ARE MANAGEMENT INCENTIVES THE KEY ELEMENT TO SUCCESS?
                               
          By Lloyd M. Gordon, GEC Consultants, Inc.

Most restaurant executives agree that a key element of success for a restaurant chain is the proper
motivation of unit-level management. Why is this factor so important in the restaurant industry,
and what are the most effective incentives for managers? 

Any labor-intensive business is heavily dependent on the attitude of its employees. We know that
it is especially true of restaurants, because they are so heavily oriented toward service and
product quality. Unlike the situation prevailing with most retailers, with restaurants the quality
of the product is measured instantly at the time of purchase. Furthermore, the restaurateur is
usually 
fully responsible for the quality of the products served in his restaurant, whereas many retailers 
can pass the blame for an inferior product on to its manufacturer. 

Consequently, product quality is less important to other retail establishments, and they have
relatively little control, whether perceived or actual, over it. Buying a defective shirt from Brooks
Brothers will probably not result in a lost customer, but eating a disappointing meal at a
restaurant may well mean the patron will never return.

The best way to ensure that unit-level employees will adhere to quality standards is to make it 
worth their while to do so. Obviously, that takes the form of some kind of incentive. As basic
as 
the principle may seem, some restaurant companies still pay their restaurant management
personnel a straight salary. Others provide a bonus based on management's exceeding some
minimum profit and return goals. Still others treat their managers as partners in their business
by 
paying a percentage of the earnings or sales of the individual restaurant.

What Is the Best Approach?

No easy answer exists. However, the closer a restaurant manager is to the owner of that
restaurant, the higher the sales and profits. Unit managers must think like owners, rather than 
employees, and how they relate to their customers should have a direct impact on compensation. 
However, it is not by accident that several of the most successful restaurant companies offer their
unit managers, in effect, an equity interest in their restaurant. 

On the other hand, many successful companies do not treat their unit management like partners. 
Nevertheless, in almost every case, a company does provide some incentive to that group of
employees. Indeed, Ryan's Family Steak House pays its unit managers salaries plus a percentage
of the unit's sales above a certain amount less a penalty for exceeding food and labor cost
guidelines. 

In the chain restaurant business, a company is only as successful as its individual units. Each
unit, in turn, is only as good as the last meal served and the smile on the face of the server. Senior
management must recognize that fact and provide an incentive to the individual restaurant
operator to ensure that both the quality of product and the smile are present.