The compliance rules that multi-units get wrong with Felice Ekelman, JD | 075

Getting workplace law advice after you get a complaint is like fixing a schedule after the shift's over. In this episode of The Pre-Shift Podcast, we sit down with Felice Ekelman, a principal at Jackson Lewis who leads the firm's restaurant industry group, to talk about the compliance mistakes that catch multi-unit operators off guard. Felice walks through why state and local rules don't travel with you from one location to the next, what "audit-proof" really looks like on paper and on the floor, and what the no-tax-on-tips provision means. Whether you're running two locations or twenty, her approach to hiring, classification, and training offers practical steps for operators looking to reduce risk as they grow.

Key Takeaways

• Call Early, Not After: Hear why the operators who end up needing a workplace lawyer are usually the ones who consult one before opening.
• Not All State Rules Are Alike: Discover why assuming your California playbook works in New York (or vice versa) is one of the most common mistakes multi-unit operators make, and why highly regulated states like California, New York, Illinois, and Massachusetts require their own separate approach to wage transparency, scheduling notice, and break penalties.
• What "Audit-Proof" Actually Means: Learn the checklist Felice runs with clients: an updated handbook, the right posters, compliant I-9s, matching time and pay records, and clocked meal breaks instead of automatic deductions.
• The Title Never Decides the Case: Understand why calling someone a manager, a sous chef, or a shift lead doesn't determine whether they belong in the tip pool or qualify for overtime exemption. What matters is what the person actually does on shift, not their title.
• Transparency Builds Trust in the Tip Pool: Hear why the biggest tip pool problems come from staff not understanding who's in the pool and how much they're getting, and why showing the math every shift cuts down on disputes.
• Training Is Where the Real Risk Sits: Discover why Felice sees management training on EEO, wage and hour rules, accommodations, and consistent discipline as one of the highest-value investments an operator can make, since most legal exposure comes from a manager's split-second call.
• What New Rules Require From Your Payroll Provider: Learn why tax only applies to a portion of overtime pay, and why your payroll provider needs to be told, specifically, to separate that line item since it won't happen automatically.

Resources

• More about Felice https://www.jacksonlewis.com/people/felice-b-ekelman
• Contact Felice at Felice.Ekelman@jacksonlewis.com

Chapters

00:00 Meet Felice Ekelman
00:55 Call Your Lawyer Early
02:55 Multi-Unit State Law Traps
04:27 Staying Ahead of Changes
07:34 California Compliance Minefield
09:22 Audit Proof Your Operation
13:49 Misclassification and Accommodations
16:07 Hourly vs Salary Exemptions
19:16 Tip Pool Rules and 80/20
23:41 Training Managers for Compliance
28:20 Insurance and Prevention Mindset
29:16 No Tax on Tips: What to Do
33:17 Contractors and Noncompetes
36:44 Top Priorities: Pay and I-9s
38:31 Key Takeaways

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7shifts is a restaurant platform that helps operators and managers hire, train, schedule, pay and retain their restaurant teams. With an easy-to-use platform and industry-specific solutions, 7shifts saves time, reduces errors, and helps keep costs in check for over 55,000 restaurants.

