How to Calculate Turnover Rate: An Easy Restaurant Guide

You've probably heard that a restaurant's food costs make up a significant portion of its overall expenses. But you might be surprised to learn that a restaurant's labor costs can also be a considerable expense. Employees are a restaurant's most important resource, and as such, it's essential to understand your employees' behavior and retention rates. You can use this information to improve your restaurant's efficiency and profitability.

But, how do you calculate turnover?

We'll go through what employee turnover is, how to calculate turnover rate, and how to interpret the data in this post.

Why is Restaurant Turnover a Problem?

Among the many metrics that restaurants should watch, perhaps one of the most pertinent (and prophetic) is for you to calculate turnover rate. As any manager will tell you, keeping good employees can be challenging. The restaurant industry has notoriously high turnover, with employees frequently moving on after just a few months or even weeks. If you've spent any time in the restaurant industry, you know the staff room has a bit of a revolving door.

Employees may quit your restaurant for various reasons, including a desire for better income, a better work-life balance, or greater stability. Though it's tempting to dismiss an employee's leaving as a "cost of doing business," you should think about what this means for your bottom line and customer satisfaction when calculating your staff turnover rate.

It should go without saying that employing a new employee is far more expensive than keeping your present employees. Constant personnel turnover is not only costly, but it also harms your office atmosphere. Sections get larger with one fewer front-of-house service person, spare seconds to run food and beverages are difficult to come by, and the payment procedure may slow down. You will add additional tasks on the line to staff members' plates, extra duties, extended shifts, and fewer staff members to complete the same number of tickets might produce a bottleneck in your business's workflow.

A shifting team also has an impact on your guests. When there are more novice servers on the floor, the chances of making a mistake multiply tenfold. When one or more workers depart, it's not uncommon to witness a jump in your employee turnover rate, and turnover tends to be higher in January after the holidays. This necessitates much more careful preparation for turnover.

What is the Average Turnover Rate in the Restaurant Industry?

The restaurant industry has an astronomical amount of turnover, with notable businesses such as Panera Bread losing close to 100% of their workers every year. On average, with a 100% restaurant rate, a restaurant has almost an entirely new staff every year. For managers, keeping an eye on turnover can be a powerful indicator of how the business is doing and can help pinpoint the causes of employee dissatisfaction in the kitchen. It can also allow managers to course-correct and address problems before they snowball into more significant issues.

However, some churn is unavoidable regardless of how you address your turnover rate. A large number of seasonal workers are employed in the restaurant business. Seasonal jobs are a common component of restaurant staffing, ranging from university students working summer jobs to an additional pair of hands during busy holidays.

So, before determining how to figure turnover rate, you must understand how seasonal labor fits into your business as a restaurant owner or manager. How much of your personnel work at your restaurant on a seasonal basis? Is there a time of year when you need to increase your staffing? When you're working on your turnover rate estimates, knowing these bits of information will come in useful. Suppose you detect a considerable rise in turnover in September when kids return to school. In that case, you won't be as concerned as if you discover a significant spike in turnover in February when you are not recruiting seasonally.

Understanding the circumstances around your turnover is critical to addressing and reducing it.

How to Calculate Turnover Rate for Your Restaurant

If you want to figure out how to calculate turnover, the first step is to decide on a time frame. If you want to compare it to the industry average, pick a year and then look at turnover monthly or quarterly to see how it's evolved.

Here’s how to calculate turnover percentage: divide the number of employees who have departed by the average number of employees necessary to completely staff your restaurant, then multiply the result by 100 to get a percentage.

Alternatively, if you can surmise how many people are required to staff, you can estimate it by adding the number of people you have at the start of a period to the number you have at the end of it and dividing by two.

Turnover Rate Equation:

(Number of employees who left / Number of employees it takes to staff the restaurant) X 100 = Your Turnover Rate

For example, let's assume it takes 30 people to staff your restaurant fully. Next, let's say that it's the end of the holiday peak season, and 25 people have left your restaurant.

The equation would be:

25(the number of employees left)/30 (the number of employees it takes to staff the restaurant).

After dividing the two, you are left with .833. To turn this into a percentage, multiply it by 100, resulting in an 83.3 percent turnover rate.

When to Start Reducing Your Restaurant Turnover Rate

Employee turnover in restaurants varies depending on the type of establishment. To decrease employee turnover:

Start by tracking which positions have the shortest and longest tenures based on your restaurant's staff history.
Determine which jobs take the longest to fill and which positions require frequent recruiting.
After you've acquired the appropriate data, pay attention to any trends you see, as they'll point you in the direction of regions where you should concentrate your retention efforts.

Perhaps you've lost a number of your original bartenders, but your back-of-house personnel has remained stable. What does the back-of-house do well that makes employees want to stay for the long haul? What is it that the bartenders are failing to do?

Next, conduct open and honest discussions with your whole team. When it comes to analyzing turnover, it's crucial to listen to your present employees' advice since they may have a different view on why your team members are seeking work elsewhere.

Inquire about their experiences working at your restaurant, including what they think management is doing well, areas where they might improve, and particular incentives you may provide to keep employees around for the long haul. Ascertain that they are aware that the talk is private and that they are allowed to speak freely and openly.

Unposed group of creative business people in an open concept office brainstorming their next project.

Next, start conducting exit interviews if you don’t already have them in place. This will provide you with some truthful information about why your employees depart and what you can do better in the future.

Pay attention to replies that come up again and again. If several employees say they don't see themselves staying for the long haul, examine what you can do to provide greater career growth and skills-based learning. Consider increasing your employee perks or reevaluating your team scheduling methods if many employees have expressed difficulty coordinating shifts with at-home obligations.

Come up with a strategy with the other personnel of your management team. Arrange a follow-up session with your complete team to inform them of what you've discovered, how you plan to handle it, and that you value their direct input throughout the process. Your employees will know that you mean what you say if you combine transparency with action.

Keep Track of Your Turnover

While measuring restaurant turnover is simple, it still requires keeping track of how many staff have gone and how many have been recruited.

Ideally, it would help if you used labor management software that integrates with your restaurant's POS to automate this procedure.

Ultimately, understanding how to calculate turnover rate and analyzing the data will help you see your company in a new light.

If you're looking for a way to streamline your operations, creating a better environment that your employees will want to stay in, contact our team at Revel Systems®. Our industry-leading restaurant POS system makes company operations easier than ever.