Burgerville: Insurance costs yield healthy payback

National Restaurant News - September 27, 2007
By DINA BERTA

The parent company of quick-service chain Burgerville pays 90 percent of its employees’ health care premiums.

 

 

 

VANCOUVER , WASH. (Sep. 24) —Paying 90 percent or more of the health insurance premiums for employees of its 38 Burgerville restaurants seemed the right thing to do for those workers, Vancouver-based parent The Holland Inc. decided. That decision, implemented in January 2006, also has turned out to be the right thing to do for the company’s bottom line.

Holland Inc. executives say that within a year of shelling out $1.4 million to cover the premiums—95 percent for single employees, 90 percent for employees with family plans—the company recovered all of its investment.

The Burgerville leaders said the return on investment came through cost savings from better employee retention and improved employee performance—fewer absences, less training for new hires, fewer mistakes, less product waste and better customer service.

Burgerville credits the improved customer service to helping generate a 2.5-percent increase in sales, resulting in an additional $900,000 in net profit last year.

At a time when quick-service chains, franchisees, and regional and independent operators struggle to provide employee health care, Holland Inc.’s experience demonstrates how such an employee perk can help a business cut turnover and stay competitive.

“The fact is, it’s paying for itself,” said Jack Graves, chief cultural officer for The Holland, which employs about 1,050 hourly workers at its Burgerville fast-food restaurants in Washington and Oregon.

Graves began tracking the costs and effects of the benefits program when it first rolled out in January 2006. He monitored the savings Burgerville experienced by not having to recruit and train as many new hires, and gauged the program’s effect on employee morale and performance.

Companies that don’t think they can afford to invest so much in health insurance should take a close look at how much money they spend on employee turnover, Graves said.

“What are your training costs?” he asked. “Your uniform costs? Do you have people who can help you manage food costs and productivity? How much is it worth to have people who want to work for you and who know you care about them?”

Burgerville’s annual hourly turnover, which had been as high as 130 percent, was only 54 percent for 2006. Management turnover, which had also been higher than the industry average at between 34 percent and 35 percent, fell to 17 percent.

The chain found it lost fewer people and achieved better attendance from employees.

“We had one of our general managers report his store went 45 days without a single person calling in sick,” Graves said. “That does not happen in this industry.”

The Holland’s experience serves as an example for the industry that is hampered by high turnover and a tight labor market, said Art Marshall, a past president of the Oregon Restaurant Association who now runs a consulting firm, Marshall and Associates in Vancouver.

The restaurant industry cannot continue to turn over 114 percent of its hourly workers every year and 32 percent of its managers if it expects to continue growing, even if there may be signs that the low unemployment rate of the past few years is rising, he said, citing turnover estimates by the industry research firm People Report.

“A recession might mean we do not have to recover as much, but we still have to recover,” Marshall said. “We have to reduce turnover and pay attention to hiring right and training right. Businesses will dry up and blow away, especially independents, if we do not cut turnover.”

Nearly 72 percent of eligible Burgerville employees signed up for the insurance. The plan allowed employees to get coverage for 319 family members, Graves said. Employees who have been with the restaurants for six months and put in more than 20 hours a week are eligible. They pay $15 a month for coverage. Health care is provided by Kaiser Permanente and HealthNet. The plan also includes dental and vision care.

Jack Graves, chief cultural officer of The Holland Inc., parent company of the Burgerville chain

The decision to foot most of the bill fell in line with Holland’s mission statement, “Serve with Love,” Graves said.

“It shows we’re walking the talk,” Graves said. “Our people get that, and they value the ability to take care of their families. They do a better job. They’re at work when they are supposed to be. Attendance goes up. Training improves.”

The insurance benefit was a lifesaver for Danielle Gash, a part-time Burgerville employee in Vancouver. Gash mans the drive-thru window and the grill as a part-time employee, but she still qualifies for the insurance. She has a rare, chronic disorder that prevents her body from absorbing the proper amount of magnesium. Without medication she can suffer grand mal seizures.

A three-year employee at Burgerville, Gash said she has stayed with the chain in part because of its health plan.

“If I didn’t have health insurance, my medicine would be really expensive,” she said. “It’s better to have the insurance for $15 a month. I also like working here. The people are fun to work with.”

Burgerville’s health plan coverage has also resonated with customers, Graves said.

“What everyone is skeptical about and has trouble accepting is that guests don’t mind and actually go looking out of their way for companies that take on these socially responsible behaviors and spend their money there,” Graves said.