The Fast Food Industry Crisis That's Only Getting Worse
The next time you visit your local fast food joint, and you happen to like the service, you might want to take the opportunity to compliment the staff — because chances are, you're not likely to see that person again when you return.
Fast food restaurants are facing a growing crisis over the hiring and retention of its employees — in some cases, restaurants lose more than 100 percent of its workers a year. "In the restaurant industry, turnover is 130 percent, turning over more than a full workforce every year," Panera CFO Michael Bufano tells CNBC. "We are a little under 100 percent, but still a huge number."
The problem with staffing at fast-food restaurants isn't going away
Official government statistics from the Bureau of Labor Statistic show turnover rates for the 2015 to 2017 period at close to 82 percent, but industry experts say that figure should be much much higher — they are looking at a possible turnover rate of 150 percent — and that the problem isn't going away anytime soon.
Part of the problem lies with the fast-food industry's hiring and training model. In order to keep hiring costs down, fast-food jobs are standard and routine, and no special skill is needed to do the work. "If you lose someone, it is not a real cost, because they are so easily replaceable," Rosemary Batt, chair of HR Studies at the Cornell School of Industrial Labor Relations says. "The industry has thrived on this HR model of turnover-proof jobs for many years, because they could get away with it."
"Now turnover is absolutely excessive, and some chains are beginning to put numbers on the cost of turnover," Batt says. "I know some chains that are focused on it. Because turnover is getting so serious and because chains have the ability to do the HR analytics, they can begin to cost out turnover and say, 'This is not a cost we have taken seriously, because historically we were counting on high turnover model as acceptable.'"
Experts say fast food companies need to invest in technology and people
A survey Batt helped carry out in 2013 shows that the cost of fast-food turnover was at $1,600 per worker — but turnover rates have spiked since then, and the National Restaurant Association says the actual cost per worker is now at $2,000. And with no fix to the labor problem in sight, food industry experts like David Portalatin says, "Restaurants will increasingly look to technology to solve the problem. Both technology to train and automate."
Automated kiosks and digital ordering could well be the only long-term solution for fast-food restaurants, because most human workers are no longer interested in growing careers within the food industry, thanks to low wages, a lack of a career path, and the commonly-held belief that fast-food jobs are temporary. But even technology is at best a band-aid because labor academics say that in order to fix the turnover problem, what fast-food companies really need to do is invest in technology and support employee development at the same time.