Chad Mackay, CEO of Fire and Vine Hospitality

The Pre-Shift Podcast presented by 7shifts is a deep dive into what it takes to run great restaurant teams. 

Host DJ Costantino covers the restaurant industry with conversations featuring industry leaders and innovators sharing their business growth insights, backgrounds, and valuable lessons on running restaurant teams.

On this episode, we’re joined by Chad Mackay, CEO of Fire & Vine Hospitality in Seattle, WA.

Chad Mackay, CEO of Fire & Vine Hospitality, leads a multi-concept operator of full-service restaurants and oversees the successful Revelers Club loyalty program, boasting 80K members and contributing 30% to the company’s revenue since its 2011 inception. El Gaucho, the flagship concept founded in 1996, spans five locations, while Fire & Vine owns AQUA by El Gaucho, Aerlume, and the Witness Tree lounge. The Revelers Club extends to independently owned properties like Walla Walla Steak Co., Crossbuck Brewing, and Yellowhawk Resort in Walla Walla, WA. Drawing from two decades of hospitality expertise, Chad founded Brigado, a consulting and technology firm. He actively serves on Oracle's Customer Advisory Board for the Global Food and Beverage Industry Group and has held leadership roles in associations like the Washington Hospitality Association and Visit Seattle. Chad is a sought-after speaker on adapting compensation models for full-service restaurants in response to the $15 minimum wage.

Links
Fire & Vine Hospitality
Brigado

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Credits
Host & Executive Producer: D.J. Costantino
Editor: Fina Charleston
Producer: Samantha Fung
Designer: Jake Sinclair

Transcript

Speaker 1: 0:00

While everybody is stripping down service, we're actually adding additional stuff, which is cool.

Speaker 2: 0:11

Hello and welcome back to another episode of the Pre-Shift Podcast, where we dive deep into what it takes to run great restaurant teams. I'm your host, DJ, and today I'm sitting down with Chad McKay, CEO of Fire and Vine Hospitality.

Speaker 1: 0:24

My name is Chad McKay and I'm the CEO of Fire and Vine Hospitality.

Speaker 2: 0:30

Fire and Vine has been running restaurants in the Pacific Northwest for more than 25 years and it's still growing. At the core is the steakhouse El Gacho, with five locations, and the group has eight restaurants and a few hotels in its portfolio. What drew me to feature them on the show was the unique way in which they pay their team. Fire and Vine servers work on a commission model where they get a percentage of all the food they sell and some servers are pulling in more than a hundred bucks an hour. Chad and I get into how they're able to make that work and how it's changed their business for the better. As always, the Pre-Shift podcast is brought to you by Seven Shifts team management for restaurants. Before we dive into the big questions about employee comp, there's a few important things to understand about Fire and Vine's business to understand the whole story. One big part of that is how they focus their business coming out of 2020.

Speaker 1: 1:13

Our operation was really simplified Tuesday through Saturday night, and what has happened is that our revenues far surpassed 2019, even though we missed those two days and missed the five-day parts of lunch, our profitability has taken a wonderful turn up. We've not looked back where there's no consideration for reopening for lunch. There's no reconsideration of opening on Sundays or Mondays unless there is a special event. For instance, if there's a sporting event or a concert that's so compelling if Taylor Swift's going to play, we probably need to be open.

Speaker 1: 1:52

So things like that and I think, the other piece that coming out, we realized that probably the way we used to just look at stuff was just overall revenue numbers, which is important, but because we're in such high-cost states I mean we're in minimum wage states and cities that exceed maybe I think we're the highest state in the union, we're almost the highest city in the country for Seattle we really needed to focus on productivity, and so the sales per labor hour number is now a key. It's really a great KPI for us to tell us are we on track to profitability? Are we off track to profitability? It's a really great number for me to gauge where we're at, and before we'd never really paid attention to sales per labor hour. But I think as an industry it's one of those items that, because labor costs have gotten so high, we have to get more productivity out of the labor base that we have.

Speaker 2: 3:00

These new operating hours allow for them to focus harder on the times when they're open. It's also provided space for special and corporate events which are profitable from the jump.

Speaker 1: 3:08

You have so many reservations, but then you're also kind of hoping that people are going to walk in, so you're kind of waiting for this other 40% of the business, of what's going to happen.

Speaker 1: 3:18

And what this does a lot of us is Tuesday through Saturday.

Speaker 1: 3:20

We've concentrated because we do have a loyalty program We'll talk about that later so we do have pent up demand for our restaurants, but we basically have just really moved those counts into a five day instead of seven days and so if you look at overall counts, it hasn't dropped, it's actually just compressed. So that makes those days much better. And then the awesome part of all of this is we created space on those Sunday and Monday, as well as during lunchtime, to do special events, to do corporate lunches for 100 people, to do buyouts of the restaurant, which give you profitable business every time you do them. So again, you're not opening the door and hoping and praying as a strategy that you're going to get enough people in, and so it's just. It's been fantastic and I think the yeah, so that you know that's just a big piece of being able to create those opportunities where maybe we wouldn't have been able to take 100 top or 150. Or people wouldn't think of us, but we're now competing with the hotel spaces during the daytime.

