Rosnet - Blog Aug 2020

The restaurant worker most in demand? A great general manager

7 Minute Read

This article was originally published by Restaurant Business

After losing more than half of their workers during the pandemic and spending the next two years trying to coax them back, restaurant operators say the struggle for hourly workers is easing. Now, however, one key position in restaurants across all segments—from fast food to fine dining—has become the focus of attention:

The general manager.

More than ever before, restaurant chains across the country are targeting this lynchpin role within their operations as the place to invest, offering six-figure salaries, the chance to win all-expenses-paid vacations and even allowing GMs to earn equity in the company.

Their goal: to attract the best and brightest performers. And to keep them performing at high levels.

When asked why this position, in particular, has become such a focus, CEOs across big and small companies gave essentially the same answer.

“The GM is the heart of the restaurant. It is the most important position in determining the performance of a restaurant,” said El Pollo Loco CEO Larry Roberts. “Restaurants with strong general managers, who understand their operations, establish a culture of caring for and respecting people while still holding them accountable, and look to develop their teams, far outperform those who do not in terms of customer service, employee turnover, sales and profits.”

In fact, restaurant GMs have become such a focus, competition for talent has become a high-stakes game, said Warren Thompson, founder of Reston, Va.-based multiconcept group Thompson Hospitality, which operates about 70 restaurants across about 20 brands.

When it comes to finding great GMs, he said, “The war for talent has just gotten even greater. You have to be more creative, and you have to be willing to pay more to get the right people.”

Recruitment carrots

An experienced GM can be the lifeline that allows chain brands to grow into new markets. But the position is also crucial for independent operators who are creating new concepts, said Thompson.

In part to help recruit top restaurant GMs, Thompson said he has been developing an operating partner program over the past year, now in place in about 10 restaurants. He hopes to grow that number to 20 within the next six months.

The idea is that great GMs will be more likely to want to work for companies that can offer that path to restaurant equity.

An operating partner for Thompson Hospitality will own 5% of the restaurant after five years and generally earn roughly $150,000 to $175,000 as a total package. GMs, meanwhile, are recruited with a base salary no less than $100,000, typically, with the offer of an opportunity to become an operating partner within six to 12 months, he said.

“So rather than saying, ‘okay, in three years I can become a district manager,’ they can see a way to get promoted six months to 12 months after joining the company,” Thompson said.

“It attracts a much different caliber of leader,” he added. “And when you’re opening a restaurant like that, in a remote market from us, it’s so important to have the right leader.”

Motivation to perform

It’s not only about attracting talent into GM positions, operators say. Many of the current initiatives are also designed to keep them motivated to perform.Bonus - Bunch of Keys with Text on Golden Keychain. Black Wooden Background. Closeup View with Selective Focus. 3D Illustration. Toned Image.

Noodles & Company, for example, in mid-2022 launched a new GM equity program, from which the inaugural class of 57 GMs was selected based on their achievement in reaching certain financial and operational objectives over the past six months.

Those GMs are now eligible to earn equity in the company—a grant of $50,000 in restricted stock units, which vests in three years. And at that point, if they continue to meet certain metrics, they will be eligible to re-enter the program to earn more equity, and the reward cycle continues, all based on their continued high performance.

The program now has about 100 GMs in total, including a second wave of GMs that have made the cut for the biannual selection. During fourth-quarter earnings, Noodles CEO Dave Boennighausen said GM turnover rates have declined by about 30% year over year.

Overall restaurant staff retention has also improved, which CFO Carl Lukach credits in part to the GM equity program, saying the goal was to create “something that was going to really keep GMs incentivized in a big way” for a long time.

“We have done so much analysis on what drives the financial health of a restaurant, all the way from compensation to certain growth metrics to the layout to real estate characteristics. And the metric that correlates best with financial success is the GM tenure,” said Lukach. “The longer the GM is in place at a restaurant, the deeper the team they can build, [and] really the more efficiencies they have across all areas of operations. And all other KPIs sort of fall in place.”

Shake Shack is another chain offering equity grants to GMs, which was part of a $10 million investment in the chain’s workforce overall in 2021. The effort included raising wages, sign-on and retention bonuses and leadership development, as well as initiatives to build more diversity, equity and inclusion.

But a particular emphasis was placed on GMs, who were given opportunities to earn more than $100,000 in base salary and the ability to earn $10,000 stock grants for high performance.

In the fourth-quarter earnings call in February, Shake Shack CEO Randy Garutti said the equity grants “incentivize them to act like entrepreneurs who want to see this stay for the long term and want to see the company succeed overall.”

Developing the GM pipeline

GMs are also an important part of the leadership bench that can shape upper management. At El Pollo Loco, for example, the focus on GMs is part of a larger effort to cultivate leaders for future expansion.

“The best GMs also take pride in developing future leaders, which enables the company to grow,” said Roberts.

Many GMs at the grilled chicken chain have been promoted from hourly staff, and over the past two years, the company has boosted efforts to cultivate those future leaders.

Once a month, region operations directors and HR execs evaluate talent in each restaurant to identify those who might be capable of taking on more responsibility. Those workers are put on individual career development plans and given assignments to develop skills.

Those budding leaders might attend GM meetings to get exposure to business discussions, for example, and they are expected to take ownership of developing shift leaders and assistant managers.

And there are incentives to climb the ladder.

GMs at El Pollo Loco are eligible for competitive pay and rewards, including quarterly bonuses and opportunities to earn higher salaries by managing a training restaurant, for example, or a higher-sales-volume restaurant. Benefits include tuition reimbursement, paid holidays, a 401(k) and subsidized healthcare.

About 180 of 187 general manager positions across the chain’s company-owned units are filled, Roberts said. The balance is currently being filled by acting GMs, who are generally high-potential assistant managers.

Celebrating milestones

El Pollo Loco also makes a point of celebrating milestones for GMs, from birthdays to performance, said Roberts.

That’s also true at Dallas-based Raising Cane’s, which in January surprised 10 top-performing GMs with trips to Hawaii for them and their families.

The 10 general managers were flown to Dallas under the guise of attending an in-person feedback session ahead of an all-company meeting. The group instead was brought on stage and surprised with the award of an all-expenses-paid trip.

Raising Cane’s has a history of giving such trips to one top GM, known as the “Big Kahuna” award. This year, however, the more-than 700-unit chain’s strong results prompted the selection of 10 Big Kahuna winners to spread the joy.

“A GM is the CEO of that restaurant,” said Todd Graves, Raising Cane’s founder and co-CEO. “It’s such a clutch position. And when you have that right leader, I can see sales difference of 20% to 25%, community involvement up like 90%, with the right leader that cares, retention with our crew, staffing levels, everything goes smoothly when you have that exceptional leader with that restaurant.”