As a restaurant owner or operator, you are no stranger to the fact that employee turnover is a challenge. In fact, it is consistently one of the top challenges restaurateurs face year after year. However, coupled with labor challenges and an aging workforce, no one would blame you for arguing that things are feeling tougher lately.
The National Restaurant Association points out that many of the available job opportunities in the restaurant industry (and there are poised to be nearly 2 million restaurant jobs created by 2027) are created by the natural churn in this industry. Which is a good thing!
But if every employee in your restaurant is capable of bringing in $79,400 in revenue, and you’re faced with turnover and you don’t know why, you’re faced with a problem.
Because the facts are still the facts….
- 72.9%: The annual turnover rate for the restaurant industry as of 2016.
- 42.2%: The average annual turnover rate in the U.S. labor force.
- 80.9%: The highest the restaurant industry has ever seen turnover at.
- 56.6%: The lowest the restaurant industry has ever seen turnover at.
- 2 years: The amount of time that will pass before only about 25% of the staff you spent time recruiting will still be working for you.
While in general, employee turnover remains steady in the private sector, in the restaurant industry, employee turnover has been on the rise since 2011.
The restaurant industry looks as if it will continue to face one of the highest turnover rates in the U.S. labor force. But the real challenge is not the rate itself, but what restaurateurs like you can do about it today.
First things first, it’s time to define what “turnover rate” actually means – and why it matters to your restaurant.
By definition, turnover rate (v.) is the frequency at which employees leave a job.
For example: Tony’s Tacos saw a 50% turnover rate last year. This means that if Tony had 10 employees, 5 left and needed to be replaced.
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If you’re shaking your head thinking about what this means for Tony — the cost of hiring and training, lost guest satisfaction, increased operations costs — then you’re not alone. High turnover brings a ton of challenges of restaurant owners and managers.
- Recruitment, Hiring and Training Employees: The more staff you have to hire, the more time you have to spend on all of these things.
- Lost Time: You’ve got a lot on your plate, and staff management is time-consuming – especially when you have to continually hire and re-train.
- Lost Experience: In the restaurant industry, the experience can be hard to find. With a high volume of new employees in your restaurant, less experienced staff can lower the customer experience, and thus harm your restaurant reputation.
How To: Calculate Annual Server Turnover
Hospitality industry turnover impacts not just your bottom line in terms of profitability, but staff morale and operational success, too. The first step to facing the challenge head on? Knowing what you’re dealing with.
Add up the monthly employment your restaurant has had for the last 12 months then divide by 12. This is your average monthly employment.
Pro Tip: Your monthly employment can be found by averaging the number of payroll deposits you had in a month.
Add up the number of separations (in other words, employees that left) in the same 12-month time frame.
Calculate your annual employee turnover rate – the total number of separations divided by the average monthly employment for the last 12 months, expressed as a percentage.
For example, if the total number of separations in your restaurant in the last year is is 20 and the average monthly employment is 50, then your turnover rate is 40% [100 x (20/50)].