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Hey, I'm Andrew Scott from Owner Shift Training. I was a multi-unit owner for almost 20 years, and now with Owner Shift, we help restaurant owners increase their sales, their profitability, and help them have more freedom with their time. Andrew Scott ran restaurants for almost 20 years before he built a business turning around sinking ships. He's the founder of Owner Shift Training, where he's now worked with more than 1,000 restaurant owners, and the average client adds about$100,000 back to their bottom line and gets their life back in the process. Today, Andrew walks us through the mistake that nearly took him under at his fifth location, the systems he built to stop being the bottleneck, and why he raised wages when everyone told him he was crazy. My name is DJ, and this is The Pre-Shift You know, I've been in the restaurant industry all my life. I started when I was in grade six. I'm pretty sure that wasn't legal, but that's okay. Family restaurant, you know how it is. I got into it, and I went to university and I was like, "You know what? I'm gonna buy a restaurant instead." And so I basically was working part-time at a restaurant, ended up buying it, and I was like, "Yeah, I'm 20 years old, you know, I've got like no money. I've got like no ownership or management experience. You know, what could go wrong?" And it turns out there's, there's a lot of things that can go wrong. So I kind of found out the hard way exactly how tough the restaurant industry could be. Uh, just to give you an example, my very first location, uh, my rent I think was like 5,500, and my sales in my first month were like 16,000. It was at a point where I had revenue. Like sales were good, you know. By now we had what, 50, 60, 70 employees, somewhere in that neighborhood at that point in time. But you know, so we had, we had a, a big enough business. Revenue was good. But it was the point where I didn't have any life. Like I was literally running from one location being like, "Andrew, uh, I forgot to order lettuce, you know. Can you go pick up some lettuce and bring it in to my manager?" Another one's like, "Susie just quit without notice. I need someone to come fill this shift." And so I'd run over there and then… You know, I'm just like driving across the city, just back and forth, back and forth. And just… I, I, I was like, "Man, like I either have to get better or I've got to get out. Like I'm not gonna make it through this thing." So I decided to get better, and so that kind of s- basically started the journey of looking at our operations, looking at our, you know, finances, looking at our marketing, looking at our, our people systems. Like looking at the entire business and being like, "This shit isn't working, so like how do I get it to work for me and for multiple units so I can actually have a life?" And you know, like how can I take a vacation? How can I do all that with the business still running? Like how can I actually create an actual business out of this? Because like realistically, the business requires you to be there all the time and can't run without you. It's, it's not really a business. It's more of a prison. So that's what we do with ownership, and so now, you know, 1,000 plus clients later, you know. I'd actually love to add up the amount of profit we've generated in addition. I, I should actually add that up, but you know, it's, it's significant. Like the average client that we work with, you know, typically adds like 100 grand to their bottom line per year. So it's just, you know… And they also get their life back. So that's, that's not even the big thing. The money's good, but then actually having a life is what we've actually had. People on, uh, on our podcast, like their wives have come on the podcast and talked about how amazing it is, and even their management teams have come on and being like, "Oh my God, this is so amazing because now I feel better at my job and I'm getting bonuses now." Anyway, all that good stuff. So, so that's, that's, that's the arc, as you say. Yeah. Take me back a little bit. You know, you mentioned kind of getting the life back, and I think that that, you know, profits of course are, are wonderful, but I think, you know, hopefully folks that are listening, I'm sure there are folks that are listening kind of in that spot- You know what? I mean, well, it's a series of moments, but I can, I can share a couple of them. I mean, there's this one instance where, you know, there's not a specific moment for this one, but I remember just being afraid to look at my phone every morning. I just remember being afraid because someone was always, you know, like there was like a email with no subject line, and then you click on it and it's like, "I quit, effective immediately." And so like, you know, you get that, or you get the text being like, "So and so can't make it in," you know, the text that came at 3:00 in the morning and after they've been out drinking. Like, whatever the case is. And so like every morning I'm like, I'm waking up at 6:00 and I'm just like, I'm just afraid to look at my phone. And so I'm like, "I shouldn't be afraid to wake up in the morning." Like, that shouldn't be how I live my life. Another one was where I was trying to visit some family, and so I was trying to drive out of town. I didn't even make it past the city limit before I got a call being like,"Hey, man, someone didn't show up. We need you to come back." I'm like, literally, like I didn't even make it to the city limit. I- there's like 10 minutes and then I had to go back . And anyway, it's just that that's the way it always was, and then I just got to the point where I'm like, I always thought the issue was I didn't have enough money. Like, I always thought like I didn't have enough locations. Like what if I had that? Would it be better? I thought, "Oh, like it's 'cause I don't have the right management." But then I eventually got some, you know, decent management, but they were using the systems that I developed. So, you know, they weren't very good before we changed it all. So it's like, yeah, and I, I, I thought the next thing was, "Oh, if I just had like three locations, I'd just have more sales." But then I had all the sales, I had the management, I had a big team. How come I wasn't making the money I wanted and how come I didn't have a life, right? So like at, at some point I was just like, I did everything that I thought I was supposed to do. Like, why isn't this working? So that was a moment I remember just sitting at home and just being like … That was when I decided I had to get better, so. Absolutely, yeah. And then one other thing, I don't know if, if you wanna talk about it. Um, you talked about, um, opening that fifth location at like a horrible time. It was my technical fifth location, but I had four operating at the time because just, you know, word, word to everyone listening to this. Basically what happened is just check your lease agreements. So basically what happened was there was, I had a lease at my very first location, spent 10 years working on this business, made it into something great. Um, and then the landlord came and was like, "Oh, by the way," like basically the landlord that I used to have was bought out by like a venture capital firm or a realty corporation or whatever. And anyway, turns out the neighbor that was beside me, which had the biggest footprint in the building, they were like, "Yeah, either