Once you develop your food business to the point where you are stable and profitable, what do you do now? Don’t rest on your laurels! A single location allows a certain amount of freedom and financial stability, but the income is capped by your abilities and unfortunately, the weather. How can a vendor hedge against weather, injury or sickness preventing the business from opening? Simple, increase the number of income streams.
If one location produces $50,000 after tax income annually, work towards a second. I know, you are thinking, how do I staff them? I encourage you to write procedures and policies in a manual from the beginning of your food business. You then have the basis for training an employee. I am a control freak, so when I hire an employee I have a complete training guide to follow. (also, when I sell the business, I have a procedure manual which adds value) This ensures the new hire is up to speed and giving the type of quality and service, I and my guests expect. An employee requires, at minimum food safety training. Check with your health department for your local requirements for food service employees.
You will need to develop some type of bonus or incentive system for the employee so that they will be invested in the success of the business. Structure the bonus program with several different areas to measure performance. I always work my new location and hire someone for my old location. This doesn’t task a new employee with trying to build sales, all they have to do is maintain what I have developed.
Here is my bonus matrix I use for my employees. I have used this type of system since 2000. Originally developed by Mark Ordway (Burger King Franchisee Vice President of Operations and the most inspiring, principled leader I have ever met or worked with), this matrix system rewards varying levels of desired performance and is not the typical all or nothing bonus system most restaurant companies offer.
Looking at the matrix, you will notice I reward 5 different areas of performance and offer differing levels of rewards. Across the top is the percentage of sales the employee will be given if they achieve the goal listed under that percentage. If they achieve an increase in sales over last year of 1.5% they could get a bonus of 1% of those sales. Likewise if the food cost they turn in is 30.10% they would have 1% DEDUCTED from the bonus pool. This system encourages the employee to work hard to achieve each area while penalizing areas they falter. The max total payout could be 15% of sales. Rarely will someone achieve all areas in the same bonus period, but this system does establish goals and rewards for achievement.
You could, and some people will, recommend basing the bonus paid on profits. It is your business do as you want. However, when you focus on profits as the base for payment, the employee is encouraged to skimp on portions, sell product beyond hold times or water down recipes to stretch them. Each of these things will drive away guests and hurt your business in the long run.
I do all the prep work and clean up for all carts as well as inventory purchasing. My employee meets me at the commissary and gathers up the cart and food to transport to the location. They are on the clock and that is why I offer mileage reimbursement and I can verify tardiness as they must meet me at certain time. The employee must have auto insurance and you should check with your state insurance on what you need to cover the employee and your equipment while in transport. Otherwise you may need to tow the trailer yourself and have the employee meet you on site.
The mystery shop could happen at any time and the form I use will fail the visit if the cart isn’t open for business on time or is closed early. (The employee must call me to close due to weather) I use friends and regular guests to mystery shop and offer additional free food as incentive as well as reimbursing the actual visit cost. Besides an unknown mystery shop the employee knows they will be inspected each day by either myself or my wife at a random time while they are open.
Inventory is counted upon return to the commissary and compared to sales reports. Any discrepancy is counted as waste. (That is why waste is measured and bonus-ed)
We then verify sales and reconcile cash to the reports. I use LoyversePOS which provides all the tracking I need as well as security as I can lock employees out of seeing sensitive sales reports. (Square, PayPal Here and other do the same thing and are reviewed here) My expectation is the cash matches exactly. If it does not the difference is taken out of the tips jar. You CAN NOT take cash shortages out of wages especially if the deduction potentially puts the employee under minimum wage. If the employee tips are insufficient to cover a shortage, consider termination and have a strong written cash handling policy that the employee has signed up on hiring. There are only three ways to be short on cash:
One last item on hiring employees check your state rules and regulations pertaining to reporting new hires, your responsibilities with unemployment insurance and workman’s comp. Remember to account for those costs.
Below is a P&L showing the profit potential of this system. This sample is set up for a one-month sales period. Look at it this way. If you spend 90 minutes a day prepping, inventorying and cleaning your second cart/trailer you just paid yourself $137 an hour for just that location. Amazingly enough, a third location does not add the full 90 minutes to your day as you will just be prepping in bigger quantities and cleaning only a few more pans. Doubling or tripling locations absolutely does not double or triple prep and clean up time.
This example is based on a beach location, working 14 days in the summer. Opening at 10:30 am and closing at 2:00 pm. Travel time, opening and closing setup plus the operational hours puts the employee working 5 hours a day. The location set up is 2 miles from the commissary. This gives the employee a base pay of $739.20 for the month. Achieving each area of the bonus matrix at the top level puts another $1291.50 in play for the employee. Thus, the total compensation package for the employee is over $2000 for 14 days of work or $29.01 an hour. Realistically hitting every level of the matrix at the top spot is difficult and it should be.
I have had a passion for helping people since an early age back in rural Kentucky. That passion grew into teaching and training managers and owners how to grow sales, increase profits, and retain guests. You’ll find a ton of information here about improving restaurant and food cart/trailer operations and profits. Got questions? Email me at Bill_Moore@live.com