What's the True Cost of Employee Turnover to the Restaurant Industry?

What's the True Cost of Employee Turnover to the Restaurant Industry?
Ana Cvetkovic

By Ana Cvetkovic

Table of Contents

    Did you know that the average American switches jobs every 4.2 years? The average restaurant employee, however, change jobs every 56 days! It’s a miracle that restaurants remain a significant part of the economy despite this major staffing problem.

    How does this revolving door affect the restaurant industry? Turnover creates more than just financial repercussions. We’re examining the true cost of employee turnover to the restaurant industry so that you can understand its impact holistically. In this article you’ll learn:

    • What’s to blame for high employee turnover in the restaurant industry
    • What employee turnover costs the industry
    • Several solutions for battling staff turnover

    What’s to Blame for the Restaurant Industry’s High Employee Turnover Rate?

    Just how bad is restaurant employee turnover? Well, the average turnover rate for the restaurant industry is a staggering 73%. This figure means that in one year, about three in four employees will leave and be replaced.

    If you think that’s bad, it’s about to get even worse. The turnover rate for quick service restaurants is 123%, which means that the number of team members who leave in one year outnumbers the average number of staff in the entire restaurant. That’s like replacing 31 employees when your average workforce size for the year is 25.

    How long do restaurant workers stay with their employers? The average tenure in the industry is just one month and 26 days. Restaurant employees leave their employers at a rate that’s 27 times more frequent than the rest of working Americans!

    So what’s to blame for the high turnover? Contrary to popular belief, it isn’t employee dissatisfaction with pay or scheduling. Hasty hiring is at the root of the problem. When you hire someone who doesn’t share your team’s values, no amount of training or tips will make them engaged in their work. When values match, employee satisfaction increases and turnover decreases.

    What Does Turnover Cost the Restaurant Industry?

    This revolving door syndrome costs the restaurant industry more than just its profits. Team culture and customer service also suffer. Here’s how.

    Money

    Turnover costs the hospitality industry an average of $5,864 per employee. Here’s a breakdown of how that cost is determined, according to the Cornell Hospitality Report:

    Productivity loss ($3,049.28): An employee’s productivity starts to wane as soon as they decide to quit. Unfortunately, this decision can be made weeks before they give notice. In between a colleague’s departure and a replacement’s arrival, remaining employees have to pick up the slack. However, it’s impossible for one person to do the job of two, so productivity suffers.

    Time spent on hiring is also a productivity suck, as that's time that managers and employees could be spending on other things, like focusing on the business’ growth or the customer experience.

    Pre-departure (Average spend of $175.92): This category accounts for investments made into administrative tasks completed after a team member gives notice, like exit paperwork and interviews.

    Recruitment ($1,172.80): Expenses in this category are linked to the payroll spent on the person who is responsible for conducting hiring activities, like writing a job description and sifting through applications, and the costs associated with posting and advertising a job.

    Selection ($645.04): Restaurants invest resources into interviewing candidates, calling references, and conducting background checks.

    Orientation and training ($820.96): Onboarding are training are costly and time consuming. This category involves processing paperwork, getting your new hire access to all of your restaurant’s tech, teaching them your restaurant’s processes, and shadowing.

    In the grand scheme of restaurant operations, $5,864 may not seem like a lot of money. However, you can better understand its impact when it’s put into context. If you lose a server once every two months, you have to replace that position six times a year, which equates to a $35,184 penalty to replace your employees! That’s a significant amount of money that you could be investing in a renovation or marketing, or giving to high performing staff as a bonus to encourage them to stay at your restaurant.

    Culture

    Have you ever been perfectly content with something until someone pointed out its flaws to you? Suddenly, you can’t see anything but those flaws and can’t remember what you liked about it in the first place.

    Employees leave an employer when they are dissatisfied at work, and they usually spread their dissatisfaction to their colleagues like a highly contagious cold. When employees feel resentful towards their workplace because of grumpy coworkers, they are less motivated to work hard, and may also want to leave.