you give us that next space or we leave." And so when the renewal came up, he was like, "Sorry, bro." I can't, I can't, you know, extend your lease." So I was like, 10 years, so, of working. And then anyway, so we eventually just relocated, but what a pain in the butt,'cause then we have to go through a whole new build-out, and anyway, it was just, it was a, it was a pain. So this other one I opened, even though I had my systems in place, I had the people in place, I had all of that stuff in place, the problem was I overextended myself from a debt perspective. And so this was a situation where I remember signing the lease agreement being like, "This is either going to bankrupt me or it's gonna be amazing." And so any time-- 'cause like, you know, like early on in the journey, we get rewarded for taking risks, like getting into a restaurant is taking a risk. You know? We get rewarded by doing these new things. And so what ended up happening is I was like, "Yeah, I can figure it out. I figured all this other stuff out to get me here. Like, sure, why not do it again?" But I didn't realize that once you scale to a certain point, the more you scale can actually become risky. And so you have-- like, 'cause one wrong thing can then upset the apple cart. And so here's the other scenario, is that I was just coming out of a divorce, meaning I couldn't get a proper bank loan. Had I been able to do that, I probably would've been fine. But because I had lost the house in the divorce, you know, I couldn't get the financing and my, my loans were above a million dollars anyway, as it was from the other locations that I had. Right. So, 'cause I had been expanding, opening up a new location every year or two. So basically, the loans were still significant, and so I ended up in a place where they're like, "Sorry, we can't finance you." I'd already signed a lease by that point, so again, idiotic. But, so I went and got it from a, like a, you know one of those like leasing places that leases, you know, say POS equipment or whatever the case is. And they're like, "Yeah, we'll finance it, but we'll finance it instead of over 10 years, we'll finance it over 3." And so, like I ended up in a situation where my loan repayments per month were like 33 or $35,000 a month between all of the debt service that I had. And so that just made it really tough. And here's another thing when we're talking about expansion. Always double-check, basically double-check your substance. So it's called the Dunning-Kruger effect. It's like, you know, if, if you don't understand something, you're not gonna be able to spot the flaw in your own logic. So you need to have someone else double-check it. So here's my thought process, is I'm like, "Hey, my best location is in this one suburb. If I open another one in that same suburb- It's also gonna do really well, right? So that's the logic that you would think, 'cause people already know you, like, you know, and I found a, you know, good location. And so I instantly thought, "Hey, this is gonna do exactly the same as this other one." But the faulty part of that logic is they were a little too close together. Basically what's happened is I've doubled all my expenses, so we need to at least double the revenue just to stay the same, but unfortunately that's not what ended up happening. What ended up happening is the new one ended up starting out fairly slow, and it actually took 30% of my customers from my other one. So then my top one, which made the bulk of the money, all of a sudden wasn't nearly as profitable anymore, 'cause I'm like, "Oh, even if this one sucks and it's losing five grand a month or whatever, I can, I can just take from my other one while I build it up." I would… I never thought that my best location would then trend down. Looking back now and I'm like,"Shit, I can see that. I can see how that would happen." But, you know At the time, I just, I didn't think of the things that could happen that I didn't think about. And so that's what kind of we bring to clients now is we're like,"Hey, just so you know, this could happen." And so, like, we're trying to hedge against those things. But yeah, that's what I like to bring to people because most people don't have anyone in their corner saying, "Hey, like, we all think that opening up more is gonna be great. Like, if we can just do this, it'll be fine." No one ever is saying like,"Hey, that's actually not a good idea." One, thank you for being so open and just transparent about, like, your experience, and, you know, not to dilute that or diminish it, but, you know, safe to say you have been through it. If someone is like, "Oh, maybe he doesn't know what I'm talking about. I- he doesn't know my story," it's like, I think, I think you can safely say you know what- what's going on. Uh- Yeah, I slept on the floor of the, of the restaurant. Like, yeah, I mean, like, I've been there. I've done the 100-hour weeks. Like, I've been through it all from, from just one location, but also doing the same thing at three and four locations when shit hit the fan. One of the things that I say to a lot of people is, "Two unprofitable locations don't make a profitable one." And I'm not saying that, you know, my locations were not profitable, but it's, it's… it just goes to the mindset of people that keep thinking, "Well, if I just had another one, then it would be better." But I will tell you that that kind of a logic, you basically need to perfect what you have with one and then scale it. And had I done that better, it would be in a much better position. So, like, I was at three locations before I started to figure all the really good stuff out. If I had done that at one location, yeah, totally different situation today. Yeah, I guess what I want to get into now is just some more of what are the solutions, right? So I guess if you had to kind of put a thesis, if you will, on what you've, what you've discovered, um, in your experience and kind of the, the leading, you know, leading thing that you're teaching, what would that be? It comes down to the people and the systems that you have in place. I think that's probably the biggest, biggest things. Let me talk about it this way. I have so many owners that I talk to that, that come in, and they build a business where they are the key piece, right? That they are the operating system of their business. And so what that means is, like, they take a few days off, and then they come back, and they're like, "Oh my God," like, you know, "the orders weren't put away properly." Like, "Things aren't cleaned properly," like, you know, "What's going on?" Like, you know, "We've got a bunch of complaints," or maybe labor's over'cause nobody cut when they should have. Like, all of these things are happening, and the owner is, like, the only one that's doing and fixing those things. Now, what's interesting is that owners actually get a sense of not only pride at being the best at, you know, being, like, maybe the best person in the kitchen or you're the best server or whatever, just based on the people that you have working for you. First question I always ask is I'm like,"Okay, well, let's take a look at your systems." And usually what happens then is they'll be like, "Oh, well, I mean, like, stuff isn't, like, written down. Like, they should just know how to do it. Like, it's common sense. Like, you sh- you know how to mop a floor. You should know how to, you know, make this burger. Like, you should just know how