People Report: Reduced turnover helps restaurants fight recession

People Report: Reduced turnover helps restaurants fight recession

DALLAS —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

Although average same-store sales have declined in the past two years for the more than 100 companies included in People Report’s consortium of members, the average same-store sales for the winners of the 2008 People Report Best Practices awards were 3 percentage points to 4 percentage points higher than other operators included in the index, said Teresa Siriani, president of the Dallas-based firm. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

People Report, which tracks human resources practices and evaluates performance metrics for its members, each year singles out companies with low hourly and management turnover, management diversity, and community involvement. The honors are given in four industry categories—quick casual, fast casual and family dining, casual, and upscale casual and fine dining—and were presented earlier this month during People Report’s two-day Annual Best Practices Conference, which carried the theme “Built to Serve & Last.” About 300 restaurant executives attended the conference at the Dallas/Addison Marriott Quorum hotel. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

The award winners had hourly turnover rates that were lower than People Report’s average segment rates of 147 percent for quick service, 133 percent for family dining, 131 percent for fast casual, 105 percent for casual dining, 92 percent for upscale casual and 65 percent for fine dining. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

The award winners also were below the average rates for management turnover: 41 percent for quick service, 30 percent for family, 35 percent for fast casual, 27 percent for casual, 25 percent for upscale casual and 23 percent for fine dining. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

Siriani reported that among member companies the longer a general manager’s tenure, the better the average same-store sales for the restaurant. Those whose general mangers stayed in positions an average of five years or more had a 2.6-percent increase in same-store sales. Those operations where the managers stayed fewer than three years had a 1.7-percent dip in same-store sales. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

But, she cautioned, the economy is affecting turnover further. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“Before we start high-fiving ourselves on our turnover numbers and feeling fat and happy about it, don’t forget that people are feeling a little stretched; they are kind of hiding out in their jobs,” Siriani said. “Now is not the time to rest back on your laurels and say, ‘I’m such a great employer.’ Now is the time to be hunkering down and saying: ‘Who is my best talent? I want to keep my best talent, and I want them to be sure and know I appreciate them.’” —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

In addition to turnover rates, management diversity and community involvement were considered in selecting the Best Practices award winners. This year’s awards went to Whataburger Inc. [3], Golden Corral [4] Corp., Olive Garden [5] and Claim Jumper [6] Restaurants. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“I walked in here like everyone else; we’re struggling,” Robert Ott, president and chief executive of Irvine, Calif.-based Claim Jumper, said in accepting the award. “Arizona, Nevada, California—those are not pretty states economically. But I walk out here today believing we’re going to be fine. We’re going to get through this. Everything has a season. When all is said and done, the things that matter the most are the people you work with, the legacy you leave behind and how you treat others.” —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

The restaurant industry is still very much a people business, and how well employees perform is a consideration for investors, said members of a panel moderated by Wally Doolin, founder and principal of Black Box Biz, the holding company of People Report and other businesses engaged in service sector business intelligence. He is also vice chairman and interim chief executive of ESP Systems, a Charlotte, N.C.-based technology company specializing in casual dining, as well as former chief executive of Buca Inc. [7] and Carlson Restaurants Worldwide [8]. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“How people in the store work when the manager is not there tells me more about the business than any financial statement,” said Rod Guinn, operating partner for Focal Point Partners, an independent Los Angeles-based investment banking firm. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

His fellow panelists agreed. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“We see a strong correlation between groups that have relatively low turnover and a happier employee base and companies that are performing well financially,” said Damon Chandik, managing director of the Restaurant and Consumer Group for Minneapolis-based Piper Jaffray. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

Operators need to stay focused on the future, said Joe Taylor, vice president of communications for Dallas-based Brinker International [9]. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“Investing in your people is investing for a long-term solution,” Taylor said. “It may be 2010 before you see the fruition of some of that investment. Approach [the difficult economy] as an opportunity but with a crisis management style and focus—communicate aggressively, be willing to talk about the tough times, the bad news, the things we are going to have to do, both individually and collectively as an industry to work our way through.” —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

Communicating clearly with employees is critical these days, said restaurant operators who discussed their strategies with moderator Ellen Koteff, editor of Nation’s Restaurant News. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

“We’re really honest with people,” said Ray Blanchette, chief executive of Houston-based Joe’s Crab Shack. “We brought all of our general managers in two weeks ago and told them exactly where we stand: ‘As a result of what’s happening in equity markets, we’re going to have to grow organically, with our own cash as opposed to leveraging the business and growing.’ We told them that. ‘This is exactly how [many] fewer restaurants we’re going to open.’ I think people just like honesty.” —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.

Also during the People Report conference, Phil Hickey, former chief executive of Rare Hospitality [10], received the group’s Legacy Award. Brinker’s Chili’s Grill & Bar [11] chain received the Heart of the Workplace award for its community involvement, and Dallas-based Dave & Buster’s [12] received the Catalyst Award for most improvement in turnover rates and management diversity. —Notable employment practices have not spared restaurant companies from the tough economy, but they have helped them better weather it, according to People Report officials.