Speaker 2: 4:32

Now, maximizing productivity does not mean just squeezing the most out of your employees that you do have. If anything, it's allowed for a better balance and it's let fire and fine double down on experiential service like table size, caesars and bananas foster that light up the dining room.

Speaker 1: 4:47

And when I say productivity of trying to maximize, it's not about maximizing the productivity, it's about where's the balance, and so what we look at is is it great for the guests, is it great for our team and is it financially sustainable to do? We're experiential restaurants. That is one of the things that we've got to deliver on that. We do table site Caesar, we carve Chateau Brionnes, we do Bananas, Foster and all of that's done in front of the guest, Whether it's the server doing it or one of our tuxedoed captains. But what we've done is we've actually upped the game. We do more table site now in every one of our restaurants than we ever did before, Because we want to maximize the experience, not necessarily revenue, not necessarily productivity. It's making sure that you are, that you understand where your sales productivity needs to be to be profitable. We talked about sustainability. A lot of that is around financial sustainability. Could we keep doing what we're doing? Our team has added table site. While everybody is stripping down service, we're actually adding additional stuff, which is cool.

Speaker 3: 6:03

You never left for you guys, right, you're doing it more. You're doing it more.

Speaker 1: 6:07

Yeah, we added Steak Diane to our Goucho menus, which is a fun table site steak option, Things like that. It's really cool to be able to deliver for a guest and just show them. Hey, we're not like everybody else, we're actually giving you more, we're doing some more razzle-dazzle, we're having some more fun not taking away things because we're trying to cut costs everywhere.

Speaker 3: 6:33

Yeah, absolutely. That's one of those things too in the dining room that just invites people to. I want that too. It's like the easiest possible.

Speaker 1: 6:41

Yeah. As soon as the first banana fosters lights up and the smell hits the room, people are like what is that? The flames are going and yeah.

Speaker 2: 6:50

But when your servers are performing duties, normally observed for the back of the house, how does training work exactly? Spoiler, it can be intense.

Speaker 1: 6:58

Because of our service level, the servers can only handle so many tables. When we bring a new person in, they're going to go through 10 days of really intense training. They're going to go through front desk. They're going to see the kitchen expo and then they're going to work with an individual server that does training on that. They won't even get a table until after that 10 days and then they'll start with a table. Then they're going to build to two, then over time they'll build to three.

Speaker 1: 7:29

We say it takes about six months to make a server feel pretty good not super confident, but pretty good because they have to master the menu, which isn't that hard, but you still have to do all those things. You have to master all of the play settings, all of the mes and plus all of the table side that the servers involved with, which the Caesar salad would be a big one. We make millions and millions of Caesar, so you just get really good at it. They take time to build up. As you get busier and you do turns, then we're adding in support teams to help them on those turns. We need them to ring a certain level so they can make money Then to turn those tables and you start adding in additional busters, food runners, others that help on that productivity side for that next level of revenue. If you only do one turn tonight, you don't really need a busser. But if you're doing a couple and you've got a lot of action going, then that's where they start to pay for themselves.

Speaker 2: 8:42

I also wanted to understand how Fire and Vine measures, labor productivity and staff have such a narrow focus and fewer tables than most restaurants.

Speaker 1: 8:50

Yeah, I think right now, if I just look at a trending number, I want to be somewhere around the 110 mark, so $110 per direct labor hour. Depending on what's happening, we can see that all the way up to 200. So if we have big private events, but for all the car, probably around 130, 140 means we've got a lot of turns going or we went a little too tight. Again, that's an indicator number versus a absolute number of what people need to do. So at the end of the day, you've got that. And then you've got your reviews Right. So we get a lot of online submissions through. We happen to use seven rooms for our reservations, so we get hundreds of reviews a day, and so that's part of did we break the restaurant last night? Right, and sometimes you break a restaurant it does happen. It just gets beyond where you can deliver.

Speaker 2: 9:53

It's not always about hitting a number, though McKay acknowledges that it's not a science, and some things are just done based on the restaurant's core values.

Speaker 1: 10:01

What we look at is we got to make sure our people are making money Right. So it's like if you have servers that are only ringing $1,000 and they need to be ringing two or 3,000 to make the kind of money that should well part of that staffing like are we starving people versus giving them opportunities to create revenue? And then the other is it's the support team needed to help sustain that, because the server really becomes a primary element of our restaurant. And then our captain layer, which comes and does the table side and the wine, but also captures and supports the service team. You know, if they get stuck on a table, that's super talkative or it's taking a while. They could just blend over and grab their other table and take them to the finish Right. So we go back and again, if you look at our purpose, it's we revel in celebrating life, and so if you do that and you figure out how are we going to do that for this party and then you take some decision criteria, which is is it great for the guests, is it great for the team and is it financially sustainable? And if you can answer yes to those three questions, just get her done Right. And also, you know our credo.

