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How to Calculate Your Restaurant Turnover Rate

How to Calculate Your Restaurant Turnover Rate

Staff turnover is growing a problem that plagues the restaurant industry. In 2020, due to restaurant closures and restrictions, the turnover rate in the hospitality industry skyrocketed to an all-time high of 130.7 percent compared to 78.9 percent in 2019. Not only that, but the industry was faced with an unemployment rate of 39.3 percent at its highest in April 2020

While this level of turnover was caused by exceptional circumstances, the aftermath has created new challenges in terms of hiring and retention in restaurants and other hospitality businesses across the globe. When staff are constantly coming and going, restaurants are left with the expensive problem of replacing employees. With a transient workforce, team culture, employee engagement and performance all suffer. 

But not everything is doom and gloom—knowledge is power when it comes to curbing a high restaurant turnover rate. 

It’s time to tackle turnover head on. When you know your employee turnover rate, you can control it better. This guide to restaurant turnover will give you the scoop on:

  1. What is restaurant turnover?
  2. Why is restaurant turnover a problem?
  3. Why should you know your employee turnover rate?
  4. How to calculate your restaurant turnover rate
  5. 5 actionable ways to lower employee turnover

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What is restaurant turnover and why is it a problem for the restaurant industry?

Turnover is a measurement of how many of your staff members leave your business—whether by quitting or by being fired—over a certain period of time. Stay tuned for our simple formula for calculating your restaurant’s turnover rate. 

Turnover is problematic for the restaurant industry for several reasons:

Restaurant turnover is expensive

Replacing just one hospitality industry employee costs $5,864 on average. How is that possible? 

There’s a cost associated with every step of the hiring process: productivity loss, publishing a job posting, sifting through applications, interviewing candidates, onboarding and training. 

Restaurants invest precious resources into new employees who likely won’t be around for the long haul. After all, the average tenure of a restaurant employee is just 56 days! If your restaurant loses 10 employees in one year, it’s spending $58,640 on replacing them. That’s money that could be invested in initiatives that could grow the business, instead of just keeping it afloat.

Restaurant turnover causes workplace culture to suffer

When staff are transient, they won’t feel the need to get to know their colleagues. However, research shows that creating a family-like sense of community in the workplace leads to better outcomes

Restaurant turnover diminishes workplace performance

The industry-wide restaurant turnover rate is problematic for businesses because it costs them money and causes culture and performance to suffer. When employees can’t establish a community because of transiency, they don’t feel a sense of belonging. 

When employees are highly engaged at work, they go above and beyond what is expected of them, and actually generate more revenue

 

Why should you know your restaurant’s turnover rate?

You understand now how turnover affects the industry, but do you know how it affects your restaurant? The escalating restaurant turnover rate is alarming, but how does your restaurant compare?  When you know your restaurant’s turnover rate, you can better combat it. 

How? Well, knowing your current rate gives you a benchmark from which to compare your turnover over time. 

Let’s say that you calculate your turnover rate and find that it’s 50%. This figure seems great compared to the industry average, so you don’t do anything to actively fight turnover. However, because of this complacency, you then find that a year later your turnover rate is 80%. 

By keeping an eye on turnover over time, you can discover what’s causing employees to leave and then do something to prevent it from happening further.

 

How to calculate your restaurant turnover rate (with examples)

Without further ado, here’s the restaurant turnover rate formula:

Restaurant Turnover Rate Formula

The first thing you need to do is to choose a period of time over which to measure turnover. You can choose one year if you’d like to compare it to the industry average, and then look at turnover on a monthly or quarterly level to see how it’s changed throughout the year.

Let’s say that you want to calculate your annual turnover rate. To calculate it, you would count how many employees left your restaurant during that year. 

Let’s say that 15 staff members left your restaurant in 2019. 

Next, you need to find your restaurant’s average number of employees for 2019.

Let’s say you started off 2019 with 6 employees. By the end of 2019, you had 10

With those numbers, you would calculate your restaurant’s average number of employees like this:

Average number of employees:

= 6 + 10 / 2

= 16 / 2

= 8

So in 2019, 15 staff members left your restaurant, and you had an average of 8 employees working at your restaurant throughout the year. 

