Here’s a shocking stat: Restaurants are seeing their highest turnover rates in the last 10 to 15 years. This is according to data released in March by TDn2K and Black Box Intelligence, a consulting firm that provides restaurant-industry metrics, that surveyed 52 companies representing 102 restaurant brands.
There is no question that high employee turnover creates unwelcome distractions for owners and managers. Plus, there is the cost of recruiting and training new employees, as well as the loss of institutional memory held by long-term employees.
How bad is the problem?
On average, says Victor Fernandez, TDn2K executive director of insights and knowledge, 42 percent of front-of-the-house employees leave within the first three months, and 43 percent of managers leave within a year. And according to restaurant management platform Upserve’s State of the Restaurant Industry Report, last summer, the highest turnover rates were among counter service employees/cashiers, at 36 percent.
Yet, according to the TDn2K survey, managers and employees are experiencing significant turnover in 2018, and the three top reasons they leave are: job abandonment (the number one reason); personal reasons (including graduating from college or moving to another location), and finding higher compensation.
“As unemployment continues to be very tight, we’re seeing more competition for employees. People know that there are other opportunities out there and they are leaving for more money.” -Victor Fernandez
While employee engagement is important to foster to avoid having someone stop showing up to work, Fernandez also notes that compensation is increasingly a major part of the decision. “As unemployment continues to be very tight, we’re seeing more competition for employees,” he says. “People know that there are other opportunities out there and they are leaving for more money.”
Although the availability of high school students, the traditional talent pool for employers, has been on the decline for decades, Fernandez says, the average age of hired employees ends up dropping in tandem with the unemployment rate. By comparison, after the 2007 recession, the average age of hires went up, mainly because managers had their pick of employees and typically hired people with more experience who didn’t need as much training, he says.
However, Fernandez cites the gig economy as the main factor that is making restaurant employment less attractive. Most restaurant jobs are part-time so it is easier for employees to swap a 10-hour restaurant job with a job driving Uber or Lyft, he says. Add to that the ability to set your own hours and work as little or as much as you want and it’s hard for restaurant jobs to compete.
Deanna Kloostra, 46, lives in Grand Rapids, Michigan, and worked part-time at a Cracker Barrel restaurant for an over a year. She quit her waitress job because, she says, “I needed to find a full-time job or a job making good money.” She decided to try driving for Uber and Lyft and discovered she could make more money driving and have more flexibility with her hours. “At a restaurant, you are on your feet all day and it can be hard working long hours, not able to sit down,” she says, adding that with driving, she can take breaks and work the hours she chooses.
And it’s not Uber and Lyft that restaurants are competing with. There are many other jobs that allow for more flexibility than a restaurant position, admits Brandon Hood, recruiting manager at Kellan Restaurant Management Corp., a Kansas City, Missouri-based company with 29 locations and 3,000 employees. Many restaurant employees are interested in jobs as bloggers, gamers livestreaming on platforms like Twitch, and even real estate agents. However, Hood says, many employees find that it takes time and effort to build up a following, and, if they leave to pursue those careers, they often return to their restaurant job to make money while they build their business.
The gig economy can also be beneficial for restaurants, says Alla Malina, founder of New York-based Chive Creative Co., a consulting firm for restaurants. While employees can supplement their income while driving for Uber or Lyft, restaurants can hire more part-time workers, limiting the amount of overtime they need to pay, she says.
However, Hood says, there are ways restaurants can make employment more attractive. For instance, his company has added an employee referral program, which encourages employees to help recruit their friends and leads to better retention among staff. The company has also explored ways to provide more scheduling flexibility while maintaining structured operating hours, he says.
Restaurants can also explore using apps to make it easier for employees to keep track shifts and trade them, Fernandez says, noting that hiring a base of full-time employees to give its best employees an incentive to continue working at the restaurant can also work well to keep everyone engaged, committed, and discouraged from seeking employment elsewhere.