Another ride coming to the end...

We do business in a resort town. That means we have “seasons” in a sense that some other operators do not experience. The ski resort closes tomorrow. We also have a great summer season so by the 4th of July we will be cranking again.

In effect, we go from a population peak of 30-35K down to 10-12K in our delivery area. To say that it slows down does not begin to describe it.

Our peak volume is over 30K per week. A couple of weeks from now when all the tourists are gone, all the second home owners are back at their main residences, the seasonal employees have left town and the schools are out for break and many families are enjoying a beach someplace our volume will drop to 4K.

We are approaching our 17th anniversary in business so this is nothing new. Over the years we have developed strategies to deal with it… so while we enjoy the casual pace of the next 8 weeks we will be cleaning ovens, tearing down the dish pit, painting the stairs all to create hours for key employees, we will also be working to manage costs in a way we really don’t have to when things are rocking.

A while ago I posted about a new way of tracking labor for the purpose of bonuses to our manager team. I have been very happy with it and recently re-worked it to refine it. I started with brackets of 2-3K in sales. The result was that the goal was a gimme at the higher end of the bracket and very tough at the lower end. We now have a revenue per employee hour worked goal for every bracket of $1000 in weekly revenue. Here is how I did it:

Tabulated sales and hours worked by week for the last 4 years. This gave me 208 data sets.

I sorted them by weekly revenue and divided the sales for each week by the number of labor hours to get a value for revenue per hour worked.

For example, I might have had 10 weeks where our sales were between $7,000 - $8,000 and the range of revenue per hour worked from $32 to $38.

I selected a goal for each bracket that had been achieved a few times in the past so if the revenue per hour worked values for those 10 weeks were 32, 32, 34, 35, 35, 35, 36, 37, 37, 38 I would take $37 and make that the goal.

My team has to recognize that it is possible since they have done it before.

It is a measurement that can easily be taken every day or week to date.

It can be applied to scheduling by looking at the revenue forecast and adding up the hours scheduled.

All in all, this has been MUCH easier for my crew to understand and use than a % cost.

The bonus available is $1.00 per hour to the GM and 50 cents per hour to each of the assistant managers if they hit the goal. (I only pay bonus on the first 40 hours per week. Overtime is bonus enough!) On the example above the difference between $33 per hour and $37 per hour on 8K sales would be about 25 hours meaning that we would have had 25 hours less labor cost. This would cost us maybe $300 blending driver wages, cook wages and manager wages. My exposure for bonus is $80 if they hit the goal.

Since we started the program several months ago the team has only missed the bonus a handful of times.

Good for you, You are a great operator.
George Mills