Breaking Restaurant Trends: Labor Retention

Over the past 25 years, we’ve had the pleasure of working with countless restaurant groups from QSR and casual dining, to cafes and pizza. We know in today’s information environment, finding signals in the noise can be challenging. So, to help restaurant leaders identify and focus on the things that matter most, every month our team reviews top industry trade journals and marketing information sources to identify emerging trends in restaurant marketing and operations.

In this quarter’s Restaurant Trend Report, we’re focusing on recruiting and retention challenges in the restaurant industry, and highlighting brands implementing out-of-the box solutions for surviving in a tight labor market.

Labor shortages are a top concern, especially for QSR.

Good help is hard to find, and even harder to keep – especially in a tight labor market.
In a recent survey from the National Restaurant Association, operators cited “recruiting and retaining employees” as two of their top challenges. This comes as no surprise to those in Quick Serve Restaurants who have been struggling to find talent in a rapidly expanding industry. Progress typically signals success, but when an industry grows too quickly, operators can end up opening locations they’re unable to staff. This is exactly what’s happening in the dining sector, which has been growing at almost twice the rate of the U.S. population, according to a report from Deloitte.

Expansion isn’t the only issue. The unemployment rate has plummeted to its lowest point in nearly 50 years, which means fewer Americans are looking for jobs. The rate of employees quitting is also the highest it’s been in 17 years. According to TDn2K, 40% of hourly employees terminate within the first 90 days of their employment and approximately 35% of managers terminate within the first year.

With more open jobs than available candidates, applicants have options, the ability to shop the market, and the freedom to change jobs quickly. If they’re not happy with their current positions, they can simply go elsewhere. And as a result, operators are perpetually understaffed, constantly interviewing and on-boarding, and continually managing teams that are short-tenured and partially trained.

In this environment, it’s almost impossible for restaurants to deliver on customer satisfaction — which ultimately affects sales and traffic. Between time spent hiring and training, loss of productivity, and damage to customer satisfaction, TDn2K estimates the average cost of turnover is $2k per front-of-house hourly employee, $1,902 per back-of-house hourly employee, and $14,036 per manager.

Employers who find themselves short-handed may be tempted to hire any willing applicant. But a bad hire can be extremely costly. An employee without the right skills or experience will need additional training. Other team members may need to jump in to help, or take on additional responsibilities until the new hire can pull his or her own weight. As a result, the productivity of the entire team suffers, again making it difficult to focus on the customer experience. And lower service levels naturally cause a decline in traffic and sales.

The U.S. Department of Labor estimates that a bad hire can cost an employer as much as 30 percent of that person’s total annual compensation. As important as it is to fill staff openings, it’s just as important to hire employees who have the right skills for the job, and who can be productive assets to the team.

Sweetgreen’s company culture and benefits make them a standout.

In a tight labor market, Sweetgreen is setting itself apart by putting employees first. The salad chain, which was started by three millennials in 2007, has grown to include 92 locations (and a corporate headquarters) across several states. The owners (Jonathan Newman, Nathaniel Ru, and Nicolas Jammet) attribute their success to their “most important ingredient,” a positive company culture.

The trio built this culture thoughtfully with perks aimed at improving happiness, productivity, and retention. To start, they partnered with Humu, a software company that uses behavioral science and machine learning to measure and identify what matters most to their employees. Once they unpacked the data, they were able to build a comprehensive benefits package featuring elements their employees really wanted, including:

• A “Family Fund” program that provides emergency financial support for employees in times of need
• A tenure program that recognizes employees with swag (like green Converse high-tops and green company-branded bikes) for each year they’re on the team
• A stock option for managers, giving them an opportunity to own a piece of the business and, in turn, making them more motivated, invested in the company’s success, and likely to stay

This is a huge differentiator; not just in the restaurant industry, but in the business community as a whole. According to the U.S. Department of Labor, paid parental leave was only offered by 15% of employers nationwide in 2017.

In addition to these benefits, Sweetgreen’s 3,500 employees enjoy company picnics, trips to the organic farms that supply their restaurants, community service days, and company-sponsored block parties. But for Newman, Ru, and Jammet, the cost of rewarding their employees is worth it. They believe their success is directly related to the happiness of their team, and that their ability to recruit and retain great employees comes from the supportive environment they’ve created. With a company that’s already worth $1 billion, they might be onto something.

Papa John’s provides tuition assistance.

According to Chief People Officer Marvin Boakye, Papa John’s has a new objective – to become “an employer of choice in the marketplace.” In order to realize this goal, the pizza company is making efforts to improve and expand their employee benefits. As part of this effort, Papa John’s is teaming up with Purdue University to offer a unique tuition assistance program to employees.

Tuition will be paid by Papa John’s up front, along with books and university fees. In addition, franchisees’ employees who have worked more than 20 hours per week for at least 90 days will be eligible for a reduced tuition fee (up to 20%).

