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NEXT. NEXT. Front of the House Economics: Optimizing Payroll Investment. Contents. 4. 14. 24. 27. Fundamental Front of House Retail Math Formulas. Average Transaction (AT). Total Sales $ Number of Transactions. Units Per Transaction (UPT). Total Units Sold Number of Transactions.

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  1. NEXT

  2. NEXT Front of the House Economics: Optimizing Payroll Investment

  3. Contents 4 14 24 27

  4. Fundamental Front of House Retail Math Formulas Average Transaction (AT) Total Sales $ Number of Transactions Units Per Transaction (UPT) Total Units Sold Number of Transactions Conversion % Number of Customers Number of Tickets

  5. Fundamental Scheduling Formulas % of Sales Total Sales $ x .15 = payroll budget $1000 per Full Time Equivalent Daily Sales $ $1000 x 8 hrs = scheduled hours Gross Margin Return on Employee (GMROE) Gross Margin $ Total Payroll $ = GMROE

  6. Fundamental Retail Math Formulas Calculate this month’s AT, UPT, and GMROE Gross Sales: $65,250 Transactions: 715 Margin: 42% Total Payroll: $9,850 Units sold: 1,240 GMROE Average Transaction Units Per Transaction Total Sales $ Number of Transactions Gross Margin $ Total Payroll $ Total Units Sold Number of Transactions $27,405 $9,850 1,240 715 $65,250 715 = 2.78 = 1.73 = $91.26

  7. Mythbusters: Payroll Edition Common “Golden Rules” • $3.00 GMROE • $1,000/FTE ($125/employee/hour) • 15% Revenue

  8. Mythbusters: Payroll Edition Scenario 1 • Open Sundays • 43% GM • Average Wage: $15/hr FTEs and Payroll

  9. Mythbusters: Payroll Edition Scenario 2 • Open Sundays • 40% GM • Average Wage: $15/hr FTEs and Payroll

  10. Mythbusters: Payroll Edition For the $500,000 store, $3 GMROE is equivalent to 12-17% of Revenue

  11. Mythbusters: Payroll Edition For the $2,000,000 store, $3 GMROE is again equivalent to 12-17% of Revenue

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

  13. 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.

  14. Planning by Service Levels • How many people should we schedule today? • Rev/Employee? • GMROE? • % of Sales? *Based on 43% margin and $15/hr

  15. The Incremental Associate • $4,000 Day • What if you add one more? *Based on 43% margin, $15/hr rate and 15% payroll burden If you added an additional associate to the floor, could they generate more than $40 an hour in incremental sales?

  16. 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.

  17. Accounting for Accounting • $4,000 Day • How many would you schedule? • $1000 FTE works for sales….BUT what are we forgetting? Back of House

  18. 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 1 Sales / # of Days Open/ $ per FTE = FOH FTEs 2 # of FTE’s for FOH * 2080 * Average Wage = FOH Payroll 3 Total Payroll Budget - FOH Payroll = BOH Payroll 4

  19. Exploring a Combined Approach = $500,000/363 days /$1,000 = 1.38 FTEs * $14 * 2,080 Hours = $71,667 – $40,110 = (43% x Sales) / 3 : $3.00 GMROE, Total Payroll Budget

  20. 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

  21. Exploring a Combined Approach Quick Tips • 65% FOH & 35% BOH payroll allocation • Salary for FT Back of House only • Part Time rocks paid by stipend

  22. One-Timers • 8 hour Saturday • 70% Footwear • Average Footwear Price: $115

  23. One-Timers • 8 hour Saturday • 90% Footwear • Average Footwear Price: $95 Mathematically, this works, but What does it not consider?

  24. Plan by Real Estate: 1,400’ Showroom Fit Rooms Womens Fitting Footwear Fitting Fitting Accs Mens Womens Mens Decompression zone Cash wrap Accs

  25. Plan by Real Estate: 3,500’ Showroom Fit Rooms Footwear Accs Fitting Fitting Fitting Fitting Womens Womens Fitting Mens Womens Mens W Accs Womens Womens W Accs Mens Mens Decompression zone Accs Womens Cash wrap

  26. Zone Offense Fit Rooms Footwear Accs Zone 1 Fitting Fitting Fitting Fitting Womens Womens Fitting Mens Womens Mens W Zone 2 Accs Womens Womens Zone 3 W Accs Mens Mens Decompression zone Accs Womens Cash wrap • Guarantees full service on busy days • Allows for ‘hand off’ so footwear customers are not abandoned • Success formula combines scheduling and training

  27. Tools of the Trade • Scheduling tool demo: WhenToWork.com • Faculty: Skinny Raven Managers James Dooley & Ben Stolpman

  28. Weekly Schedule

  29. Graphical Weekly Schedule

  30. Employee Time Off Preference

  31. Unpublished Blank Schedule

  32. Time Off Requests

  33. Import Previous Week Template

  34. Messaging

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