In our previous article, we discussed employee retention rates by industry and looked at which industries have the best and worst employee retention rates. This article examines the quick-service restaurant industry, which has a high turnover rate and low retention rate.
Fast food restaurants and fast-casual restaurants make up a segment of the restaurant industry known as quick-service restaurants (QSRs). While QSRs are growing rapidly, staffing issues persist.
The Turnover and Growth Rates in the QSR Industry
Employment in the food and beverage industry is forecasted to grow by 9% between 2021 and 2031, according to the U.S. Bureau of Labor Statistics (BLS), which is faster than the average across all sectors. The growth, however, directly reflects the turnover rate in the industry. The BLS states, “About 955,100 openings for food and beverage serving and related workers are projected each year, on average, over the decade. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire.”
In 2021, the overall turnover rate in the QSR sector sat at 144%. According to labor data released by the BLS, the seasonally adjusted quit rate for the accommodation and food services industry was 5.6% as of July 2022, which is higher than any other industry. Additionally, the hiring rate remained mostly stable over the second half of 2021, even though the industry didn’t grow at a fast rate. According to an article published by Nation’s Restaurant News at the start of 2022, more restaurant employees are quitting than any other industry, and companies are resorting to unique benefits—like buying cars and paying employees to do their school work—in order to recruit and retain.
The Cost of Turnover in the QSR Industry
In 2016, the Center for Hospitality Research at Cornell University estimated that employee turnover in the restaurant industry cost 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 showed that the average full-service restaurant operator paid about $146,600 in turnover, annually.
The costs of these items can be detrimental to the profitability of a thin-margin restaurant.
Why are QSRs struggling with staffing?
The staffing issues are two-fold. To start, it’s a tight labor market out there. There are more job openings than available workers, which means there is more competition than ever. Finding qualified staff is a difficult task for any QSR.
According to a May 2022 report from Alignable, 83% of restaurants can’t hire enough staff, which is higher than any other industry.
The second issue comes down to dollars and cents. According to survey results from BlackBox Intelligence and published by Nation’s Restaurant News, 92% of respondents said that the No.1 change that helped non-management employee retention was raising wages. According to data collected by Glassdoor, only 2% of hourly food service workers make less than $7 an hour; but federal law still allows employers to pay workers as little as $2.13 an hour if they make more than $30 a month in tips.
The federal minimum wage as of 2022 is $7.25 per hour, and according to the BLS, the median pay in the food and beverage serving category for 2021 was $25,980 per year or $12.49 per hour.
As restaurants already operate on a tight margin, finding a balance between wages, recruiting and retention costs is essential for survival.
Finding Leverage in a Tight Labor Market
On-demand pay 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 an on-demand pay benefit, employees can access their earned pay before payday with the click of a button. In an industry where raising wages isn’t enough to retain employees and companies are looking to offer creative benefits that better support their employees, on-demand pay solutions are a great fit. Whether it’s sending off-cycle payments at the touch of a button, offering cash rewards digitally, or giving employees their earned pay before payday, on-demand pay benefits inspire, motivate, and engage employees.
According to DailyPay research, companies who offer on-demand pay experience the following benefits:
- See an average of 50% reduction in turnover
- Watch 59% of employees who use DailyPay be more motivated to go to work
- Hear 74% of employees using DailyPay say it helped reduce their financial stress
Want to learn more about providing an on-demand pay benefit?