to do it. Like, I showed you how. Like, how come you're not doing it?" Or, "How did you forget to do this thing that is so obvious and evident to you as an owner, but they're not doing it?" And so that is the lack of systems. And if you have a lack of systems, it's always gonna keep you in the business. So perfect example of this is I use a streaky mirror example. So, you know, I go in there and I'm like, "Okay, I need Windex. I need paper towel. I'm going to start at the top and spray towards the bottom. Then I'm gonna use circular motions." And like, it, it's very specific how I do it. I know that what I'm looking for at the end is for a streak-free, clean mirror where I can see myself and probably notice my gray hair and, you know, maybe think about dyeing it. But anyway, what most people will do, though, what we have to understand, is that common sense isn't common because there is no common anymore, right? Uh, like when I grew up, you know, most parents taught their kids how to sweep and mop and do some chores around the house. That may not be the same thing today. You know, people may not even come from the same cultural or language scenario, right? Like, there is no common anymore. That, that is the way the world is today. And so common sense isn't common to someone who's never done it before, and so I wanna make sure that's evidenced in our system. So the example that I use is I had on my checklist, "Clean bathroom mirror," and I would come in and I'd be like,"How come this mirror is streaky? Like, like how come it, like, w- looks worse than before they probably tried to cl-" Like, you can tell when someone cleaned it and they used the wrong product or they used the wrong towel. Like, you can tell. And you're like, "How the hell did they do that? How do they not know how to clean a mirror? It's so simple, so stupid," right? So our system needs to reflect that. And so what I put in our checklist was,"Clean bathroom mirror with Windex and paper towel." Most common problems, people didn't know what cleaner to use. They didn't know what, you know, whether paper towel or a bar towel or their paper… Like, who knows what? People then have to make all these subsequent decisions, and if they don't remember their training or they weren't trained well or they've never known how to do that previously, they're going to end up making the wrong decisions. And we might think this is stupid, but this is just the way it is. Because I will tell you, once we put that there with Windex and paper towel, and then someone didn't use Windex, you go back and you're like,"Hey dude, is there anything wrong with the way this is written? Like, did you understand this fully?" And he's like, "No." I'm like, "Okay, so like why didn't you do it?" You know? It's, it's right there. So it's like either you do it or you don't, and if you don't, you know, then we start the write-up procedure because the system's clear, right? And the ball's in their court to follow it. But if it's not written down, if they're not trained on it, and if it's not specific enough, all of a sudden we're blaming people because of our flawed systems. And so most owners end up in a situation where they are the system 'cause they have all the information in their head, and they know it all, but that's also why their business doesn't run without them because they are the glue that keeps the business together. But when you have a system, all you have to do is monitor And make sure that system is functioning properly, and hold people accountable if they don't follow that system. That becomes the job of management rather than you being the thing. It's like being inside of a motor, you know, moving the gears yourself versus just hitting the gas pedal and having it run. It's two different things. Like, you wanna be the guy hitting the gas pedal, not the, not someone, you know, in a car trying to, like, hand crank it or something. You know what I mean? That makes sense. The big thing is just, like, why do we, why do owners keep doing it this way? And I think we kind of touched on that, just a sense of, like, pride and, and, you know, almost a dopamine hit. I don't know if it's necessarily pride. I, I honestly think that they… There's two things. I think that owners, they don't know what good looks like when it comes to systems. They also don't know what good people look like, right? And so the- they're just basing it off of the things that they know how to do. So it's not really their fault. Like, most owners just don't know how to do it better. No one ever teaches you how to hire properly, right? You're just going off, "Oh, I need to do an interview. Well, let me Google interview questions." Or, you know, someone comes in, you're like,"Oh," like, you know, "You have a pulse. Okay, you're hired." You know? Like, we don't know what good looks like. Like, if, if we were to say, "Hey, we need a job description for this position. We need to rate their performance on interview questions," like, you know, most owners wouldn't know where to start because they're in a situation where they're just constantly in the business. They can't even work on the business to get themselves out of it. And so that's, that's a big piece of it. They don't know what good looks like. They don't know where to start. And when people get to the point of they're like, "Okay, I don't know. Let me find out," that's where we jump in, and we can show them this whole thing. But for the longest time, I just blamed everyone else. I had a competitor that was right across the street from me, and I would've been like, "Oh, well, you know, he just has more money than me, so he advertises more. Oh," like, like, you know. So it was an owner that literally showed up, grabbed the bills, grabbed the deposit bags, and then, like, drove off in his Beamer. And I was like, "Well, screw that guy." You know?"I'm, I'm grinding 100 hours a week. My product's way better. Like, I'm a better owner 'cause I'm here all the time." And meanwhile, he made way more money than me and had a better life than me. The thing is, his business did something different than mine did. I just had a hard time admitting that because I just didn't know how to do that. So I found all these other things to blame."Oh, it's COVID. It's the economy. It's, there's no good people." It's like, "Oh, well, they're, they're using crappy products, and I use good products. That's why my stuff's more expensive, yet I'm making less money," which should be the opposite if you're doing that. So, you know, it's, like, those types of things that keep us from doing it. Um, and the other thing is just time. We're so busy fighting the fires. It's like fire prevention versus firefighting. We don't have the time to do fire prevention because we're too busy fighting the fires, you know? How do you finally kind of break from that, right? Like, how do you just step away Yeah, I mean, do you think, do you kind of have to let things go a little bit wrong in order for that to happen? Yes. Uh, it- it's kind of the analogy… I used to use this with my managers, 'cause like every September at least one of my managers would call me, like crying. I, like, yeah, anyway. So like, because there's usually some staff turnover in September because people are going back to school, like there's some different stuff that's happening in that time, so we're trying to hi- hire. Hiring's also harder in September because there are a lot of people looking for jobs because the