Three of the next four employees you talk to in your restaurant won’t be with you this time next year — that is, if hospitality business statistics bear out for your business. Industry turnover rates are at 73%, and it’s more than just the hassle of rehiring that restaurants have to deal with. Restaurant labor costs are growing every day, but it’s not just base salaries that you need to worry about.
According to research compiled by RAIL Media, the average cost of replacing an employee — salary aside — is $5,864 each person. For the average full service restaurant operator, that could run up to $146,000 annually.
Between the cost of hours lost to interviewing, of advertising the position, of training a new staff person, of accounting for early mistakes, and the loss of customers from temporary decreased customer service (or the cost of overtime to balance it out), nearly six thousand dollars goes right down the drain every time someone walks out your door for the last time. And the trouble is, this brand of restaurant labor costs is nearly invisible on your balance sheet. But that doesn’t mean they aren’t there.
The good news is, hidden restaurant labor costs from turnover are often avoidable, at least to a degree. Yes, very few restaurants can get their employee turnover rate down to zero, any more than they can completely eliminate food waste or over-scheduling. But there are at least seven factors to retaining your employees longer and keeping these kind of exorbitant restaurant labor costs to a minimum.
1. Smarter Hiring
It may seem obvious, but finding the right person from the start can save you a lot of headaches down the road. Part of the magic behind a great hire is being clear upfront about what the position entails, including hours, physical labor, and any goals you may set. And doing that in the advertisement will save you from wasting time in the interview stage.
Once at the interview stage, what you ask potential employees is crucial, but so is giving them a sense of how you operate. Having a peer-level employee give serious applicants a tour can help in two ways: it gives the potential employee the freedom to ask questions they may not feel comfortable asking a manager, and your staff member can report back about how the interviewee behaved out of a manager’s earshot.
2. Better Training
According to Little Caesars’ Manager of National Training Jeff Drozdowski, the pizza chain had a company-wide turnover rate of 170% in 2006. After instituting a comprehensive training program, their turnover dropped to 80%, an unheard of level for quick service restaurants in America. Formal and continual training simply keeps employees longer.
Better trained employees and managers save you money in many ways other than turnover as well. When efficiency and customer service improve, profits improve. Investing the time (and money) upfront during onboarding — and then refreshing on a regular basis as procedures change — can save you much more down the road. And it will give your staff the confidence they need to perform at their best from the start, which only encourages them to come back every day with a smile on their faces.
3. Benefits that Matter to Your Staff
Think of your employees like you think of your guests: they need compelling reasons to return to your restaurant, and one incentive isn’t enough on its own. Just as great food is rarely the main reason customers return over and over (data shows overall experience and rewards motivate more than great food), salary isn’t enough for employees either.
Ranked at the very bottom among all industries on Glassdoor, the restaurant industry has the reputation for offering the least amount of meaningful perks and benefits. Most employees expect medical and dental insurance, supplemental life insurance, paid time off, and some form of retirement benefits. That can be a lot to balance in terms of restaurant labor costs.
Start off by surveying your staff anonymously through a program like Survey Monkey to find out what they consider important regarding benefits and what you might be missing. Keep your questions open-ended so as not to influence their answers. Then make a plan, keeping that employee turnover cost in mind as well.
4. Career Opportunities
Be clear with your employees if there is a clear career path for their position available in your establishment. For instance,
Team Member —> Shift Manager —> Assistant Manager —> Manager
Make sure you’re sharing the competencies needed for each position, as well as how the training works to move from one to another. Do not share upfront any information about salaries (because wages will invariably change over time) and timing (as that is likely to depend on the ebb and flow of your management turnover and the need that presents itself as your restaurant hopefully expands).
Do be sure to share success stories of other employees when you have the chance. Not only could it inspire some of your lower level employees to stick it out and work toward a goal, but it gives them a potential mentor to ask questions of and inquire about their day-to-day work.
5. Rewards and Recognition
Much like deciding on benefits, it’s great to start your decision-making on rewards for employees by asking them what is most meaningful to them. Cash is always likely to be a popular answer, but you may be surprised by what else is important to your staff, from paid time off to gift cards.
Ultimately, focusing recognition at your restaurant on accomplishment — not necessarily longevity — will motivate productivity and appreciation from your employees. Five years of service can seem unattainable to a member of your kitchen staff, but doing something today that has a positive effect on your business and their team is much more attainable. And it has a more direct effect on your bottom line.
6. Open Communication
Employees want to know how they’re doing, but public recognition doesn’t take the place of one-on-one manager-employee discussion. Keeping tabs on each staff member’s progress and sharing that information on a regular basis is time-consuming — and easy to forgot when things are perpetually busy. But sharing that feedback can mean the difference between an employee that knows they are valued, and one that will look for that feeling elsewhere.
Providing job success metrics on a regular basis can ensure your staff know exactly how they’re performing and what they need to do to improve. Think of these discussions like “stay interviews,” and ask some of the following questions:
- “If you could change one thing about your job…”
- “What’s the one thing you would never change about your job?”
- “What can I do to make sure you stay happy at your job?”
7. Exit Interviews
And if an employee does leave, it is imperative to find out WHY. Sometimes, it can be a reason for personal celebration — your staff person is stretching their wings to go to a greater opportunity. Cheer them on. Don’t begrudge their success.
That said, maybe offer them a soft landing in case things don’t work out like they think it will. Leaving to stretch their wings will often happen with very experienced employees, so offering to keep them on a single shift a week or holding their paperwork for a short period of time could result in them coming right back if things don’t work out. And then you’ve completely avoided the restaurant labor costs around hiring a brand new employee to train.
But when employees do leave for reasons that primarily involve the state of their (un)happiness with your restaurant, take their concerns seriously. Ask yourself if there’s a way to prevent this situation in the future, and hire your next employee with that in mind.
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