Edit

Paying the middleman

money cash hand wage

Question:

I work for a small privately owned pizza restaurant in my town. I am in training to take over the restaurant for the owner, to basically be the GM. I took a lower wage with the agreement that I would be eligible to earn quarterly bonuses.

Business has flourished since I first started. I have incorporated a customer rewards program and also utilize it regularly to help bring in new customers. I have taken over the beverage order, hired someone to redesign and update our webpage and created new and updated menus. While creating the menus, I finally convinced my boss to raise prices on certain items after showing him what our competitor's prices were. I've also assisted in boosting employee morale by being a team player and leading by example and respect.

Overall, before the new prices even take effect, I estimate an easy 20-30% in sales growth in the last four months. My question: What would be a reasonable quarterly bonus goal and payout? I'm feeling a little lost on the subject, seeing as I have not earned a bonus within a smaller company like this before.

– Sarah, GM in training, Zoe’s Pizza and Seafood, Southbridge, Mass.

Answer:

First, congratulations on what sounds like tremendous success! I’m very happy for you. My overall advice is harsh but simple: too late. You should have agreed to the terms of your new position before accepting it. But that’s where the “in training” part of your title comes from. Hopefully you can have a frank conversation about your value and accomplishments to negotiate a structure that is favorable both for you and the operation. And if not, I’m sure you have options given your success.

This is another area where we can bemoan the lack of standard industry benchmarks. Some managers are paid bonuses based on performance; others are not. Operations that use bonuses have a variety of structures. To illustrate this, I spoke with three industry leaders who have held both GM and corporate operations positions at their companies that show the diversity of approaches in our industry. All asked to remain anonymous, as they are sharing company policies.

  • The first was adamant that he never worked under or offered a bonus structure in his operations. “I am always suspicious of complicated bonus structures. They can be used as ‘grass is always greener’ poaching tactics to lure good people away and rarely deliver serious compensation. Also, there are too many factors that go into a successful restaurant. If business is down because of construction scaffolding or costs of a signature item go up, it’s not fair for managers’ pay to rise and fall with that. I believe in people who give me their all regardless of the numbers, and those who stick with me get raises because of that.”
  • The second, who comes from a large fine-dining group that does use bonus structures, says, “The talent pool is small, so we have to be creative. When we have good people, we typically throw more money at them to keep them. Our main structure is based on a combination of net sales over budget and net profitability over budget. I think it’s important to use both so people aren’t focused too much on cutting costs. It made me always strive to think about how I could get 10-15 more butts in the seats each night. It makes all of us better business people. We understand the P&L and strive to improve.”
  • The third, GM of a casual-dining pub in a smaller group, says, “I have worked in all different aspects of the industry. I worked in the casino industry as a beverage manager at a pretty low salary, but with a bonus each week of 1% of the beverage sales in the nightclub. This worked out well for both myself and the casino. Win/win.”

This is by no means a comprehensive list. Back-of-house bonuses are often tied to reducing labor, food or prime cost percentages. Both back- and front-of-house managers may earn bonuses on improvements to costs or revenue over previous periods, increases in overall sales, or continued performance from signing bonuses through quarterly bumps.

Our pub manager continues, “I now think that managers should have proof of what they have done to help draw people in, how they saved money, or what they did and how it worked to increase sales. Know your worth and have the facts to prove it before you ask for compensation.”

More on manager compensation here

Want to ask Advice Guy a question?

Trending