labor force diminishes, um, during that month for, you know, for most, you know, lower wage jobs, for example. So even though we didn't like hire a bunch of high school students, like, you know, it was still college. It was still like that rough age group. So every September it would happen, and I'm like, "Guys, like the solution is we just need to go out and actually interview more people and hire them," and they're like, "But I don't even have time to interview." So I'm like, it's like you're, you're drowning and you're two feet away from the ladder to get out of the pool. Like you just need to like let your head go underwater for a second, and then you'll be at that ladder and you can just fucking get up. So it's… The, the thing is you kind of have to let some things burn and you focus on one system at a time. And here's how I figure out what that system is. So I used to do this. Uh, I would grab my leadership team, and I, I did this at a bunch of restaurants when I… Whatever. I would just grab a dry erase marker, and I would just clear the walk-in of all the prep charts and everything that's usually on it, and I would just get everyone. I'd be like, "All right, guys, just tell me every problem that exists in this business right now." And they'd be like, you know, "People don't know how to make the product." They'd be like, you know, "Bad customer service." And they'd be like, "People showing up late." And they'd be like,"Orders aren't correct," and like,"We're not ordering enough," and like,"Sales aren't high enough." And you know, they would just give me all of the problems, and I would write them all down. And so like the ones I just mentioned here are a lot of like people problems, right? And so then what we do is we start to group them into categories. We say, "Okay, well, training is related to, you know, people showing up late." Like it's a people problem. So we would start to chunk up and say, "Okay, well, here's a lot of people problems." And so what it came down to, one of the first times I did this, was that, you know, people didn't know how to make products. They were making mistakes. They weren't doing their jobs. They weren't following the lists. All of this stuff is together. And so I'm like Do you think maybe we're just not training people well? And all of a sudden everyone was like, "Oh my God, you're right. Our training is like, 'Yeah, just follow me around and, like, walk with me as I'm in the middle of rush.'" And then, you know, the next day it's like, "Okay, now you do it." Like, the training wasn't thorough enough, and they weren't experienced in that way. And so, like, here's the, here's the scenario. We had, we had three products. It was sandwiches, salads, and smoothies. And so one time I'm calling out orders and I, I call out an order of a strawberry banana smoothie to one of these employees who had been with me for about three months, and she looked at me and she's like, "Andrew, I don't know how to make a smoothie." And I'm like, "You've been here three freaking months. How do you not know how to make a smooth- We have three products. Like, what are you doing?" You know? So I was just like, oh my God, like how, how did we miss that in training, right? So we didn't have a checklist for our training. We didn't have procedures around it. Like all, all of that stuff wasn't there. And so that's kind of how I figured out like, we need to change this. So then when we went and did all this on the board, it's like, oh, we actually just need to train people properly. And instantly that improved so many of those issues. So again, it's not about trying to put a bandaid on every individual thing. It's about figuring out, okay, what is the root cause of that? And it always comes back to a system. So it's like the training system or the operations system or the people system being like hiring and interviewing, like all that kind of stuff. The financial system. It always relates back to a system that we don't have or we do have, it's just not good enough, right? In most restaurants, the system is the owner, and so that's why it's just not good enough 'cause it's one person. It's not written down, it's just lives in that one owner. And then even if, even if that's not the case and you have management, you know, it's the same thing. They're only as good as the systems that they're following. So all of that kind of goes back. So how you figure it out is you gotta figure out, okay, what are my biggest problems? All right, and what one thing… This comes from a book called The One Thing. It's a great book, by the way. It is basically what one thing could I fix that would make all the other problems either easier or irrelevant? So that is the question we ask to make sure we're focused on the right priority in the business. And then if we put all of our effort towards that, we fix that, then all of a sudden we have time to tackle the other problems. And so that's basically what we do with, with our clients is we figure out what's the one big thing we need to do. Usually it pertains to, like, food cost or labor cost. Like, usually most people come to us because their prime cost is too high and they're not making money. So we're like, "All right. Let's, let's fix that." And then once we fix that, get them some money in the bank account and free up about five hours of their time, then they're like, "Okay, now we can start building the business that works for you instead of you working for it." But, I mean, we gotta start somewhere. But, uh, that's exactly how we do it. So is that typically the first thing you kind of look at is, is, you know, the f- the prime cost and fixing that first? And, uh- It's two things. So I mean, number one, it's, it's basically getting it… Like, first thing we do is we figure out, okay, how can we get this owner some time? So we look at their schedule. We look at what they're doing with their time. We're like, "All right. How can we find five hours a week?" 'Cause you're gonna need five hours a week to then go and make the changes we talk about. And then we literally go through their schedule together. We go through their forecast together. We go through their ordering. We go through their pricing. We go through their menus. We go through all of that with them, and then we're like, "Okay, so now, you know, we're live together." We're like, "All right, so now we're gonna change this, this, this, and this." And we make those changes, and typically by week four, yeah, they've got about an extra $1,000 in profitability per week, usually by about week four. And that's when they start to feel that. It's in the bank account. They're feeling less stressed. And so then we're like, "Okay, now we can work on the bigger systems that you didn't have time to or, you know, didn't have the money to." 'Cause a lot of owners also try and save money by working more. They try and cut labor by just doing it themselves. So, you know, instead we get them to own the business. But now again, that doesn't happen in four weeks, but the first few things we do starts that… It's like kinda, you know, rolling one of those snowballs. That's, like, the audit to kinda figure out what to, what people need to automate, what they need to delegate, what they need to stop doing. And is that kind of that first main thing that you're doing? Okay.' Cause I mean, here, So like we'll go into someone's schedule and be like, "Hey, so like right now you're working, you know, between 2:00 and 4:00.