Speaker 1: 11:15

We have a series about 28 different things that we go through that are behavioral standards and one of them is we start with yes. So when, when somebody's wanting something, we start with yes and then we let them know how we can do that. Versus walking into a restaurant or calling and they're like we're fully booked. I'm like I I've been to a couple fully booked restaurants. Most restaurants, even busy ones, are not fully booked.

Speaker 1: 11:43

If I walk in at 515 and you needed the table back at 645, we got a deal. You just have to start with yes, we'd love to get you in, but we have the table back at 630, you know so. So I don't know if that that gives you a couple of ideas, but that that those are the things that we're focused on. We don't sit there with a scorecard of you know you got to hit 110. That's like at the end of the month, like let's see where we're at during the week and just know you know if, kind of day to day, where that number is. So it's just a good indicator. Not the marching orders. The marching orders is Reveal in SolBringLife.

Speaker 2: 12:23

Take it a quick break to share an exciting update from SevenShifts. Usually I don't do this, but our users have been waiting for it for a long time. I know I don't have to tell you that running payroll is a lengthy manual process Data entry, multiple systems, cross referencing, triple checking so I'm excited to announce that SevenShifts payroll is now available in the United States. Now you can schedule your employees, manage the time clock, calculate tips and pay your team in one app, and when you make the switch to SevenShifts payroll, your first three months are on us. Now it's time for the big question. The commission model for service Commissioners is common in industries like auto sales, retail real estate, but it's not all that common in hospitality. But Fire and Runt is found a way to make it work. Give staff an opportunity to earn high above industry averages. I'll let Chad explain how it works.

Speaker 1: 13:06

We stumbled upon a new way to really think about how we pay our employees, how we pay our servers primarily, and that was to implement a service charge across the board. So, no matter party size, we just do a 20% service charge and a 22% for booked contracted events and then we pay, instead of trying to divvy that out as a tip and do all these different things that other people do or trying to figure out well, how do we pay everybody $30 an hour or all this kind of stuff? We started with the premise and I sat in front of our teams and stood in front of them and talked about it. This is not a front of the house, back of the house war. That's not a war we're in, nor was it a war we were ever about. I paid my back of the house teams well then. I pay them well now, and that's a different career path. I love my servers, I love the sales team. They execute and deliver to the guest, and without them we don't really have a business because we won't have the guests. And so what we did is we took the model that was this tip out model, where really the server was keeping about 12.5% of their sales as tips for them. The rest of it was getting tipped out to expos and front desk and bussers and captains and the wine steward and all that kind of stuff and we put them on a 15% commission. So not the service charge. Service charge is a different deal. But their commission sells people. Now If they sell it and we deliver and we don't take it off the bill for you know, for reason, like we burn a steak or whatever those types of things or we messed up, then they get paid. It's not to the whim of the guest, it's not you know that side, it's your professional. You get paid with what you sell.

Speaker 1: 15:11

And if the customer, if our guest, wants to leave an additional amount, they're welcome to. But it is not asked. But we do allow that. We will accept that because there's some people and I've been in this situation where I went to a restaurant I wanted to take care of. There were some other place places that were doing a service charge, but then they, their compensation model was totally different and I wanted to leave as extra as our server just did an awesome job and they're like you can't, like wait a minute, I can't. I actually want to leave some more money. We don't have a way. I'm like, well, ring a dollar up and let me tip, or you know something, so.

Speaker 1: 15:53

So leaving that out, I think, is it's it's an area where other places have struggled. What we want to do is want to tell our guest we're going to deliver for you and we've been delivering for 25 years, 26, almost 26 years now for our corporate clients that have always paid a service charge Right. A third of our business has always had a service charge and now the other two thirds does as well. And if we, if we don't make it right, then we, we eat the bills Right, just like you do on other things. So, and then this is I have a DJ. I think this is something that was a surprise, but, looking back on it, I didn't realize how poor the restaurant industry did of marketing people that had not worked in our business. When you have a job posting like this, come work for us. It'll be minimum wage plus tips. You'll be a bus driver. You'll, minimum wage plus front desk, be a runner, minimum wage plus tips. Well, if you've never worked in our industry, what does that mean?

Speaker 3: 17:05

Right.

