Do you know how to calculate the turnover rate in your restaurant? If not, you may be missing out on key metrics that can help you better run, manage and grow your eatery. With rising expenses, it’s important to know that you can retain your most important assets – employees. In this guide, we’re going to show you how to understand your turnover rate and how you can improve this rate.
Why Are Restaurant Turnover Rates Important?
If you’ve never tried to calculate employee turnover, you may not know why a high turnover rate is a problem. In fact, you may not know why keeping these rates low can be extremely beneficial to your business.
Learning how to calculate turnover rate of employees will help you:
- Maintain your current employees
- Reduce the risk of needing to train new employees
- Save more money in the long-term
For example, when you have to hire new employees, this leads to someone needing to train them, increases the risk of bad customer service for a short time and can cause a loss in customer satisfaction.
Restaurant owners that are considering firing an employee must understand the monetary and business risks involved. You will lose money on training and hiring, but there is also a collateral loss of in-restaurant morale.
Imagine line cooks losing their sous chef multiple times per year.
Morale in the back of the house greatly drops when the sous chef of the restaurant doesn’t remain consistent. There is also the burnout of employees who need to take on the tasks of the lost employee, even if it is only for a week or so.
Shifting teams due to high rates of employee loss will further lead to front-of-house issues. New team members or employees who need to do more than one person’s job will make mistakes, and this can have a ripple effect on your turnover – both in employees and customers.
What Is the Average Restaurant Turnover Rate?
Learning how to calculate turnover rate for employees will have restaurant owners come to a shocking realization that turnover percentages are high. One report states that 75% of employees plan on leaving their restaurant job in the next year.
The same report states that 75% of restaurants are 10%+ understaffed.
In a slightly older report, restaurant turnover was 130%. This report considers many fast food restaurants, so a traditional eatery will often have a lower percentage than this amount.
How To Calculate Turnover Rate
How do you calculate turnover? First, you need to gather the following information before you can begin calculating turnover percentage:
- What time period will you calculate for the turnover? Often, an annual turnover rate is used, so you can choose from January 1 to January 1 of the following year.
- List of all employees that were hired during this period.
- List of employees that left during this period
- The number of employees needed to staff the restaurant.
Once you have all of this information, you can begin your restaurant calculations using the formula below.
Formula To Calculate Turnover Rate
You've gathered all of the information to calculate turnover percentage, and now you need to plug the information into the following calculation:
- (# of employees who quit or were fired / # of employees to staff the restaurant)
- Times the sum above by 100
The sum of this calculation is your turnover rate. Now that you know how to determine turnover rate, let’s look at a better example.
- 25 people are needed to fully staff your eatery
- 20 employees left the restaurant in the past year
You would then use (20/25)*100 = 80%.
In this case, you have an 80% turnover rate – not ideal. You may also have times when you have over 100% turnover rate, meaning that even when you rehire people, these individuals also leave.
Now that you know how to calculate turnover percentage, you can try to learn more about why and when employees leave. You can gain a lot of these insights by performing the same calculations for:
- Each quarter of the year
- Each month of the year
Perhaps you have the highest turnover rate in summer when it's your busiest season of the year. This may be an indication that the staff needs more help during this time of year. You may also experience higher turnover in Q3, and this may be because you hire a lot of college workers who must go back to school.
How To Improve Your Restaurant Turnover
You’ve learned how to figure out turnover rate, but there’s one thing left to do: improve the retention rate. Keeping your kitchen well-staffed is one of the best decisions you can make for your eatery.
The following recommendations can help you improve your staff retention:
- Survey your employees to learn what their pain points are and how you can best help them in their position. It's crucial to have an open mind when surveying employees and to ensure that your team can be open and honest with you.
- Increase pay and benefits. Restaurant workers are often underpaid due to tips, and a small pay raise may mean the difference in retaining or losing employees.
- Use the data when running your calculations to identify why people may be leaving your business. For example, if you notice that workers are leaving in droves during the busy season, the work may be too intense and additional employees – even temp workers – may lead to higher retention.
- Learn which positions have the highest turnover rate. Perhaps you’re losing a lot of chefs, and this may be due to your kitchen design, lack of line chefs or other reasons. If you know which positions have the highest turnover rate, you can then strategize ways to improve these positions.
You need to be willing to make drastic changes to keep employees working and stop them from leaving their positions.
How do you calculate turnover rate of employees and use this information to strengthen your business? Follow the tips above. If you improve your rate of staff loss, you’ll improve your bottom line, customer satisfaction and morale.