A fast food restaurant, also known as a quick-service restaurant (QSR) in the industry, serves fast food cuisine with minimal table service. Fast food items are typically the focus of quick-service restaurants over a limited menu since they can be prepared in a lesser amount of time with the least amount of variation.
As a result, QSR restaurants are known for their standardized, modular, and efficient processes, which help them to reduce their lead times while maintaining the quality that customers expect.
As of 2022, the global fast food and QSR industry is valued at a whopping $881.1 billion. The US alone contributes nearly 40% of the global industry, worth a staggering $331.4 billion. Over the period of 2017-2022, the US market size for fast food and QSR grew 2.8% annually. (IBISWorld, 2022)
Turnover Rates in Fast Food and Quick Service Restaurants
High turnover rates are common among fast food establishments and restaurants. It particularly rings true for restaurants with the highest turnover of any industry. According to a 2014 study conducted by the National Restaurant Association, the industry has a 66.3% turnover rate among its employees. In this group, 46.5% quit voluntarily. (Mckee, 2022)
In the restaurant industry, there has been a huge increase in turnover in recent years, with data showing that there is an average churn of around 75% - a percentage that is continuing to rise as a result of the pandemic. In comparison to all workers in the private sector (where turnover is around 46%), this amount exceeds 1.5x. (Zuluaga, 2022)
For the 2015–2017 period, the Bureau of Labor Statistics reported an official turnover rate of 81.9%, but industry estimates are much higher, reaching 150%, and the problem has worsened. The QSR sector experienced an overall turnover rate of 144% in 2021. Additionally, per the data from BLS, a seasonally adjusted quit rate of 5.6% was recorded for the accommodation and food services industry in July 2022, making it the highest rate of any industry. Furthermore, despite slow growth in the industry in the second half of 2021, hiring rates remained mostly steady. (BLS, 2022, Reuter & Hoff, 2021)
Since the pandemic of 2022, restaurants have had a major labor shortage. The spike in the number of hospitality workers quitting their jobs is due to various reasons, including low wages, no benefits, long hours, tough management, and difficult customers. (Selyukh, 2021)
Generally, fast food chains have a higher turnover rate than other private enterprises because of their workforce composition. A third of all teenagers working in restaurants are adolescents. In fact, 1.7 million adolescents work in restaurants. As a result, most individuals entering this field have no or little work experience. Additionally, many are students who work seasonal hours or with limited hours as their academic schedules permit. (Klein, 2021)
Cost of Employee Turnover in Fast Food and Quick Service Restaurants
It’s a well-established fact that businesses lose a lot of money each time they lose their employees. The fast food and QSR industry is no exception. According to a study by Cornell's Center for Hospitality Research, the average cost of employee turnover for a typical front-line employee is around $5,864 per person for a year. (Mack, 2017)
Here’s a breakdown of how the $5,864 per person cost is determined:
Cost of Loss in Productivity ($3,049)
As soon as an employee decides to leave the company, their productivity begins to decline. In most cases, this decision is made weeks before the employee's notice date. The remaining employees have to pick up the slack between a colleague's departure and a replacement's arrival. However, it’s impossible for one person to do the job of two, so productivity suffers. The time managers and employees spend on hiring eats into productivity too, since they could be spending it on other things, such as growing the business or improving customer service.
Pre-Departure Cost ($176)
It can be seen as a category for investments made in administrative tasks that have been completed after a team member has given their notice, such as exit forms and interviews.
Recruitment Cost ($1,173)
As the name suggests, these expenses include the salaries of the people responsible for conducting hiring activities, such as writing job descriptions and reviewing applications, and the costs related to posting and advertising jobs to fill vacancies.
Selection Cost ($645)
During the hiring process, restaurants take time to interview candidates, call references, and conduct background checks on candidates. All of this adds up as a cost to fill the vacancy.
Orientation, Training, and Onboarding Cost ($821)
Onboarding and training are time-consuming and costly. This category includes processing paperwork, teaching your new hire your restaurant's processes, and letting them shadow your staff.
The $5,865 per person per year may not seem like a lot of money initially, but once you start looking at the bigger picture, you realize its impact. The cost of replacing your employees is $35,184 if you lose a server every two months, which means you have to replace your employees six times a year. If you invested that money in renovation or marketing or gave it as a bonus to your most valuable employees for staying with your restaurant, you could make a significant profit instead. (Cvetkovic, 2019)
To estimate an employee turnover expense, Rosemary Batt, chair of HR Studies and International & Comparative Labor at the Cornell School of Industrial Labor Relations, breaks it down into a few simple steps: how long it takes a manager to hire a worker, how long it takes a manager to train a worker, and how long it takes a worker to learn to do their job. In fast food, that period is measured in one to two months, and half of the pay should be considered a loss during that period. Furthermore, there are less tangible costs, such as disruption to the organization and team. (Rosenbaum, 2019)
Considering the fact that fast food and QSRs already operate on a thin profit margin, it makes sense to invest in your current employees so they not only stay longer, but the business can save more money and prosper in the long run.
Reducing Staff Turnover in Fast Food and Quick Service Restaurants
Restaurants were having trouble keeping staff even before the Great Resignation. While several industries have been able to overcome the pandemic's impact by increasing remote work, restaurants are simply not equipped with these options.