Now, we can calculate your restaurant turnover rate for 2019:

Restaurant turnover rate:

= 15 / 8

= 1.875

= 187% 

Yikes! This restaurant turnover rate is much higher than the national average. Why is this? 

Let’s analyze your monthly restaurant turnover rate and see if there was a particularly rough month. 

 

How to calculate your monthly restaurant turnover rate 

Off the top of your head, you remember that 3 employees left in April and, for the month, you had an average of 7 restaurant employees. 

Restaurant turnover rate for April:

= 3 / 7

= 0.42

= 42%

For April, your restaurant turnover rate was 43%, which is quite low when compared to your annual restaurant turnover rate of 187%. 

Next, you examine December, a month where all of your staff quit because you didn’t give them flexible shifts for the holidays. 

Restaurant turnover rate for December:

= 8 / 4

= 2.00

= 200%

In December 8 employees quit and you had an average of 4 employees that month. December’s turnover rate was 200%, which could be what inflated your annual turnover rate. 

Use labor management software to track restaurant turnover

While calculating restaurant turnover is relatively straightforward, it still involves keeping track of how many people left your business and how many you hired. 

Ideally, you should automate this process with labor management software that synchronizes with your restaurant platform. The biggest benefit? Tracking, paying and scheduling your employees with precision.

Rather than relying on an Excel spreadsheet to track your employee count, labor management software helps you manage and automate labor, time and attendance, scheduling and human resources. 

For example, Push Operations is an employee labor management software with the ability to integrate scheduling, payroll, time attendance and HR management into a single employee labor management solution. 

With time attendance and payroll on the same platform, you have the ability to be transparent with employees by allowing them to view their approved hours, while getting an accurate comparison of your true labor cost, particularly for employees who work at different wages, against your actual sales through an automatic POS integration.

But of course, there are a ton of great labor management platforms to choose from that can integrate with your POS. Here’s a list of some other great alternatives in no particular order: 

 

5 actionable ways to lower employee turnover at your restaurant

Now that you know how to calculate your restaurant turnover rate, you must pay attention to the times when it spikes. 

Here are a few simple ways to combat turnover at your restaurant:

1. Focus on hiring

In order to improve your turnover rate, you have to start at the beginning—the hiring process. Matching the right prospective employees with the right positions will be key in ensuring a good fit. If you hire just for the sake of filling an empty role, you might end up back on the drawing board shortly after. 

Hiring is much more than finding someone that can perform the specific duties—it’s about understanding the position, the type of person that best fits the position, the person’s ambitions, personality and your restaurant’s culture. 

Whether you’re looking for a manager or a line cook, consider asking yourself these before beginning the hiring process:  

  • Are you looking for a seasonal hire? 
  • What duties will they be performing?
  • Are you looking for someone that wants to grow within the restaurant? 
  • What are the growth opportunities like? 
  • How many people will the new hire be working with?
  • How much experience are you looking for? 
  • Is there a specific personality that’s best suited for this role? 
  • What’s your restaurant culture like? 

Understanding the type of new hire you are looking for is the first step. Once you have a clearer idea of what you’re looking for, make sure it’s reflected in your job description and postings. Publishing a clear and accurate job posting will help you find the right type of applicants and,  eventually,  a new hire that fits the role. 

2. Ask for feedback 

Conduct exit interviews with all employees who leave to get a better understanding of why they left. Use their feedback to improve human resources.

Although it may be tempting to justify your actions, it’s important to focus on listening to the employee who’s leaving. Ask for honesty and use their feedback to improve your employee management.

Perhaps you can’t stop that person from leaving, but by listening to and acting on their feedback, maybe you can avoid others leaving in the future. 

Exit interviews are just one part of the solution. If you only ask staff for feedback when they’ve already given their two weeks’ notice, it’s too late to do anything to retain them. 

Asking for feedback should be a continuous part of your operations. Ask employees how they’re doing and what they think can be improved during all-team meetings and one-on-ones. You may uncover issues that you didn’t know existed.

