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NEXT Front of the House Economics: Optimizing Payroll Investment
Contents Scheduling Metrics 4 Service Levels 14 People vs. Real Estate 24 Tools of the Trade 27 3
Fundamental Front of House Retail Math Formulas Average Transaction (AT) Total Sales $ Number of Transactions Units Per Transaction (UPT) Total Units Sold Number of Transactions Conversion % Number of Customers Number of Tickets 4
Fundamental Scheduling Formulas % of Sales Total Sales $ x. 15 = payroll budget $1000 per Full Time Equivalent Daily Sales $ x 8 hrs = scheduled hours $1000 Gross Margin Return on Employee (GMROE) Gross Margin $ = GMROE Total Payroll $ 5
Fundamental Retail Math Formulas Calculate this month’s AT, UPT, and GMROE Gross Sales: $65, 250 Total Payroll: $9, 850 Transactions: 715 Units sold: 1, 240 Average Transaction Units Per Transaction Total Sales $ Number of Transactions Total Units Sold Number of Transactions $65, 250 715 = $91. 26 1, 240 715 = 1. 73 Margin: 42% GMROE Gross Margin $ Total Payroll $ $27, 405 $9, 850 = 2. 78 6
Mythbusters: Payroll Edition Common “Golden Rules” > $3. 00 GMROE > $1, 000/FTE ($125/employee/hour) > 15% Revenue 7
Mythbusters: Payroll Edition Scenario 1 > Open Sundays > 43% GM > Average Wage: $15/hr FTEs and Payroll Sales $500, 000 $2, 000, 00 $3. 00 GRM 0 E $71, 667 (2. 3 FTEs) $286, 667 (9. 2 FTEs) $1, 000/FTE $42, 975 (1. 4 FTEs) $200, 643 (6. 4 FTEs) 15% Revenue $75, 000 (2. 4 FTEs) $300, 000 (9. 6 FTEs) 8
Mythbusters: Payroll Edition Scenario 2 > Open Sundays > 40% GM > Average Wage: $15/hr FTEs and Payroll Sales $500, 000 $2, 000, 00 $3. 00 GRM 0 E $66, 667 (2. 1 FTEs) $266, 667 (8. 6 FTEs) $1, 000/FTE $42, 975 (1. 4 FTEs) $200, 643 (6. 4 FTEs) 15% Revenue $75, 000 (2. 4 FTEs) $300, 000 (9. 6 FTEs) 9
Mythbusters: Payroll Edition For the $500, 000 store, $3 GMROE is equivalent to 12 -17% of Revenue 10
Mythbusters: Payroll Edition For the $2, 000 store, $3 GMROE is again equivalent to 12 -17% of Revenue 11
Mythbusters: Payroll Edition For the $500, 000 store, $1, 000/FTE yields a payroll of only $40, 110, significantly lower than the other rules. 12
Mythbusters: Payroll Edition For the $2, 000 store, $1, 000/FTE yields a payroll of only $187, 267, also significantly lower than the other rules. 13
Planning by Service Levels > How many people should we schedule today? > Rev/Employee? > GMROE? > % of Sales? *Based on 43% margin and $15/hr 14
The Incremental Associate > $4, 000 Day > What if you add one more? *Based on 43% margin, $15/hr rate and 15% payroll burden If you added an additional associate to the floor, could they generate more than $40 an hour in incremental sales? 15
Planning by Service Levels Average Footwear Price 43% of the days with less than 20 transaction had a higher average sale than the highest day with 20 or more transactions. 16
Accounting for Accounting > $4, 000 Day > How many would you schedule? > $1000 FTE works for sales…. BUT what are we forgetting? Back of House 17
Exploring a Combined Approach > GMROE to establish the total payroll budget > $1, 000/FTE to establish FOH and BOH budgets 1 GM $ / GMROE Target = Total Payroll Budget 2 Sales / # of Days Open/ $ per FTE = FOH FTEs 3 # of FTE’s for FOH * 2080 * Average Wage = FOH Payroll 4 Total Payroll Budget - FOH Payroll = BOH Payroll 18
Exploring a Combined Approach = $500, 000/363 days /$1, 000 = 1. 38 FTEs * $14 * 2, 080 Hours = $71, 667 – $40, 110 = (43% x Sales) / 3 : $3. 00 GMROE, Total Payroll Budget 19
Exploring a Combined Approach > Owner role initially includes GM, Floor Manager, and buyers > As sales increase, responsibilities are distributed, first on a part-time basis, with associates filling both FOH and BOH roles > Owner may continue to fill a specific role as the business grows, but the roles must be clearly defined 20
Exploring a Combined Approach Quick Tips > 65% FOH & 35% BOH payroll allocation > Salary for FT Back of House only > Part Time rocks paid by stipend 21
One-Timers > 8 hour Saturday > 70% Footwear > Average Footwear Price: $115 22
One-Timers > 8 hour Saturday > 90% Footwear > Average Footwear Price: $95 Mathematically, this works, but What does it not consider? 23
Plan by Real Estate: 1, 400’ Showroom Fitting Womens Footwear Fit Rooms Fitting Accs Mens Womens Ca wr sh ap Decomp ression zone Accs Mens 24
Plan by Real Estate: 3, 500’ Showroom Footwear Fitting W Womens Mens cs Ac Cash wrap s Decomp ression zone Womens om en W Accs W Mens Accs Womens Mens Fitting Accs Fit Rooms Womens 25
Zone Offense Footwear Fitting W Womens Zone 2 Mens cs Ac Cash wrap W Womens Decomp ression zone om en s Zone 3 Accs W Mens Accs Womens Mens Fitting Zone 1 Fitting Accs Fit Rooms Womens > Guarantees full service on busy days > Allows for ‘hand off’ so footwear customers are not abandoned > Success formula combines scheduling and training 26
Tools of the Trade • Scheduling tool demo: When. To. Work. com • Faculty: Skinny Raven Managers James Dooley & Ben Stolpman 27
Weekly Schedule 28
Graphical Weekly Schedule 29
Employee Time Off Preference 30
Unpublished Blank Schedule 31
Time Off Requests 32
Import Previous Week Template 33
Messaging 34
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