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NEXT Front of the House Economics: Optimizing Payroll Investment

NEXT Front of the House Economics: Optimizing Payroll Investment

Contents Scheduling Metrics 4 Service Levels 14 People vs. Real Estate 24 Tools of

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

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

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,

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)

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:

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:

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

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

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

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

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?

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?

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

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? >

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,

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

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

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

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 > 70% Footwear > Average Footwear Price: $115 22

One-Timers > 8 hour Saturday > 90% Footwear > Average Footwear Price: $95 Mathematically,

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

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

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

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:

Tools of the Trade • Scheduling tool demo: When. To. Work. com • Faculty: Skinny Raven Managers James Dooley & Ben Stolpman 27

Weekly Schedule 28

Weekly Schedule 28

Graphical Weekly Schedule 29

Graphical Weekly Schedule 29

Employee Time Off Preference 30

Employee Time Off Preference 30

Unpublished Blank Schedule 31

Unpublished Blank Schedule 31

Time Off Requests 32

Time Off Requests 32

Import Previous Week Template 33

Import Previous Week Template 33

Messaging 34

Messaging 34