Perhaps you’ll find that your servers (even the good ones) are struggling to describe menu items. Rather than take the easy route and blame it on their incompetence, you could enstate menu tastings for new hires, and offer samples of new dishes during your pre-shift meetings as well as an explanation of the ingredients and origins from your chef. 

Or maybe you’ll learn that back of house is having trouble keeping up with orders due because of your outdated ticketing system. That’s not ideal for your cooks, nor for your table turnover rate, so you take that feedback and invest in a Kitchen Display System (KDS) that clearly displays orders to the appropriate kitchen workstation. 

If you take it as an opportunity to improve, feedback can strengthen your relationship with your employees and improve the work environment, which will lead to decreased turnover and increased performance and profits. 

3. Increase employee engagement

Another way to reduce turnover is to help employees become engaged in their work. Highly engaged employees feel committed to their employers and are therefore less likely to leave than disengaged employees. 

Here are our top tips for engaging employees:

Create opportunities for growth

Invest in your staff’s future through educational opportunities and opportunities for advancement. Offer promotions to the best performers. Create a management training program so that your employees see their jobs as careers and not just pit stops along their career trajectories.

Offer competitive pay and/or perks

There are more than one million restaurants in the United States alone. If employees aren’t getting paid enough through wages and tips, they can easily leave your restaurant and find a job at another that will pay them more. 

Keep your employees by offering them competitive wages. Find out what other restaurants in your area are paying their staff and offer your employees equivalent (or more) pay and a solid tip out structure

If you can’t afford to pay your staff more than the competition, use perks to keep staff happy. Offer more vacation days or health benefits when other restaurants won’t. Offer flexible shifts and training opportunities.

Make your team feel like family

Working with awesome colleagues makes people happy. When employees feel like a family, they’re less likely to leave. Create a sense of community amongst your team through bonding activities like family meals and after-hours events. 

Schedule well

Allow employees to request days off and do everything that you can to accommodate them. If your employee’s job gets in the way of things like their family, education or other important life elements, it won’t be long until they start looking for employment elsewhere. 

4. Be generous with recognition

Wages are obviously an important part of employee happiness, but did you know that recognition also has a big impact, too? 

When recognizing your employees, remember the golden rule: give praise in public, give feedback in private. 

Employees who feel like you notice when they do a good job feel appreciated, perform better and are less likely to leave your restaurant. Positive reinforcement is an incredibly strong motivator and predictor of future performance. 

Employee recognition can be as simple as giving someone a shout-out during the pre-service team meeting when they go above and beyond, or as formal as implementing an employee-of-the-month program. 

Your goal is to make them feel awesome and show your appreciation for their hard work. A little bit goes a long way when it comes to praising employees for a job well done. 

5. Understand seasonal turnover

No matter how much you reduce your turnover rate, some turnover is always expected. The restaurant industry is often a source of employment to a lot of seasonal employees. From university students working summer jobs, to an extra set of hands during busy holidays, seasonal jobs are a normal component of restaurant staffing. 

As a restaurant owner or manager, you do need to understand how seasonal work fits into your business. What percentage of your staff works at your restaurant seasonally? Are there specific seasons where you often need to ramp up your staffing? Knowing these pieces of information will come in handy when you’re working on your turnover rate calculations. If you notice a huge increase in turnover in September as students go back to university, you wouldn’t need to worry as much as a huge turnover in February for example, when you are not hiring seasonally. 

Understanding the context behind your turnover is essential in finding ways to address it and reduce it. 

 

Your restaurant turnover rate cheat sheet

Finding the right people to work at your restaurant is difficult—that’s why the industry-wide turnover rate is as high as it is. With the current hospitality labor crisis at its peak, it’s key to understand the ins and outs of your hiring process and employee retention. When you know your restaurant’s turnover rate, however, you’re better equipped to combat it. 

Calculate your turnover rate over various periods of time to track progress. If you notice that your turnover is getting out of hand, implement changes to lower it. Praise staff for a job well done, employ tactics to keep them engaged and ask for feedback to keep turnover in check. 

If you’re looking to get a deeper understanding of your restaurant’s performance, talk to one of our experts to find out how our one-stop restaurant platform can help.

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