Last thread I found was in 2007, so I figured i’d start a new one.
For the sake of discussion, my business is in Illinois, as laws differ per state.
Currently, all my drivers are paid minimum wage because they are cross trained to take orders, clean, etc… However, we are reaching the point that I need just dedicated drivers who do nothing else but deliver as our delivery sales are growing and my cross trained employees are maxing us inside. This is a good problem for us to have because this is where the business can truly flourish on the bottom line. This allows me to create a profit sharing program later that I’ve been anxious to start working on for my management team as I feel they are underpaid and deserving of incentive for more. I need to get my cost structure perfected though before I can do such a program.
My commercialized competition nearby has paid some drivers as independent contractors and $7 instead of the min wage of $8.25. I know their labor is continually under 35%. I’m trying to figure out if this is one of the reasons. I’ve seen their financials. They do well over a million a year in sales with 23-25% food cost and 33 to 35% labor with NI of 10 to 15%…which is where I’m guiding my business model towards as our product is superior, but their cost structure is currently superior than mine…for now.
I offer free delivery (like them), so 100% of tips go to the driver. This tends to be bigger tips this way making my drivers happy. Some drivers don’t want to do anything else but be drivers. I don’t hire those types right now because I cross train. To hire those types, I would need to consider an Independent Contractor type situation, which I am familiarizing myself with now due to labor laws and ensuring that they do fall under that category. I have no desire in breaking the law.
I believe my competition says you can work any hours you want (required to be considered and Ind Contractor), but you don’t go onto the clock until you take a delivery and when you return, you are off the clock until the next delivery.
Anyone have any thoughts/experiences with this? I’m planning ahead as minimum wage is set to increase soon (politics) and I expect it will be $2.75 higher shortly which kills my current business model making my Labor cost skyrocket above 35% if I don’t increase my prices.