BUYING A SMALL BUSINESS

Franchisees Thrive with Open-Book Management

Advertisement

Increasingly, franshisees are hopping on the open-book bandwagon. Two such owner-operators are Jim Brown and Joe Clark who run separate Chick-fil-A franchises in West Virginia. They've learned - and continue to learn - how to teach their part-time employees (many of whom are scarcely old enough to drive a car) how to think like businesspeople. Some of the keys to their open-book success are applicable in many environments:

Get people involved right away. "On the wall, we have a big profit-and-loss chart, and everyone's assigned to a group that's responsible for one of the line items. If they' re in the food-cost group, for example, they' re responsible for recording and posting what' s happening with food costs," says Brown. "We also have P&L instruction class where people come in one day a week to discuss cost control."

Develop a simplified P&L.. Brown and Clark initially shared their restaurants' financial statements with their employees, but it didn't go over big because they were too detailed. In time, the duo developed a " Game P&L" showing sales, key operating expenses, and operating profit. Cost lines on the Game P&L are monitored weekly. " These are the major cost components of our business," says Brown. "They're the ones people can really affect."

Create fast-feedback goals. The restaurants have five-year plans, annual plans, and monthly salestargets. But what employees watch most closely are daily and hourly numbers. " We have a 3:00p.m. goal and an end-of-the-day goal. We monitor hourly because there are changes we canmake hourly," Clark explains. "Maybe they' ll look and think, OK, there are three hours left and $900 to go.How can we do $300 an hour for three hours?"

Pay bonuses frequently. Originally, Brown and Clark paid bonuses every two months, but when they realized employees were losing interest they shortened the bonus cycle to a month. "Now it's tied directly toour accounting cycle," says Brown.

Show people the per-hour bonus calculation. Monthly bonuses are pegged to sales dollars and profit dollars, bothcompared to goal. A chart shows how much goes into the bonus pool at 100% of goal, 102%, and so on.The bonus pool divided by total hours worked gives the hourly bonus for the month;employees get that for every hour they themselves worked. " We try to emphasize the per-hourbonus," says Clark. "We want them to understand that they really have control of their pay."

Tie bonus levels to training. Each employee is at one of four levels, based on how much training he orshe has completed. Level 1 employees - who are essentially on a 30-day probationary period - get70% of the hourly bonus. Regular employees get 85%, supervisors get 100%, and managersget 120%.

What about results? Sales at Clark' s restaurant shot up when he launched open-book management, then leveled off when a competitor opened up nearby. Brown' s sales increasedsteadily. Both restaurants have recorded steady increases in profits, and have turnoverrates of less than half the national average for the fast-food industry.

Copyright 1998 Open-Book Management, Inc.

Last updated: Jan 1, 1998




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: