The Strong American Economy and Employee Churn Rates
The strong American economy has increased churn rates to the highest they have been since 1995. High job creation and low unemployment rates are primitive factors in increasing churn rates in low-paying industries such as hourly workers in quick service and casual dining restaurants, which only average $9.73 an hour.
HOW THE ECONOMY STATE HAS IMPACTED THE RESTAURANT INDUSTRY
CHURN RATE HAS INCREASED
The churn rate in QSR in America has increased to 150%. This is the highest it has been since 1995. This means that restaurant owners need to hire three people for every two people needed. Due to low unemployment rates and higher salary positions available, competition for employees in the quick service and casual sectors of the restaurant industry has become brutal. The booming economy has also increased competition in the talent pool. QSR are offering higher wages and it is not uncommon for employees to bounce from one restaurant to another.
In April 2019, 263,000 new jobs were added by employers to the US economy. High job creation and low unemployment means that most Americans who wish to seek employment will be able to find a job easily and those "who lose their jobs, or decide to leave, probably won’t have a hard time finding another position", thus increasing churn.
Business services, health care, social assistance, and construction were the leading industries providing new jobs this past April. Such growth has given causal restaurant workers more opportunities to look for employment in other industries. The current labor shortage is making it hard for employers to fill all available positions.
CHURN Negatively impacts the RESTAUARNT AND overall Guest experiences
A typical restaurant losses $5,864 per a single employee loss. This can be broken down as $176 for pre-departure, $1,173 for recruiting, $645 selection, $821 training, and $3049 for productivity loss.
Churn also effects guest experience. This is because churn can create an environment in which employees are under trained, understaffed, short tenured, not fully trained, and disengaged with their jobs. Poor retention makes it more challenging for restuarant managers to provide guests "a superior experience that keeps them coming back because under trained employees can increase errors and decrease the customer experience." Being understaffed can also limit the restaurant's hours of operation
INCENTIVE-BASED PROGRAMS TO INCREASE EMPLOYEE RENTENTION ARE ON THE RISE
The current strong state of the United States economy is impacting churn rates in quick service and casual restaurants because it is forcing owners to offer incentives in an attempt to increase employee retention. Restaurants struggle to keep hourly employees on staff due to the low minimum wage. The current unemployment rate in America is 3.6%, the lowest since 1969.
This makes finding replacements to be especially challenging. CNBC reported that "sending employees back to school — even to pursue careers in other industries — has become a remedy. Chipotle Mexican Grill, McDonald’s, Taco Bell, Starbucks and other QSR have begun to offer tuition benefits. Although this may appear counter-productive, studies have proven otherwise, as indicated by the fact that Starbucks reported that employees are "1.5 times more likely to stay with the brand and are being promoted at 2.5 times the rate of those that are not enrolled" [in tuition assistance programs].