In our previous article, we discussed employee retention rate by industry and looked at which industries have the best and worst employee retention rates. In this article, we take a closer look at the restaurant industry, which has a notoriously high turnover rate and low retention rate.
Fast food restaurants, along with fast-casual restaurants, make up a segment of the restaurant industry known as quick service restaurants (QSR). Though the QSR industry is fast-growing, staffing issues abound.
What does turnover and recruiting look like in the QSR industry?
The Turnover and Growth Rate in the QSR Industry
Between 2016 and 2026, the Bureau of Labor Statistics (BLS) estimates that the Food and Beverage service industry will grow 14%, which is faster than average across all sectors. The growth, however, directly reflects the turnover rate in the industry. The BLS states, “Job prospects in most dining establishments will be excellent because many workers leave the occupation each year, resulting in numerous job openings.”
In 2016, the overall turnover rate in the restaurant sector was about 73%.
According to a recent study by Nation’s Restaurant News (NRN), 46% of the surveyed restaurant operators said turnover increased either “significantly” or “somewhat” over the past year. Additionally, 67% of restaurants polled in the NRN survey stated staffing challenges cited as a top concern.
The NRN study details which employees are most difficult to recruit and retain:
- Back of the house: 59%
- Front of the house: 28%
- Corporate or regional employees: 4%
- Other: 8%
Within the back of the house category, restaurants have the most difficulty finding:
- Line cook candidates: 72%
- Prep cooks: 36%
- Dishwashers: 33%
(Source: Nation's Restaurant News)
The Cost of Turnover in the QSR Industry
The Center for Hospitality Research at Cornell University estimates that turnover costs approximately $5,864 per person.
The granular breakdown looks something like this:
- Pre-departure disengagement: $176
- Recruiting to fill position: $1,173
- Selection for new hire: $645
- Orientation and training: $821
- Productivity loss for all staff: $3,049
The same study shows that the average full-service restaurant operator pays about $146,600 in turnover, annually.
And the figure continues to rise.
Restaurant operators have experienced year-over-year increases associated with recruiting. More than two-thirds, or about 67%, of operators say increased competition for workers is the primary driver in rising costs.
These costs, especially when put into context, can be detrimental for a thin-margined restaurant business.
Why is Staffing an Issue for QSRs?
The staffing issues are two-fold. To start, it's a tight labor market out there. There are more job openings than available workers, and there is more competition than ever. Finding qualified staff is a difficult task for any QSR.
The second issue comes down to dollars and cents. The vast majority of respondents in the NRN study, (70%) said wages provide the most influential factor in motivating employees. This makes sense as many QSR employees are minimum wage employees.
As restaurants already operate on a tight margin, finding a balance between wages and recruiting and retention costs is essential for survival.
Finding Leverage in a Tight Labor Market
On-demand payment benefits are a way to differentiate yourself in a tight labor market by giving your employees more control over when and how they receive their pay. With a daily pay benefit, employees can access their earned by unpaid wages with the click of a button.
We’ve seen companies who offer on-demand pay:
- Fill open positions 52% faster than organizations who don’t offer an instant payroll benefit
- Experience an average of 41% reduction in attrition
Daily pay is a financial perk that can be offered at no cost to a business.
Want to learn more about curbing the turnover costs at your QSR? Download our helpful workbook.