You know, what are you doing between 2: 24:36

00 and 4:00?" They're like, "Oh, well, you know, I, I'm there to save on labor." Like, "Okay, is there someone else that we could bring in from 2:00 to

4: 24:42

00, so like we could meet between those hours and actually do the work that's gonna create us far more than what you're saving in labor?" And so that's a quick change to make. Like, yeah, someone else could totally work during that time. And so we just start with, okay, what can we do that doesn't really affect the operation and create a little bit of time, and let's use it intentionally. Um, we teach owners how to literally schedule their time better, 'cause let's face it, you know, most owners have never been taught how to manage their own time and their own priorities. They mostly every day firefight, right? We're used to being on the, "Okay, I work from…" Like we, we can do a time study with owners and we're like, "Okay, just, just write down what you do every

day." And they're like, "Okay, 9: 25:18

00 to 9:00 I work." I'm like, "Okay, but like what do you do in, in between that?" And, but, but they don't know, and they don't know what's eating up their time, so we actually dive into that with them. We're like, "Oh, hey, did you realize that you…" Like there was this one owner that we worked with, had three locations. We realized he spent eight hours a week driving between, between his locations and between like Restaurant Depot and like getting, you know, products and stuff like that that is mana- So I'm like, "Okay, we need to get a better inventory system, a better ordering system real quick, and we need to schedule your visits for sites so that it corresponds with like, so you go to one site per day, and then you have a flex day so you're not driving around." So we literally saved eight hours out of his week just by making a couple different tweaks. And he's, he's always said, "Andrew, I don't have time to market." And I'm like,"Okay, but if you did have time, are you confident you could build the sales?" He's like, "Yeah, 100%." So I'm like, "All right, dude, well, let's find you time." And we found him time, and sure enough, he grew his sales 20%. What's the first system that you build as, when you come in typically? Like, what's the, like that initial framework? First thing hands down is financial tracking because, you know, like let, let's do this way. Have you ever tried to lose weight before? I have. Me too. Me too, and I, I, I've lost it and gained it and lost it and gained it. It's been, it's been, you know, my entire life. So, you know, I've went back and forth on that. But let me ask you this. So when you've tried to lose weight before, were you more successful when you measured yourself on a scale routinely? Yeah, and tracked. You, you track what you eat. You weigh yourself on the scale, right? You're more likely to be successful. So let me ask you this. If you're a restaurant owner, are you going to be more profitable if you track your sales, your food cost, your labor cost, the major things that go into your business profitability? Probably. Yeah, 100%. Because what you measure can then get managed, right? So like here's one thing that I-- here's one thing that, where this all came from. So originally I was in my first location, and it was a situation where, you know, I would look at the P&L every month. And, you know, now granted, I know a lot of restaurant owners either do their P&Ls themself, which means they're always behind and usually incorrect, or they don't have a P&L at all, which I mean realistically is probably about the same as if you do it yourself and it's late and incorrect. I mean, it's u- it's useless data. So anyway, just by the way, if you do your own books, don't. Um, we just hired an accountant to work with our clients, and it's like literally she has meetings with them, and like this one guy was over-reporting his profits by like, you know, $200,000 a year, and he had just tried to get investors and like… Anyway, like he just, because he was like double counting tips and anyway, so, so just FYI, side note. But anyway, so I would look at the P&L. And so usually what happens, I would get all my P&L data to the bookkeeper by like the 10th of the month because I had two-week accounts with Cisco and like… So anyway, so after all this pain, I would get that over to them, and then they would take approximately seven to 10 days to get me the reports back. So it was roughly the 20 to the 25th of the month by the time I get the P&L back. So I got it back one time, and my food cost had shot up to like 47% or something like that. And I'm like, "Man, I was feeling this in my bank account," but I didn't know what it was. I didn't know why this was happening. It was 47%. So now here's the problem. I'm there at the 25th of the month, and now I drastically change. I go back and find out like, you know, where our portioning went off, like what we're doing wrong. Like I, you know, I go and search all of the likely culprits, and I find a bunch of them. And so I look at this now, but I'm like,"Hey," so all of a sudden I'm in July. Meanwhile, this problem was there all in June, but now I'm already three and a half weeks into July, which means it's been like, what, seven, eight weeks of this, and I had no idea. So we track things weekly because if my food costs shoot up, I can fix it at week one Not week seven. So that means I was able to bring my food costs back down to, I mean, at that time it was probably like 32%. But I mean, like, that's like a 15% swing in food cost, 15% more profitability, and I was able to change that much quickly. So by seven weeks had gone by, like I just made no money for seven weeks, and I didn't know until I got the P&L back. That's why I track it weekly, so we can make the changes we need to before it wrecks your entire month or your entire quarter. And so that's why we track it. And when we're focused on it, we naturally will look at it more. We'll naturally be more profitable.'Cause like, let me ask you this, what's the point of having a business at all? What's the goal? Yeah. No, that's fair. So like you can have a successful restaurant and not have a successful business. You can be busy, you can have people love your food, you can have great reviews, and still not make money and go out of business. Like, that is a very common thing because if you don't manage the business side… Like, and that's what we do is, is we take people that have great restaurants and like have good products, and we help them actually turn it into a business that works and they can be profitable. And so that's the thing, is if you're running it only by the quality of your food, which again, is a very, very, and I would say crucial component. You have to have good food, right? And you have to have good service. Like those need to be there. But if you do that but don't actually manage the business and your finance, you're still not gonna make it. So that's the thing that most people get wrong. So first thing we do, weekly tracking. We'll look at their food, labor cost. You know, we go in depth out of their scheduling. Where are the hours where they're overstaffed, understaffed? We correct all of that. Uh, and that's what we do. We dive in there. It's the first thing, easiest thing to do, just establishing what future habits look like.'Cause an owner who tracks their, an owner who tracks their metrics and their numbers over years will be far more profitable than someone who sticks their head in the sand and just focuses on firefighting every day. 100%. So what about, you t- we talked a lot about food costs, but you know, obviously 7shifts here, labor costs. Curious your, your take on that side of the coin and, you know. I guess one, how do you, one, what do you typically do? What do you typically see? And what are you going to fix initially? And then also like how do you enforce labor percentage, right? Without kind of diminishing morale, cutting staff, you know, affecting people's lives. I'm gonna say something that most people are not going to understand because everyone, usually the issue is that labor's too high, right? That's, most people think that, right? So what I did is I paid people more It's counterintuitive. And, and I did this, you know, 10 years ago, and everyone thought I was crazy. It was back, it was back when, I don't know, we were paying people like maybe, you know, $15 at the time or whatever it was. I, I can't remember now exactly what it was. But everyone that was in my kinda category, like all the people that were part of