We’ve finally made it! In our last few posts we’ve shown you two different strategies for team compensation when adding a surcharge and removing the tip from your restaurant. Today we’re going to discuss our third and final strategy which we personally think is the clear front-runner in methods of compensation. Yes folks, we’ve saved the best for last. Our final compensation approach is a hybrid of both the wage increase and split distribution strategies; it implements the best of both worlds! If you’ve been following along our blogs this month, you’ll have seen that we decided a wage increase method would clearly cater more towards your BOH while a split distribution (of additional income from a surcharge) would find your FOH the happier of the pair. The beauty of the hybrid is that you can make BOTH sides of the spectrum happy… we’re talking wage increases for your BOH, and a split distribution for your FOH. Boom. Mind blown.
In utilizing this hybrid strategy for your restaurant, it’s critical you still have the historical accounting data on hand that we discussed back in our wage increase blog: ‘How To Give Your Team More Money And Remove The Tip.’ To see what you’ll need if you haven’t been following along, please refer back – we’ll also be using the same example from that post. Once you have that data on hand you can get started. In the example below we’ll walk you through how this hybrid method works for your team. Anything in yellow is what YOU would enter based off of your restaurant’s operational information. Throughout the example you’ll notice that you can always view a before/after surcharge scenario; this is so you can view your base in comparison to your proposed change.
We started out by entering a surcharge percentage (15%) to get an overall idea of how much extra cash it would get us. You can see that the 15% surcharge produced an extra $762,478.25 (you’ll be surprised to find that when you start inputting your specific metrics, the surcharge may turn out to be far less to get what you need, than what you expected!). Keep in mind that your State Sales Tax will be applied to the guest check after the surcharge.
We pulled the next step directly from our second strategy; tinker with the percentages of funds that you would like to split up among your FOH. Now listen closely because here’s where this strategy differs (and becomes oh so much sweeter). Notice that I didn’t mention your entire team this go around. Reason being, you’re only going to distribute a piece of the pie from your surcharge to your Front of House players. With the remaining money, you will provide your Back of House members with a straight wage increase. Thus, your FOH still has the motivation to work for their paydays (which they’re already used to) and your BOH feels the love with an increase to their take-home pay. In the example below you can see that for your FOH, we weighted split percentages based on prior percentages received from the tip pool, whereas with your BOH, we presented wage increases most similar to what they were making pre-surcharge.
Again, after playing with the numbers you always want to make sure you take a look at your EBITDA before and after adding the surcharge so that your change in EBITDA is as close to zero as possible (this means your EBITDA will be relatively similar to what it was before your tip elimination). You can see below that with this hybrid method we distributed additional income to our team using two different methods, and still had 37K leftover for your restaurant. Keep in mind that if you feel comfortable that your change in EBITDA isn’t taking advantage of your guests, and you’re still providing a value to both your guest and team, there’s nothing to say you can take any small amount leftover funds and use it for bonuses and incentives for your team. Just remember happy team = happy guests and happy guests = butts in seats!
Now let’s talk considerations for a Split Distribution on supplemental income from a surcharge.
- FOH is already used to working for their tips; this is similar so it keeps them motivated to work for their money.
- Provides stability to your BOH; this allows you to set an expectation about what you’re going to pay them.
- This gives you an advantage to hire competitively by offering an environment tailored to each member of your team; you have the right emphasis on your work centers.
Have any thoughts on this strategy? Let us know how you think it may work for your team!
In closing up our second month covering The Tipping rEvolution, we hope were able to provide with you some solid insight on ways to navigate the ever-changing restaurant industry, in this case specifically, removing the tip and adding in a surcharge.