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Articles
Turnover Freedom Day
January 1, 2007
Originally published in the QSR Side Order Newsletter
In 2006, Tax Freedom Day was April 26 (according to the Tax Foundation). On average, every American works from January 1 thru Tax Freedom Day just to pay their taxes (federal, state and local) - EVERY dollar you make during that time goes to the government. Let's take this approach to wake everyone up to the cost of turnover!
So, when does Turnover Freedom Day occur? It will vary by restaurant, but Turnover Freedom Day is the day you no longer have to spend all your profits on turnover.
The cost of turnover per employee varies from $500 to $2,300 in various reports from groups such as the National Restaurant Association and The People Report. The costs of turnover include: recruiting and hiring a replacement, training time, trainer time, lost productivity, uniform costs, etc. Let's look at an example to calculate Turnover Freedom Day using only $500 as the cost per employee:
Annual Sales $800,000 ($2,191 per day)
Annual profit $80,000 (10 cents on the dollar)
Annual Employee Turnover 200%
Base Staffing 30 employees
In this case, the restaurant hires and trains 60 people per year (200% turnover x 30 employees). At $500 per employee, the cost of turnover is $30,000. Since the restaurant makes 10 cents on the dollar, $300,000 in sales will have to be generated to deliver $30,000 of bottom line profit.
Since the restaurant averages $2,191 per day in sales, it will take 137 days of sales just to cover the cost of turnover. The Turnover Freedom Day is May 17th! Everything the restaurant does during this time is solely to cover the cost of losing turnover. Do you want to work over 1/3 of the year just to make enough money to cover the cost of losing employees? Wanna get your life back? Fix this issue and move your Turnover Freedom Day earlier in the year by reducing turnover - hire, train, reward, retain!