Speaker 1: 17:05

Right, and it was actually talking to a front desk person that had been hired at our Bellevue location and she had been on the job about four months and I was asking how it was going and this has priored us switching to this service charge commission model in this new way of compensation and she's like oh, it's fantastic. She had come from Nordstroms and she's like I just love it here, people are awesome. I said, how's the money? She's like oh, it's great, you know, I make. I think at this time it was like 14, 15 hour. And then I make five or six bucks an hour in tips. She goes, but I don't count those because I can't count on them. And I was like okay, so you make 21 an hour and you don't count on that, even though for four months you've made $21.

Speaker 1: 17:56

And I just realized, if you're not in this business, we do a disservice to ourselves. And so when we switched our servers to commissions, we actually switched all the support teams which were our really entry level points. We converted them to hourly rates. And so all of a sudden, if you're a bus or 22, 25 an hour, that's guaranteed You're not waiting for a server to pay you out. We could advertise for front desk and start them at 20 bucks an hour. Again, this is seven years ago. That was kind of unheard of, but that's what people were making in our restaurant, and so when I look at labor, at the end of the day I want us to win, I want our teams to win, I want our restaurants to win, I want an unfair advantage over other places. I don't care about the other places, I want us to win. So in the advertising game and the marketing game of entry level, we've won.

Speaker 2: 18:59

In detail, the servers make a set base wage with the commission on top.

Speaker 1: 19:06

Typically there's a base wage and then the commission, so in essence 15%. Sometimes it's a little different or it's an hourly rate for a couple of events. So it's a base wage plus commissions, plus any additional bumps that they get are 100%. There's no credit card deduction and no tip out to anybody else. So those three components. The average server is somewhere in that $60 to $90 an hour, but we have servers up into $110, $120 an hour in terms of earnings, between all of those things.

Speaker 2: 19:41

But the drastic switch like this, especially when compensation is concerned it may alienate some longtime staff, which it can admit was a fear, but it has had a positive impact on how employees work in their day-to-day. I think one of our most important things is that we have a lot of people who are working in the same field.

Speaker 1: 19:57

I think one of our longtime servers. He's 22 years, 23 years. I was asking him how it was going. This is six and a half years ago, so after about six months and he's like I have never realized how much I prejudged tables until I didn't have to. All I got to do is practice my craft and I get paid right Take care of the guests and if I do it exceptionally well, I might get a little extra. If not, I don't have to worry about preconceived notions.

Speaker 1: 20:32

Are they international travelers? Like I get paid and I love this job and, yes, compensation is part of, but I don't have to worry and run over and look at the check to see if they left me anything or do an autograt under the old deal. And so he's like it's so much more relaxing to take care of the costs. People not worry. Is this table even going to tip me? Like I get three tables tonight and this one might stiff me. So. And then one of our very veteran servers. She was with us 23 years until she retired. At the end of the day she was like yeah, why didn't we do this 20 years ago? She's like this is the best thing going that was what my dad said too Because it just changes the dynamic.

Speaker 2: 21:23

And they also didn't find that it led to any attrition. If anything, a lot of staff regret not doing it sooner.

Speaker 1: 21:28

We didn't lose a single server when we converted everybody Like to me. That's, that's the. The pudding, you know, that is the proof is when we switched over, are we going to lose our, our senior servers?

Speaker 3: 21:42

People that have been there for a long time.

Speaker 1: 21:44

Yeah, and, by the way, that's the last thing I want in a in experiential restaurant with longtime clients. And so that's why I think some of the other restaurant tours that have done some of these different models, they've they lost sight of the fact that part of their restaurant is their service staff and, yes, there's the cooks and you need to take care of them, but, man, you cannot balance the P and L off of your servers.

Speaker 2: 22:10

Now McKay is working to help other businesses follow the same model of paying their teams, among other things with his new company, brigado.

Speaker 1: 22:17

Brigado's art was an in-house kind of a captive IT company that we started about six years ago and that has now morphed into, you know, a whole nother company that is delivering tech support services and projects and POS management, network management, cybersecurity, those types of things, specifically in the hospitality space.

Speaker 1: 22:39

We do take care of a company that has a lot of clients as well, and so that has been one outlet that I have done some consulting and more speaking engagements around, and so you know some people are open to it and some people are not. We in the very beginning we told everybody what we were doing, we showed them how to do it, and I think we've talked with 50 restaurant tours in Portland and you know, at the end of the day nobody else did it. Or if they did it in Seattle, they they were trying to peanut butter around, they lost their servers, and so again, I learned from other restaurants that when I say they declared a war on their sales teams, they declared a war against their servers, trying to balance their business On their backs, and to me that's not fair.

Speaker 2: 23:36

Thanks for checking out this episode of the pre shift. If you enjoyed this one, leave a review and share it with one friend to help the show grow Could not do without your support. As always, I'd love to hear what you think. You can email me at dj at seven shiftscom. You can also find great insights like these on the seven shifts blog and on all of our social channels. Catch you next time.