After our business has shut down I was trying to pick up some money. There was an issue, we were expecting our first child, and if I made more the 29,000 we would lose our health insurance. (Masshealth Income limitations)
No way could we afford a $10,000 pregnancy bill. So I found a place, that was running small-batch, similarly had been running the pop-up circuit and was in need of help.
So whilst I was working for a steep discount, this was beneficial to me for the time being, and they really needed the help.
Once I got in, I managed FOH and transitioned their payroll %from 70 to 35 in the first three months. A lot of that was me just literally taking over the quick service shifts. They had 6 part-time high school employees, and all of them (minus the ones that were directly related to the owners) all did good jobs.
They also catered on the side and had a huge local word of mouth. In short they were killing it. Or so it seemed.
I started to clean up their books about a month in. The owners kept complaining about cash flow, had taken loans from their elderly parents and the bills were piling up still.
There were four owners. The two friends and their spouses.
All of them were paid out in cash from the safe.
For legal purposes they were structured as an LLC but were filing as an S-Corp :
In essence, this allowed the owners to draw a salary as opposed to taking money directly out of the 'equity' of the business
After reviewing the line items, the two BIGGEST red flags I saw were the aforementioned labor costs, food costs were high but not erroneous. They were basically looking at doing almost 2.5-3 Million in topline revenue for the year. (The year before Covid)
Yet I was looking at net losses for a QSR on the south shore that was maybe 700 sqft of service and sitting. Their revenue per sqft was astronomical…it didn't make sense.
Three months in we had fired the head butcher. This was my recommendation, while skilled, he was already burnt out from the owners, and had a bad reputation with the staff. They were paying two FTE Kitchen Managers and the two owners were technically the pitmasters. There was a bunch of redundancy.
Three months later we would fire the other kitchen manager. I took a night off for the first time in weeks as I was covering all management shifts so ownership could spend time with their family, at their other jobs etc
the kitchen manager was drunk, left work, drove the company van home and back, and yelled in front of customers. We obviously let them go the next day.
This is when I really started to see the BOH slip, where they were re-using meats they had taken off-site and throwing them back in the walk-in, in five-gallon buckets. I got yelled at when I threw it out instead of letting the kid they told package it away in the walk-in.
We were expecting our first child in October, and I was starting to get fed up with the seemilngly endless issues, and lack of transparency.
I had officially got our labor to the industry average, and our gross receipts were increasing month to month, yet we were losing money STILL
I called their accountant a couple of times to set up an appt, but they never responded. The other owner's partner reached out to me with concerns about unpaid bills, and I had to talk to National Grid about turning off their electricity. WTF is going on?
Turns out the 'full-time' owner was paying himself 120,000k a year + the cash distributions they took from pooled tips.
I walked out, and called the other owner's partner (she was doing the office admin) I was shaking with anger. I asked her if she knew what the owner's salary was on top of everything else. (I did the math, between him and his wife's payouts they were taking in close to 180,000 k a year) For a YEAR ONE QSR resaraunt.
She said she had been trying to tell the other owners, but non believed this was an issue.
How can I work here full time and make under 100k he asked incredulously when I sat him down. I told him He would've been crazy to start at 75k, but he was singlehandedly handicapping his own business.
After my kid was born, I was not welcomed back with open arms.