sealPurdue News

October 1999

Benefits for fast-food workers improve bottom line

WEST LAFAYETTE, Ind. -- Hold the pickle, hold the lettuce -- but don't hold back on benefits for part-time employees. That's the message to fast-food hamburger chain restaurant owners from a Purdue University survey of wages and benefits in the industry.

Restaurants typically have higher employee turnover rates than other industries, yet the Purdue study found those rates were lowest for restaurants that offered part-time workers benefits such as Christmas bonuses, incentive pay and regularly scheduled wage hikes.

"Employee turnover can drive a stake in the heart of what makes franchised-chain restaurants such powerful businesses," says Joseph La Lopa, assistant professor of restaurant, hotel, institutional and tourism management and co-author of the study.

"Customers expect consistent and efficient service when they purchase a burger and fries. If a restaurant is constantly hiring new employees to replace old ones, that may compromise its ability to deliver a satisfactory product every time."

In the study of 209 fast-food chain restaurants in Indiana, managers reported annual employee turnover rates of between 133 percent and 238 percent. The findings indicated that 72 percent of all the restaurants' employees were part-time workers.

"Restaurant managers hire part-time workers to keep labor costs down, but if the workers leave, that may cost more than what it would take to offer even simple perks like a Christmas bonus," La Lopa says. Some of the costs of turnover are hiring and training new employees, lost sales because of slower service, and poor customer relations.

"In real terms, if it takes 50 persons to staff a restaurant and you have 150 percent annual turnover, then you have to hire 75 people every year just to maintain proper staffing levels," he says. "Hiring and training just one replacement worker could cost you $500. Replacing all those employees could cost the restaurant as much as $37,500."

In comparing the various restaurants, the researchers calculated the mean turnover rates based on the various wages and benefits offered. For example:

  • Christmas bonuses -- those who offered them had 137 percent turnover, while those who didn't experienced 191 percent turnover.

  • Scheduled wage increases -- 169 percent vs. 199 percent.

  • Life insurance -- 156 percent vs. 191 percent.

  • Health insurance -- 174 percent vs. 209 percent.

"Interestingly, some of the cheapest benefits were indicative of some of the lowest turnover rates," La Lopa says. "For example, life insurance benefits are one of the cheapest benefits to offer restaurant employees."

Or, he suggests, why not give employees a chance at a $500 scholarship, when the cost of replacing one worker could cost the same amount?

The high turnover rates in this study reflect the trend across the country. The National Restaurant Association reported in 1995 that annual turnover rates for hourly restaurant employees were about 100 percent. Other researchers have found turnover rates as high as 240 percent.

The study data were collected during the summer of 1998 through a mailed survey. The study was conducted with Ray Kavanaugh, head of Purdue's Department of Restaurant, Hotel, Institutional and Tourism Management, and Anthony Felli, a graduate student in the department.

Source: Joseph La Lopa (765) 494-6218;

Writer: Beth Forbes, (765) 494-9723,

Purdue News Service: (765) 494-2096;

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