Gale Street Inn has been a Chicago hot spot since 1963, but it abruptly closed down in June after more than 60 years in business — and the owner cites staffing problems.
According to an NBC5 Chicago report, the establishment’s owner, George Karzas, stated in an Instagram announcement that "the challenges of hiring and maintaining quality personnel have been insurmountable for an extended period. We’re fatigued with providing subpar service… but we recognize that overextending our current team is not a viable solution. The demand from customers simply outweighs our staffing capacity."
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Despite the gracious nature of Karzas’s announcement, noting his "sad but satisfied heart," the shuttering of this established eatery highlights the challenges inherent in the restaurant business — an industry known for its razor-thin profit margins and high employee turnover rates.
Here’s a look into the issue of employee retention and what small business owners can do to retain quality employees in an increasingly tough economy.
Employee turnover
Employee turnover is when an employee leaves their role for another job opportunity, retires, or is let go. It not only impacts the business owner, but also the other workers who will have to make up for the loss of the employee by taking on extra work, if only temporarily. Turnover can also have a significant impact on morale, especially if the employee who left was with the organization for a long time and had a lot of knowledge that benefitted the team.
In the restaurant industry, employee turnover is an issue that almost amounts to a crisis. Restaurant management software company 7Shifts reports that the average turnover rate for the restaurant industry is 79.6%. For fast food restaurants, it’s a staggering 123%. To put these figures in real terms, the average restaurant will have to replace about four out of five employees each year. In fast food and other quick service restaurants, 7Shifts says, “it’s like replacing 31 employees when your average workforce size for the year is 25.” They report that the average tenure in the restaurant industry is just 110 days.
In the wider American workforce, the Bureau of Labor Statistics notes that the Great Resignation (an economic trend in which employees voluntarily resigned from their jobs en masse, beginning in early 2021 during the COVID-19 pandemic) saw employees leaving their jobs at a higher rate than ever before across the board, with a peak 3.5 million people quitting their jobs in February 2024.
With workers in the restaurant industry leading this trend, 7Shifts points to the issue being not just the low pay or irregular hours in this field, but poor hiring practices on the part of restaurant owners. They wrote, “when you hire someone who doesn’t share your team’s values, no amount of training or tips will make them engaged in their work. When values match, employee satisfaction increases and turnover decreases.”
Similarly, bad hires can lead to your other employees picking up the slack — both in customer service and with their other duties that keep the restaurant clean and functional. If employees feel overworked because they’re making up for a bad team member, it can impact their own morale.
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The struggles of restaurant workers in America
Restaurant staff who depend on gratuities are facing significant financial challenges in the current economic downturn. With the federal tipped minimum wage frozen at a mere $2.13 per hour, these workers rely heavily on customer tips to earn a living wage.
But some suggest that ‘tip fatigue’ has set in across the country, with tip rates falling from their pandemic high. Restaurant employees who don’t make enough tips to earn minimum wage must be paid out the difference by the restaurant.
While some states and cities are raising minimum wages for tipped employees, Toast reports that the average salary for a full time restaurant employee is just $31,000, and can be as low as $15,080 for 40 hours per week. This is just above the poverty line, which sat at $14,891 for a single person in 2023.
How small businesses can retain their staff
In an industry that’s fiercely competitive, the best restaurants are not only those with the most innovative menus or the trendiest decor, but those with the best employee cultures. 7Shifts recommends restaurants struggling with employee turnover perform a culture audit, gathering key stakeholders to discuss your values, and who on your team best exemplifies these values. Getting clarity on what’s working will help you improve your culture and make better hiring decisions in the future.
They also recommend establishing clear lines of communication, and for restaurant owners and managers to make themselves available to their employees in-person for regular check-ins. This goes hand-in-hand with monitoring the workload of employees, both as a group and individually. Look at who is working hardest — they may be your most valuable employees, and also the ones at the highest risk for quitting.
In the 7Shifts interview, Mike Bausch, owner of the Andolini’s restaurant group in Tulsa, reveals his remarkably low 35% annual turnover rate across six locations. Bausch credits this success to his philosophy of "scheduling with empathy," which prioritizes staff needs while managing operations.
“I think it’s extremely undervalued how directly connected a schedule is to staff morale, attrition and retention,” says Bausch. He encourages all managers to work with employees to make their schedules work for their lives, and not the other way around.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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