the franchise, I said, "I'm gonna raise everybody's wages a dollar." And they're like, "Dude, you're crazy. Like you're never gonna make money. Like there's no way you can do that." And I'm like, "I'm gonna try, and this may fail, and it may be terrible, but I'm gonna try it." And so what's so interesting is I bet for everybody listening, you guys have someone on your staff right now that probably works circles around other people. So people got my job ad and they were like, "Oh dude, like yeah, I wanna work there 'cause they pay more money and it's better working environment," blah, blah, blah, blah. So I did that, and so I started getting these awesome caliber people. And so pretty soon once I started hiring these awesome caliber people and I compared that to some of the people I currently had, it was pretty obvious which ones were worth the money and which ones weren't. The dude that played Nintendo DS and took 45-minute bathroom breaks, not the guy I kept, right? I gave that money to someone else who was worth it. And so what's funny about that is I increased everyone's wages. It, it was roughly a dollar that I increased it, a dollar above what all of our competition were paying. And what's funny about it is my labor went down 5% of sales Like we're, we're-- Like 5% of sales is mas-massive. Like if you're doing a million a year, you know, that's a significant amount of money. We're talking about 50 grand right there in profitability, just instantly. So that's what we did. So it's counterintuitive. Now, so how we control labor is using a tool. Now, some people schedule in different ways. Obviously, we have 7shifts. There's a lot of good forecasting tools and things that, that is available. And so one of the key things we do is we go hour by hour at your schedule. We look at how many people are staffed, what's the volume, what can you handle at peak service?'Cause here's what I, here's what I found is that in a lot of schedules, you would, you would be surprised at the amount of people that just schedule the same shift every single day and the same schedule week over week over week. And so I asked them like, "Hey guys, like does your sales vary at all?" They're like, "Oh yeah, some weeks we're slammed, some weeks we're slow, some days we're slammed, some…" I'm like, "So why do you schedule the same? Like no wonder you have terrible reviews all coming on your Friday nights. Meanwhile, on Monday, everyone's there like twiddling their thumbs. They've got, they've got nothing to do." So we go hour by hour and make sure that our sales are aligned with the people that we've staffed, so we have good service. And like I'm okay with, you know, shifting some people away from the slower times and putting them on the times when you need them, right? And the thing is, here's another counterintuitive thing too. Your labor cost target when you're busier should be lower than when it's slower. Your labor cost target wants to even out over the course of a week or a month. But that shouldn't mean your labor target per day is still at that, right? So you have to vary that based on your actual sales volume because you can be more efficient at a certain volume. Now, other thing I will say too is one of the worst things you can do, because I've seen this in multiple of my locations. From time to time, the locations that always are over in labor also complain about not having enough staff, needing more, and they also don't get their cleaning duties done So we had a weekly and monthly cleaning checklist that once their daily stuff is done, you know, you needed to do like a couple of those duties over the course of time. Stuff that doesn't need to be done, like, you know, cleaning the condenser coils and stuff like that. That doesn't need to be done, you know, every day. It needs to be done, you know, once a month. So things like that. And so what would end up happening is I always found when our labor went over, we got more complaints about people being like, "It's too busy. I'm, I'm burnt out. Like, I'm thinking about quitting." Like when our labor was over. Meanwhile, our other location, which has labor 2 or 3% less of sales, they're running like a well-oiled machine. All the cleaning duties are getting done. Everyone's happy. They're loving their job. And why is that? Because if you schedule three people on a shift that needs two, and again, these are just random numbers. Some of you may review that you schedule seven on a shift that needs five, like whatever, the numbers don't really matter, but just- just use this equation. So scheduling three people on a shift that only needs two people, what ends up happening? Well, so I'm moving my hands like people talking right now. So basically what happens, right, there's too many people. What happens is somebody doesn't have enough to do. So what do they do is they talk to all of their employees. Like they talk to their, their friends, they start talking more. And here's the other funny thing too is in a situation where you know it's busy and you know a rush is coming and you know there's only two of you and like you've got to get stuff done, they will be more likely to do that. Whereas if they're like, "Oh, there's three people here, it's not that busy," people work slower, right? So let me ask you a question for a second. If I said to you, "Hey man, like it's not very busy tonight, so like I just need you to get a few tomatoes done, like maybe get like three, three cambros of tomatoes done, but like, you know, no big deal if you don't do it. Like three cambro's probably fine, but it's gonna be super slow, so like you should probably be able to do it." So that's one version, right? Or I say, "Oh my God, we need to get 10 cambros of tomato. We have a massive caterer order tomorrow. Like we are going to be slammed for lunch. It's gonna be Friday. You know, it's gonna be busy tonight because Susie, you know, called in sick, so you're gonna have more stuff to do. So like we need to get these 10 cambros done as fast as humanly possible." So Which versions of you is more productive? The one where you're like,"Oh my God, I don't have enough time." Like, it's pretty clear. Like the dude, you say, "Oh yeah, it's gonna be slow. You can do the three…" What happens is that person then puts that task off because that's what humans do. We delay things, we push it off, we are less productive, and so it ends up being a situation where then we push that off until eventually then it gets busy, and then we're, we're caught with our pants down because we slacked off in the beginning. Like, everybody does this. Like people running a marathon, I'm sure you've seen videos like this. People are running a marathon, they're at first, and then they start to slow down like, you know, 10 yards away from the thing. Meanwhile, the person that was right behind them zooms by because they never took their eye off the prize, and they end up coming in first. You guys have all seen videos of this. And so that's kind of what happens with humans, right? We delay, we procrastinate. It's part of human nature. And so when you have too many people, everyone just thinks, "Oh, we'll do it later. Well, there's enough people. We'll be able to get it done, so let's, let's chill now." But they never have enough time to get it done. I really wanna just jump into, you know, some action items that people can take, right? They're listening to this, they're hearing what you're saying. They're like, "I gotta get it together. I gotta get my ish together. Pretend I'm an owner right now, kind of, you know, running two locations. I'm the bottleneck. I'm realizing maybe through this conversation, oh shoot, I am the bottleneck." You know, what's one or two things they should do this week to try and start to alleviate some of the pressure? Number one, track your numbers. Just start. Like, it doesn't, it doesn't have to be much. Like, literally an Excel spreadsheet where you literally add up all the food that you purchased that week, and then all of the labor. You can grab that from your POS, you can grab that from your scheduling platform, whatever the case is. Um, yeah, just grab those so you know where that is, and just divide that by your sales to get your food and labor costs. So you can see the numbers of where you're at. And then do that every single week. Takes about 10 minutes a week, right, to do that. I usually do it on Mondays, and I would just do that, and that's because my, my Sysco order is like I had to do those on Mondays. So I was there, and I did… when I did my order, I always did inventory anyway, so