Purdue offers more than 180 different degrees through their online program, giving Papa John’s employees the chance to earn an associate, bachelor’s, or master’s degree. Boakye believes this new benefit will give the company a more competitive edge in the labor market and provide members of the Papa John’s team with tremendous growth opportunities. Papa John’s consistently promotes from within, so today’s driver could be tomorrow’s manager. The company benefits from employees with long tenures and inside experience, and Boakye clearly sees the value in educating the entire staff.

Other QSRs have also seen great success when they’ve offered tuition assistance to recruit and retain employees. When Chipotle implemented a tuition assistance program, they found employees who enrolled were twice as likely to stay on with the company, with 89% of them still employed by Chipotle nine months after beginning the program. Likewise, Starbucks found that baristas enrolled in their education program were 1.5 times more likely to stay on and ultimately earned promotions at 2.5 times the rate of their unenrolled counterparts. Papa John’s hopes to see similar results.

Jersey Mike’s focuses on mentorship and ownership opportunities.

Jersey Mike’s has developed a program specifically designed to retain their most outstanding employees. The program, ironically called “STAY” (Sweat, Tears, and Years) pairs candidates with sponsors who are current store owners. These mentors are charged with teaching STAY candidates how to run a business and with keeping candidates motivated and focused. If successful, each candidate will become a co-owner of a Jersey Mike’s franchise along with their mentor. The STAY program also provides financial assistance for new store openings.

According to company president Hoyt Jones, the STAY program is a great way to grow the company through retention. “When people come into the system, they can see the possibility for future ownership,” he said. “It provides that upward mobility and goal to aspire to be an owner. I think the people coming into the workforce today especially want to be in charge of their own destiny, and this program gives them a road map to fulfill that.”

In-N-Out meets the demand for higher salaries.

In a recent workforce survey from National Restaurant News, 70% of respondents said money is the most influential factor for motivating hourly restaurant employees. The operators at In-N-Out must agree, since the chain pays its staff well above the industry standard.

According to Business Insider, a typical In-N-Out employee starts at $13 an hour while a store manager (with no college degree) can earn an annual salary of $160,000 — triple the industry average. In addition, the chain offers sought-after benefits such as 401(k) plans and paid vacation, as well as health, dental, and vision plans.

The chain has seen increased loyalty and productivity, less turnover, and (in the long run) larger profits. More than 90% of In-N-Out workers say they’d recommend their workplace to a friend. And In-N-Out was ranked number three in Glassdoor’s 2019 Best Places to Work list, beating out companies like Google, Southwest Airlines, Apple, and Microsoft. For this chain, an attractive compensation package is the key to signing and keeping talent.

McDonald’s targets a new demo.

This summer, McDonald’s planned to bring in 250,000 new hires to help handle the traffic. Unlike prior years, they were hard-pressed to fill the majority of those openings with teens. A recently study by the Pew Research Center found that fewer teens are entering the workforce and according to The New York Times, only 30% of teens have a job, compared to 45% in 2000.

To combat the effects of a tight market and shrinking labor pool, McDonald’s started looking elsewhere for workers. In April, the company announced that it was partnering with the AARP to grow its employee base. McDonald’s was looking to fill many of its summer openings — from cashier to shift manager positions — with men and women aged 55 and up. That way, they could staff appropriately (and with less competition) by pulling from a pool of applicants who are typically overlooked by other companies. And they’d have a wide selection according to the U.S. Bureau of Labor Statistics, which recently named the 55+ population as the fastest growing segment in the workforce.

It’s estimated by 2024, 25% of the labor pool will be comprised of the 55+ demographic — a side-effect of Americans living longer and needing to supplement their savings. While this will mark the company’s first national effort to recruit older workers, some McDonald’s operators have already found success with the strategy at the local level and abroad. In 2008, a study of 400 restaurants in the United Kingdom found that customer satisfaction levels were 20% higher in outlets that employed kitchen staff and managers over age 60.

More recent research also supports the hiring of seniors. An international Cogito study found that older workers’ productivity and cognitive performance are more consistent than their younger counterparts. According to Aon Hewett and Gallup, workers 55+ are the most engaged and the most motivated employees. A study by McDonald’s and The National Council on Aging also found that older workers offer low turnover rates, low absentee rates, and are more interested in learning new tasks.

What can we learn from all this?

As restaurant operators grapple with an increasingly competitive market, it’s becoming clear they need to evolve their recruiting programs, offer larger incentives that are better aligned with employee interests, and consider changing the profile for their candidates. Those embracing a new outlook to hiring and retention are already seeing significant results while those stuck in the status quo threaten to fall further and further behind.

AMY FIELDS is a Brand Manager at LOOMIS, the country’s leading challenger brand advertising agency and a top Dallas advertising agency for digital, social, mobile and user experience. For more about challenger branding, advertising and marketing, leadership, culture and other inspirations that will drive your success, visit our blog BARK! The Voice of the Underdog and catch up on all of our posts.

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