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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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Front of the House Economics:

Optimizing Payroll Investment

contents
Contents

4

14

24

27

fundamental front of house retail math formulas
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

fundamental scheduling formulas
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

fundamental retail math formulas
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

mythbusters payroll edition
Mythbusters: Payroll Edition

Common “Golden Rules”

  • $3.00 GMROE
  • $1,000/FTE ($125/employee/hour)
  • 15% Revenue
mythbusters payroll edition1
Mythbusters: Payroll Edition

Scenario 1

  • Open Sundays
  • 43% GM
  • Average Wage: $15/hr

FTEs and Payroll

mythbusters payroll edition2
Mythbusters: Payroll Edition

Scenario 2

  • Open Sundays
  • 40% GM
  • Average Wage: $15/hr

FTEs and Payroll

mythbusters payroll edition3
Mythbusters: Payroll Edition

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

mythbusters payroll edition4
Mythbusters: Payroll Edition

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

mythbusters payroll edition5
Mythbusters: Payroll Edition

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

mythbusters payroll edition6
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.

planning by service levels
Planning by Service Levels
  • How many people should we schedule today?
    • Rev/Employee?
    • GMROE?
    • % of Sales?

*Based on 43% margin and $15/hr

the incremental associate
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?

planning by service levels1
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.

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

Back of House

exploring a combined approach
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

exploring a combined approach1
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

exploring a combined approach2
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
exploring a combined approach3
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
one timers
One-Timers
  • 8 hour Saturday
  • 70% Footwear
  • Average Footwear Price: $115
one timers1
One-Timers
  • 8 hour Saturday
  • 90% Footwear
  • Average Footwear Price: $95

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

plan by real estate 1 400 showroom
Plan by Real Estate: 1,400’ Showroom

Fit Rooms

Womens

Fitting

Footwear

Fitting

Fitting

Accs

Mens

Womens

Mens

Decompression zone

Cash wrap

Accs

plan by real estate 3 500 showroom
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

zone offense
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
tools of the trade
Tools of the Trade
  • Scheduling tool demo:

WhenToWork.com

  • Faculty: Skinny Raven Managers

James Dooley & Ben Stolpman

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