I just did that all together. And I just added all the invoices up from the previous week. So I just did it on Mondays. Maybe for you that's Sundays or Tuesdays, I don't really care. Do it however you want. Or like if your schedule runs Thursday to Wednesday, then, then do that on Thursdays, you know? But the point is, do that. That's number one. Number two, one of the best things if you're finding that you're the bottleneck in the business and you're tired of constantly answering the same questions, what I say is that the things that you get asked and the questions that come up and the problems that people have, that is like a big blinking neon sign that says, "Hey, problem here. Like, fix me, fix me, fix me." If you ever get asked a question more than once, you know that there's a problem in your system. So that means, like from a training perspective, if multiple people have to ask you where the receipt paper is, it means you didn't train them on it, and it's not obvious enough and marked well enough where it is, right? So if multiple people, you know, come to you and say, "Oh, well, I didn't know we were supposed to do things this way," then it's not clear enough both in your systems and also in your training, right? So what I started to do is I started to look at that, and I-- every time something like that happened, every question I got, everything that came to me or one of my managers, I wrote it down And then I would take all those things at the end of the week, and I'd be like, "All right. How can I take our systems, and how can I adjust them so that we solve these things so these are the things that I'm not dealing with anymore?" Right? The questions that, that have come up. So I just started doing that. Or if you have no systems at all, super simple, literally just, like, run a voice memo, 'cause we have AI now, which, which helps a lot of… So, like, literally run a voice memo and talk as you're doing certain things. Like, if you needed to do, like, a training checklist or an opening checklist, like, whatever it is, if you didn't have that in place, literally just, like, put your phone to record, put some AirPods or, you know, headphones in or whatever. Hit a-- do a voice memo. Literally talk as you're doing stuff, and be specific as you're doing it the way that you do it. And then literally just take that, upload it to an AI, and be like,"Create a checklist based on what I just did." Like, super simple stuff to do. Like, it doesn't have to be over-complicated, but the point is just to start. Like, to start to take action on something, because the more you let it go, the more frustrated you'll be. The problems, the problems, if you don't handle them, they don't go away. They either stay the same or get worse. Like, that's just the reality of where we're at. Even though we have certain seasons in business that might be better for sales, like, you know, winter still comes. Your slow season still comes, so you gotta prepare for it, and you need the time to be able to do the marketing to prepare for those things. Um, and so I would just say for an owner, that's, that's the bottleneck. Just start somewhere and start tracking your numbers. Start, you know, tracking all the problems that are in the business. And, you know, even if you can dedicate an hour. Or even if it's not you, another thing I would do is, like, if you have someone that can do something 80% as well as you, like, let's just say food ordering, right? I always delegated that to my managers pretty quickly. And so I was like, "Okay. If they can do it 80% as well as you, have them shadow you, then have them do it. If you shadow them, do this four separate orders until they get it right. Make sure you have a par list in place and stuff like that, and they do proper inventory and so on." Starting today is way better. Another thing I'll say too is I used to hate it when either me or my managers got called in to, like, be the key holder at close or an opener or something like that. We were forced to work one of those positions. I always tell my managers is like, "You are too-- You get paid too much to go in and do, like, a frontline shift. So if you're gonna go and do that, you better be training someone while you're at it." So I always try and say, "Okay, if I have to do anything, how can I make this double purpose and train someone at the same time or create a system while I'm doing it? How do I take whatever I'm doing and make it dual purpose?" And so that's no net time. So in other words, I'm not taking more time to do it. I'm just using what I'm already doing and just making it more efficient and dual purpose. And if you do that, um, those are a few things to start with if you're feeling like you don't have time, you don't know where to start. Start somewhere is probably what I would do. I was gonna say, so maybe the last thing they do at the end of that week is give you a call, uh, once they have a little bit of information. Yeah, 100%. And I mean, I- and the way we do things too is, like, you know, we will have free calls with people. We'll, we'll take a look at your numbers, we'll take a look at where you're at. Um, and we'll basically give you free trainings on like, "Hey, like, this is what we would do in, in, you know, your position if we were there running your business. This is exactly what we would do." And we have tons of free resources. Like, I have my own podcast where we go in-depth on all of these topics and kind of go through the resources that we use. You know, there's tons of, tons of stuff there available. But if you really want help, you want someone to work with you one-on-one and actually come into your business and work on all these things with you and, you know, in a matter of weeks start to turn things around and within a matter of months have a business that works for you, that's what we do. So happy to, uh, happy to do that. And the best part of it is, yeah, from a financial perspective, within a matter of weeks, you know, we help owners make way more than what we charge. So realistically, it, uh, it's not an expense but investment because an investment will make you more than what you put in. So that's the way we do it. That's the way we do it. Awesome. Well, thank you so much, Andrew, for joining us today. Um, if you have any last advice, feel free, but, um, if not, where can folks find you if they want to reach out? Yeah. So we're Ownership Training, so ownershiptraining.com. Uh, on social media, I am AndrewRScott, because there's actually an actor named Andrew Scott, so I had to differentiate that and have my, my middle initial in there. Uh, the podcast is called, uh, Restaurant Growth Accelerator Podcast, so you can check that out as well. We also take listener questions and stuff like that. Would love to, if you have topics… You know, we do also webinars as well, live Q&A's at the end of those. So happy to jump in. And, uh, for anyone out there, what I would say is even though the restaurant business is tough, it is not impossible. You just haven't figured out how to make it better yet. And that is the key thing, is that it can get better. It will get better when you decide to make that change. There's three things that stuck with me after this episode. The first is that Andrew's mistake was not opening a fifth location. It was failing to check his numbers. He thought a location near his best performing one would perform the same way, and instead it took away 30% of his top store's customers. If you're scaling, consult those outside of your orbit for honest feedback. Second is that streaky mirror. When something isn't getting done right, the instinct is to blame the person. Andrew's point is that it's almost always the system. Not specific enough, not written down, or not trained properly. Fix the system and the people problem generally disappears with it. And lastly, track your numbers weekly, not monthly. Andrew went almost two months without knowing his food cost had spiked 47% because he wasn't seeing his P&L until three weeks after the month closed. A 10-minute weekly habit is the difference between catching a problem in week one and eating the cost for the whole quarter. And that's the show. Thank you to Andrew Scott of Owner Shift Training for joining us. You can find him at ownershifttraining.com or check out his show, The Restaurant Growth Accelerator podcast. If you enjoyed the episode, please leave a review and share it with someone who needs it. Reach out to us at podcast@7shifts.com. As always, I'm DJ Constantino, and this has been another episode of The Pre Shift.