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NEXTFront of the House Economics:

Optimizing Payroll Investment

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Contents

Scheduling Metrics

Service Levels

People vs. Real Estate

Tools of the Trade

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Fundamental Front of House Retail Math Formulas

Average Transaction (AT)

Units Per Transaction (UPT)

Conversion %

Total Sales $Number of Transactions

Total Units SoldNumber of Transactions

Number of CustomersNumber of Tickets

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Fundamental Scheduling Formulas

% of Sales

$1000 per Full Time Equivalent

Gross Margin Return on Employee (GMROE)

Total Sales $ x .15 = payroll budget

Daily Sales $$1000

x 8 hrs = scheduled hours

Gross Margin $Total Payroll $

= GMROE

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Fundamental Retail Math Formulas

Average Transaction Units Per Transaction

Calculate this month’s AT, UPT, and GMROE

Gross Sales: $65,250 Transactions: 715 Margin: 42%Total Payroll: $9,850 Units sold: 1,240

= 1.73

Total Sales $Number of Transactions

Total Units SoldNumber of Transactions

1,240715= $91.26$65,250

715

GMROE

= 2.78

Gross Margin $Total Payroll $

$27,405$9,850

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Mythbusters: Payroll Edition

Common “Golden Rules”> $3.00 GMROE> $1,000/FTE ($125/employee/hour)> 15% Revenue

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Mythbusters: Payroll Edition

Sales $500,000 $2,000,00

$3.00 GRM0E $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)

Scenario 1> Open Sundays> 43% GM> Average Wage: $15/hr

FTEs and Payroll

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Mythbusters: Payroll Edition

Sales $500,000 $2,000,00

$3.00 GRM0E $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)

Scenario 2> Open Sundays> 40% GM> Average Wage: $15/hr

FTEs and Payroll

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Mythbusters: Payroll Edition

For the $500,000 store, $3 GMROE is equivalent to 12-17% of Revenue

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Mythbusters: Payroll Edition

For the $2,000,000 store, $3 GMROE is again equivalent to 12-17% of Revenue

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Mythbusters: Payroll Edition

For the $500,000 store, $1,000/FTE yields a payroll of only $40,110, significantly lower than the other rules.

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Mythbusters: Payroll Edition

For the $2,000,000 store, $1,000/FTE yields a payroll of only $187,267, also significantly lower than the other rules.

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Planning by Service Levels

> How many people should we schedule today?> Rev/Employee?

> GMROE?

> % of Sales?

*Based on 43% margin and $15/hr

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The Incremental Associate

> $4,000 Day> What if you add one more?

If you added an additional associate to the floor, could they generate more than $40 an hour in incremental sales?

*Based on 43% margin, $15/hr rate and 15% payroll burden

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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.

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Accounting for Accounting

> $4,000 Day> How many would you schedule?

> $1000 FTE works for sales….BUT what are we forgetting?

Back of House

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Exploring a Combined Approach

> GMROE to establish the total payroll budget> $1,000/FTE to establish FOH and BOH budgets

GM $ / GMROE Target = Total Payroll Budget

Sales / # of Days Open/ $ per FTE = FOH FTEs

# of FTE’s for FOH * 2080 * Average Wage = FOH Payroll

Total Payroll Budget - FOH Payroll = BOH Payroll

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Exploring a Combined Approach

= (43% x Sales) / 3 : $3.00 GMROE, Total Payroll Budget

= $500,000/363 days /$1,000= 1.38 FTEs * $14 * 2,080 Hours= $71,667 – $40,110

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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

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Exploring a Combined Approach

> 65% FOH & 35% BOH payroll allocation> Salary for FT Back of House only

> Part Time rocks paid by stipend

Quick Tips

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One-Timers

> 8 hour Saturday> 70% Footwear> Average Footwear Price: $115

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One-Timers

> 8 hour Saturday> 90% Footwear> Average Footwear Price: $95

Mathematically, this works, but What does it not consider?

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Plan by Real Estate: 1,400’ Showroom

Cash wrap

Womens

Wom

ens

Mens

Accs

Accs

Foot

wea

r

Fit Rooms

Decompression

zone

Fitting

Fitting

Fitting

Mens

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Plan by Real Estate: 3,500’ Showroom

Cash wrap

Womens

Wom

ens

Mens

Accs

Footwear Fit Rooms

Decompression

zone

Fitting

Fitti

ng

Fitti

ng

Men

s Womens

Accs

Accs

Womens

Mens

Fitting

Womens

Wom

ens

Fitting

Accs

Mens

W

W

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Zone Offense

Cash wrap

Womens

Wom

ens

Mens

Accs

Footwear Fit Rooms

Decompression

zone

Fitting

Fitti

ng

Fitti

ng

Men

s Womens

Accs

Accs

Womens

Mens

Fitting

Womens

Wom

ens

Fitting

Accs

Mens

W

W

Zone 1

Zone 2Zone 3

> Guarantees full service on busy days> Allows for ‘hand off’ so footwear customers are not abandoned> Success formula combines scheduling and training

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Tools of the Trade

• Scheduling tool demo: WhenToWork.com

• Faculty: Skinny Raven ManagersJames Dooley & Ben Stolpman

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Weekly Schedule

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Graphical Weekly Schedule

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Employee Time Off Preference

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Unpublished Blank Schedule

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Time Off Requests

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Import Previous Week Template

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Messaging