitors offer with a workforce intelligence tool so you can identify ways to make your employer brand and offer stand out.
To determine where you need to pivot, it’s important to understand where you are. Benchmarking provides a foundation for your decision-making process. Download the Restaurant Benchmarking Guide to learn how to set your benchmarks and measure your business performance in comparison to your competitors.
Do you have the data you need to reduce your turnover?
Speak with a product expert to learn how Black Box Workforce Intelligence™ can help you impact your overall restaurant performance and build a workplace that fosters employee loyalty.
What do I get with my Black Box Workforce Intelligence subscription?
- Monthly interactive reports featuring data on turnover, staffing, demographics, and compensation with gender, age, ethnicity, and transactional analysis.
- Quarterly overview of the latest industry trends, highlights, and macroeconomic conditions.
- Monthly legislative report for HR leaders produced with Align Public Strategies on key issues affecting your workforce.
- Quarterly compensation report providing detailed data on annual bonus and total cash compensation benchmarks, down to the market level.
- Regional salary and wage data by percentile, DMA, or segment.
- Access to client-only quarterly State of the Industry webinars and thought leadership events.