Epic Managers for Franchises | Fortune 100 Operator | Investor | Franchise owner | Management 2.0 ??
Yes, you can afford $80,000 (or more) for a good store manager. Most franchisees rationalize that they can only pay managers what their P&L says they can “afford”. They focus primarily on the base salary, and vastly undervalue the bonus. But, those “rational lies” prevent good operators from hiring A-players who could significantly increase their profitability. We work with a franchise group who initially thought this way about manager comp. They claimed that their proforma showed they could only “afford” to pay up to $60k. So, they devised a comp plan that was $54k base plus $500/month, for a $60k target. But how many high-potential A-player applicants were they getting? Zero. Because their offer wasn’t competitive or inspiring - few managers will activate discretionary effort for $500. So, they reached out and asked for our help. We explained that we only work with clients who view managers as an investment, not an expense. They must be willing to pay a reasonably competitive wage for top-tier talent, which we help them determine with a market comp study. In this case, our market study showed that A-player managers were getting ~$80k. For context, in my wireless retail days in 2005, we paid store managers $80k to run a box with 10 employees doing $75k in monthly revenue. $80k in 2005 is $129k in 2024. How did we afford to pay that much way back then? We maximized their VARIABLE comp and tied it to the margin metrics that matter. We helped this franchise group do the same, using a simple formula: Variable comp should be AT LEAST 25% of total annual cash comp. Ideally 30%. We raised the base to $60k, a number they were already prepared to pay. And we devised a $20k bonus plan which includes $1,500/month in bonus IF the manager hits their KPIs - meaning those additional dollars are FULLY FUNDED through increased performance. Now, if the manager produces results that boost profits, they can earn up to $80k. If they underperform, they don’t get the bonus that month. Shared risk, shared reward. As we expected, we found them an A-player pretty fast, who had an immediate impact on the business. Now they can level-up their entire management team and win the battle for talent in their markets. The moral of the story? P&L-based pay plans get you a PULSE. Performance-based pay plans get you a PRO. These insights are proudly NOT written by ChatGPT #franchise