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2. Front of the House Economics: Optimizing Payroll Investment

3. Contents Scheduling MetricsService LevelsPeople vs. Real EstateTools of the Trade 4 14 24 27 3

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

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

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

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

8. Mythbusters: Payroll Edition 8 Sales$500,000$2,000,00 $3.00 GRM0E$71,667 (2.3 FTEs)$286,667 (9.2 FTEs) $1,000/FTE$42,975 (1.4 FTEs)$200,643 (6.4 FTEs) 15% Revenue$75,000 (2.4 FTEs)$300,000 (9.6 FTEs) Scenario 1 >Open Sundays >43% GM >Average Wage: $15/hr FTEs and Payroll

9. Mythbusters: Payroll Edition 9 Sales$500,000$2,000,00 $3.00 GRM0E$66,667 (2.1 FTEs)$266,667 (8.6 FTEs) $1,000/FTE$42,975 (1.4 FTEs)$200,643 (6.4 FTEs) 15% Revenue$75,000 (2.4 FTEs)$300,000 (9.6 FTEs) Scenario 2 >Open Sundays >40% GM >Average Wage: $15/hr FTEs and Payroll

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

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

12. Mythbusters: Payroll Edition 12 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 13 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 14 >How many people should we schedule today? >Rev/Employee? >GMROE? >% of Sales? *Based on 43% margin and $15/hr

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

16. Planning by Service Levels 16 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 17 >$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 18 GM $ / GMROE Target = Total Payroll Budget Sales / # of Days Open/ $ per FTE = FOH FTEs # of FTE’s for FOH * 2080 * Average Wage = FOH Payroll Total Payroll Budget - FOH Payroll = BOH Payroll 1 2 3 4

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

20. Exploring a Combined Approach 20 >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 21 >65% FOH & 35% BOH payroll allocation >Salary for FT Back of House only >Part Time rocks paid by stipend Quick Tips

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

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

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

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

26. Zone Offense 26 Cash wrap Womens Mens Accs Footwear Fit Rooms Decomp ression zone Fitting Mens Womens Accs Womens Mens Fitting Womens Fitting Accs Mens W W Zone 1 Zone 2 Zone 3 >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 27

28. Weekly Schedule 28

29. Graphical Weekly Schedule 29

30. Employee Time Off Preference 30

31. Unpublished Blank Schedule 31

32. Time Off Requests 32

33. Import Previous Week Template 33

34. Messaging 34