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According to a new report from People Report and Black Box Intelligence, the restaurant industry experienced job growth and increased starting salaries for unit level managers during the first quarter of 2013. However, it also experienced rising turnover for both management and hourly employees.
"These results are to be expected as unemployment continues to drop, albeit slowly. At the same time, the industry has relied on new units to fuel its growth, given the flat-to-negative same-store sales we have been reporting on since the middle of 2012," said Victor Fernandez, executive director of Insights for People Report and Black Box Intelligence.
Job growth continued for the restaurant industry during the first quarter of 2013, with year-over-year restaurant employee growth averaging 0.7 percent during the first three months of the year. In addition to the increased hiring levels reported during Q1, the expectation is for increased hiring throughout the industry during Q2.
The People Report Workforce Index, which is a quarterly barometer of market pressures on employment practices for the chain restaurant industry, reflected values indicative of employment growth for all segments within the industry, with the strongest growth coming from segments with the lower price points: quick service, fast casual and family dining.
The restaurant industry continues to rely on hiring relatively young employees: the median age for an hourly employee hired during 2012 varied from 22 years old for QSR companies to 25.5 years old for upscale casual/fine dining. However, that metric also means that half of all employees hired are in their mid-to-late 20s or older for full-service companies and what would be considered typical post-college age for QSR concepts.
Further, a quarter of all hourly employees hired last year were about 30 years or older for full-service companies and about 28 years old for QSR.
"This is very different from the typical image of the restaurant employee being a very young person just out of high school, especially in what are commonly known as 'fast food' restaurants," Fernandez said.
Turnover rates on the rise
While the industry continued to add jobs during the Q1, increased hiring also came as a result of having to fill the vacancies caused by rising turnover levels. Median annual turnover for restaurant managers increased for all segments during Q1 when compared with the previous quarter, with the biggest increases in turnover also happening in the fast casual/family dining and QSR segments. The only exception to this rising management turnover trend occurred in casual dining, which has reported flat annual turnover during the last three quarters.
Turnover pressures are also rising for store-level hourly employees across the industry. Median annual turnover increased for all segments during Q1 2013 when compared with the first quarter of 2012. The biggest increase in turnover was reported for the upscale casual/fine dining segment (6.5 percent increase); casual dining again exhibits less turnover pressures than other segments, with an annual turnover increase of 1.9 percent during Q1.
The report also shows added pressure to increase starting salaries for entry-level managers. As of March 2013, year-to-date median salaries for newly hired restaurant assistant managers (first level of salaried managers) increased for all industry segments, with the exception of upscale casual/fine dining, when compared with Q1 2012.
While the industry faced these accelerated hiring and turnover costs and rising compensation costs, sales were relatively soft during the first quarter of 2013, as reported by Black Box Intelligence, People Report's sister company. Same-store restaurant sales were down 1.3 percent during the quarter, while same-store traffic continued to remain in negative territory with a -3.7 percent growth. Although April did show an improvement for same-store sales with a 0.4 percent growth rate, the improvement was not enough for the rolling 3-month rate to register positive growth.
Read more about restaurant industry trends.