Bonus Round

QUESTION From: GM in NJ

“I’ve been a GM for a little over 5 years at only one place - What's a good percentage to start with as the commission part of my salary for my mew job? Taking over as the GM of a new place and trying to work out a deal that would work for me and the company. Never had this type of salary before.”


HH ANSWER:

Bottom line: A Bonus is just that- a bonus. You need to be satisfied with your base salary first and foremost… And ask yourself if you’d be satisfied with the salary if the bonus never came through.

If the bonus in question is based on profit, labor, cogs or any other metric - you can simply look at their last 3 years worth of P&Ls, multiply your bonus percentage offered by that line item....and if you're satisfied with the potential then go for it. However, (and this is a big “however”) when based on "profit" you need to know and they need to articulate whether your bonus is based on "Gross Profit" or "Net Profit".

The Net Profit can decrease or disappear at-will by anyone who has the authority to change wages, invest in a capital expenditure, buy, rent, lease or pay for something that’s not even on the budget, etc...

Bonuses should be tied to "Gross Sales" so long as % goals for those things that are within your control [e.g., controllables like: comps, voids, labor, food cost (so long as your hands aren’t tied to one vendor), breakage, misc expenses, etc..] are met / part of the equation. That way its a win-win for ownership AND management.

Many bonuses are based on line items that senior management, executives and owners have an equal amount of control over – if not more.

Ryan Ransom of Restaurant & Bar Owners, Operators & Managers Group offers this example:

“you might have a bonus, as an executive chef that is directly tied to the COGS, But if you’re locked into a contract with one – or a limited number of vendors, how much can you really control that?”

Not to mention… The kickbacks or “refunds” offered , As an incentive to multi – unit operators, for ordering more product from one individual vendor.

I like bonuses but I don’t like salaries that are dependent on them. When your compensation is directly tied to the performance of any particular outlet you are essentially sharing the Owners risk… And in my mind, that makes you a partner.

If you’re not getting actual equity, why take on that risk?

Bonuses can shed a tremendous amount of light on ownership and their level of: transparency, honesty and respect for you managing the day-to-day operations of their business. Examine your bonus structure carefully and when it’s presented - ask if there is any flexibility with regard to how it’s structured.