    When employees are unhappy and transient, it’s difficult to build a team culture. You can’t build a community when employees are spreading bad vibes or quitting left and right.

    Service

    Customer-facing roles experience turnover at higher rates than back-of-house roles. When there’s a shortage of servers at a restaurant, service suffers.

    You may think that hiring quickly can prevent a lapse in service. However, if half of your front-of-house team is in training, the customer experience won’t be up to par because the servers haven’t perfected your restaurant’s service style yet or memorized the menu.

    Alternatively, if you aren’t able to hire quickly enough to replace the employees who have left, you’ll have to overschedule your staff. When staff are overscheduled, they’re tired, stressed out, and unable to perform optimally.

    In either scenario, service suffers. When service suffers, customers notice and leave nasty online reviews or visit your restaurant less often.

    Solutions to Restaurant Turnover

    Reading about the consequences of restaurant turnover might make you nervous, but our goal isn’t to leave you in despair. Fortunately, there are ways to combat turnover, and we’re sharing them with you.

    Make the Right Hiring Decisions

    One of the most common mistakes that restaurateurs make is to hire based on experience (or even just availability) rather than values. However, when you hire someone whose values don’t match those of your restaurant and your team, no amount of experience or training will make them a good fit. When employees feel out of place at work, they are unhappy and will quit.

    Shift to a values-based hiring approach. The first step in this process is to establish a set of values for your restaurant. How do you do that? We’ve broken it down into five easy steps:

    1. Choose who to “clone”: If you had the ability to duplicate one or two members from your team, who would you clone?
    2. Identify your MVP’s key traits: What traits do these star employees have? List them out!
    3. Ask for employee input: Ask your current staff what they think the restaurant’s values should be.
    4. Refine and define: Find the values that are most true to your restaurant, then turn them into action-based phrases.
    5. Share with your team: Roll out your values to the company. Make them known far and wide and incorporate them into new staff orientation sessions.

    Once you’ve established your values, incorporate them into your hiring. Create interview questions that will reveal whether or not candidates share these values.

    Track Employee Engagement

    While you ultimately can’t make a bad fit work out in the long term, you can ameliorate a bad situation or get a clue as to who is on the verge of quitting by tracking employee engagement.

    Using an employee engagement tool like 7shifts allows you to gather shift feedback from employees and see whose performance has declined. If you notice that an employee is less engaged than usual, you can meet with them and ask them what kind of support they need from you.

    Hire Proactively

    Restaurant employees don’t always give the standard two-weeks notice that’s expected in the corporate world. With little to no notice, restaurateurs often don’t have enough time to make a smart hiring decision, so they hire the first qualified person they can find, rather than someone who would be an excellent fit for the role and team culture.

    Instead of looking for new talent only when you desperately need to hire someone, seek talent on an ongoing basis. Ask colleagues for referrals, reward employees for recommending talented friends, and be present at hiring fairs.

    Hold informal interviews with potential employees on a regular basis, even when you don’t have any openings. When a position does open up, you’ll have several qualified candidates in mind and you’ll be able to choose someone whose values match yours rather than hiring someone out of desperation.

    Turnover is Inevitable—But You Can Help Curb it

    Turnover is a pervasive problem in the restaurant industry. Unfortunately, turnover creates more turnover. People usually quit without giving much notice, which forces restaurateurs to hire quickly. Haste results in hiring people who don’t fit with the company culture and therefore quit less than two months after being hired, leaving restaurateurs to start the hiring process once again.

    Turnover costs more than just $5,864 per employee. A restaurant's service and culture also suffer, which ultimately affects the bottom line.

    Diminish turnover at your restaurant by keeping an eye on employee engagement and making values-based hires proactively, rather than seeking employees out of desperation.

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    Ana Cvetkovic
    Ana Cvetkovic

    Ana Cvetkovic is a freelance writer for 7shifts. She is also the CEO of BLOOM Digital Marketing, a creative marketing agency that helps the hospitality and tourism industries reach millennials online.