Steak and Shake

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The Challenge: When Peter Dunn took over as CEO of this fast-casual

restaurant chain, earnings had slipped, and crew turnover stood at 200 percent—

markedly higher than the 129 percent average reported by other

restaurants in its category. At 50 percent, management turnover was also

excessive.

If Dunn was going to achieve his goals to turn around the company

and fuel an expansion, he knew he was going to have to reduce the high

turnover among store employees because it was negatively impacting guest

satisfaction scores. The company told investors that it could save $2 million

to $4 million per year by increasing the retention of front-line workers. He

also estimated that bringing manager turnover under control could save

another $1 million to $2 million per year.

Strategic Actions: Dunn hopes to build customer retention based on increased

employee retention, an idea known as building a ‘‘virtuous cycle,’’

similar to the ‘‘service-profit chain’’ described in Chapter Ten. One of the

ways the company planned to do this was by giving store managers more

freedom to make decisions about how to increase revenues and efficiency.

For the first time ever, Stake and Shake has provided managers with statistics

on each store’s operations, including turnover rates, customer satisfaction

data, drive-through efficiency, and which items produce the most

profit. Managers were challenged to create their own business plan for their

stores and share them with employees

The company also decided to increase benefits to front-line workers,

starting with a 50 percent reduction in their vision and dental expenses, in

addition to the health care insurance, and a full range of other benefits it

already offers. One of these benefits is life insurance, which the company

believes produces the greatest reduction in turnover for the money spent.

Stake and Shake has also increased the amount of time new hires spend

being oriented, based on industry data showing that restaurants that give

four or more hours of orientation enjoy turnover rates 34 percent lower

than those who provide only an hour or two.

The Results: In less than a year, manager turnover had dropped to 30 percent

and turnover among front-line workers was down 24 points, to 176

percent. Guest satisfaction had improved from 81 percent to 86 percent

and same-store sales had increased by 12 percent.7