There are approximately 11 million job vacancies in the labor market, which is far from pre-pandemic levels. Food service accounts for over 10 percent of these vacancies, further adding to the stress. As the industry began to gain momentum, inflation has resulted in nearly a third of restaurants cutting staff and reducing hours. (BLS, 2022)
Given the current economic climate, it’s in every restaurant owner’s interest to hire and retain their staff. While paying top salaries may not be possible for many due to intense price competition and thin margins, there are plenty of other ways to ensure you are taking care of your QSR workforce.
Offer Flexible Scheduling
A greater work-life balance has always been the demand of the workforce, but the pandemic has further boosted the need to strike a balance between personal and professional. According to a recent survey by FlexJobs, 41% of employees who quit did so due to a lack of flexibility. (Pelta, 2022)
Employees who are offered flexibility are more motivated, productive, and engaged since it allows them to balance work and life. Furthermore, you'll be able to have your team work when they're most productive. Some roles and companies require structured hours, of course. For example, customer service representatives need to work during normal business hours, but many other jobs do not.
Increase Internal Mobility
Approximately twice as many workers in companies with high internal mobility (hires and promotions from within) stay almost twice as long as those in companies with low internal mobility, according to LinkedIn Learning's 2021 Workplace Learning Report. It is also three times more likely that an employee who is promoted internally will be engaged when they move into their new role. Offering mobility within the organization can offer your staff opportunities to grow, which will ultimately make them stay longer and not get bored with their monotonous daily tasks. (Nuys, 2021)
Offer Innovative Benefits
For an industry that has fierce competition, offering higher wages is not always an easy task to do. However, fast food chains and QSRs can make all the difference to their employees by providing them with unique benefits that can help them alleviate their financial stress.
It is estimated that 83% of US workers experience stress as a result of their work. In addition, 50% of workers are unproductive at work due to stress on any given day. As a result, companies end up spending almost 75% of an employee's annual salary to mitigate productivity loss and to replace employees. (Mazur, 2022)
Offering innovative financial wellness benefits to your employees such as on-demand pay, which allows them to withdraw their earned funds before their next paycheck, is a great way to reduce financial stress. When an unexpected expense arises, your employees will be better prepared financially.
It is important to ask employees how they are doing and pay attention to their responses. Burnout affects 74% of workers, so identifying (and resolving) stressors and problems that bother your team can prevent them from quitting. Dispute issues between colleagues, address disrespectful managers and adjust a schedule if an employee is exhausted. You can increase employee satisfaction, loyalty, and retention by reducing their stress and showing them that you care about their happiness. (Staley, 2022)
BLS. (2022). Table 4. Quits levels and rates by industry and region, seasonally adjusted - 2022 M10 Results. Bureau of Labor Statistics. Retrieved December 6, 2022, from https://www.bls.gov/news.release/jolts.t04.htm
BLS. (2022, November). Job Openings: Total Nonfarm (JTSJOL) | FRED | St. Louis Fed. FRED. Retrieved December 7, 2022, from https://fred.stlouisfed.org/series/JTSJOL
Cvetkovic, A. (2019, December 27). What's the True Cost of Employee Turnover to the Restaurant Industry? 7Shifts. Retrieved December 7, 2022, from https://www.7shifts.com/blog/true-cost-of-employee-turnover/
IBISWorld. (2022, June 23). Fast Food Restaurants in the US - Market Size. IBISWorld. Retrieved December 5, 2022, from https://www.ibisworld.com/industry-statistics/market-size/fast-food-restaurants-united-states/
Klein, D. (2021, July 8). Teenagers Surge Back Into the Restaurant Workforce. QSR magazine. Retrieved December 6, 2022, from https://www.qsrmagazine.com/employee-management/teenagers-surge-back-restaurant-workforce
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Nuys, A. V. (2021). LinkedIn Learning's 5th Annual 2021 / Skill Building in the New World of Work. LinkedIn Learning. Retrieved December 7, 2022, from https://learning.linkedin.com/content/dam/me/business/en-us/amp/learning-solutions/images/wlr21/pdf/LinkedIn-Learning_Workplace-Learning-Report-2021-EN-1.pdf
Pelta, R. (2022). Great Resignation: Survey Finds 1 in 3 Are Considering Quitting Their Jobs. FlexJobs. Retrieved December 7, 2022, from https://www.flexjobs.com/blog/post/survey-resignation-workers-considering-quitting-jobs/
Reuter, D., & Hoff, M. (2021, August 24). 9 Stats Show How Crazy It Is to Work in the Restaurant Industry. Business Insider. Retrieved December 6, 2022, from https://www.businessinsider.com/what-its-like-to-work-restaurant-industry-fast-food-statistics-2021-8
Rosenbaum, E. (2019, August 29). Fast-food restaurants in America are losing 100% of workers every year. CNBC. Retrieved December 7, 2022, from https://www.cnbc.com/2019/08/29/fast-food-restaurants-in-america-are-losing-100percent-of-workers-every-year.html
Selyukh, A. (2021, July 20). Low Pay Is The Main Reason So Many Workers Are Quitting Restaurant Jobs. NPR. Retrieved December 6, 2022, from https://www.npr.org/2021/07/20/1016081936/low-pay-no-benefits-rude-customers-restaurant-workers-quit-at-record-rate
Staley, G. (2022, June 30). 10 ways to improve restaurant employee retentionFast Casual. Fast Casual. Retrieved December 7, 2022, from https://www.fastcasual.com/blogs/10-ways-to-improve-restaurant-employee-retention/
Zuluaga, T. (2022). How to Calculate your Restaurant Turnover Rate - On the Line. Toast. Retrieved December 6, 2022, from https://pos.toasttab.com/blog/on-the-line/restaurant-turnover-rate