Trading war stories over labor issues is akin to breathing for many restaurateurs. It’s why Nick Sarillo expected industry friends to warn him about opening in Chicago’s urban center. But they didn’t quite grasp what he had built in the past 22 years.
“They said, ‘You’re going to hire 50 people and 25 are going to show up. Then, of those 25 who show up, only 15 will actually come to work after orientation,” Sarillo says.
The reality: In the first round, Nick’s Pizza & Pub hired 54 people and 52 made it. They’re still with the restaurant, which opened its third unit October in Chicago’s Lincoln Square. The team hired 21 the next round. Nineteen showed up and are still on board.
According to the National Restaurant Association, the turnover rate in the hospitality sector topped 70 percent for the second consecutive year in 2016. In the restaurant and accommodations sector it was 72.9 percent. It’s gone up six straight years since hitting a cyclical low of 56.4 percent in 2010. And there’s no real reason to believe that’s about to flip anytime soon.
At Nick’s Pizza & Pub, however, the restaurant, which also has locations in Crystal Lake and Elgin, Illinois, and was founded in 1995, boasts an employee retention rate of about 80 percent. That’s a far cry from annual employee turnover rates that regularly touch 200 percent in some establishments. And while this isn’t unheard of in fine-dining landmarks, where servers clutch jobs like New York City studios, it is pretty unique in a pizza joint.
That’s the key, Sarillo says. His restaurant was designed to buck the odds and stereotypes from day one.
For Sarillo, whose father owned a pizzeria in Carpentersville, Illinois, creating a workplace where employees “wanted to come back tomorrow,” was always a goal. Sarillo was a carpenter when he decided to change tracks. An experience eating out, where his kids were treated like second-class citizens, led him to believe he could do better. And improving on the base model extends beyond just offering top-notch service to guests.
“I was always a believer in doing what you love to do every day. I was an entrepreneur, and whether I was in the construction business or my dad’s restaurants or whatever I was doing, I was always good at saying, ‘If I don’t like this I’m not going to do this anymore. I’m going to find something else that inspires me, and I’m passionate about, and excited to do.’ My employees deserve that, too,” he says.
Sarillo, though, didn’t exactly enter into the business understanding nuances of company culture. In fact, he pretty much had no management philosophy at all. It wasn’t really until he thought about expanding the brand did he understand how thin the issue truly was: As long as he was in the store, everything worked. He needed to find a way to develop a system that could essentially replace him.
In 2002, Sarillo teamed up with Rudy Miick, a consultant who specializes in business leadership. According to a story by Inc., Sarillo spent upward of $200,000 preparing to expand—80 percent of which went to pay for Miick’s services. His restaurants were making a touch more than $3 million a year in sales at the time. Sarillo says the investment was well worth it.
Employee turnover rate dropped from 185 to 20 percent, where it still resides today. As Inc. points out, at a cost of $1,500 to recruit, train, and interview a new employee, the decrease saved Sarillo nearly $250,000 a year.
Equally important, it set the stage for openings like the one Nicks Pizza & Pub just experienced in Chicago.
There are several aspects to this process, but the heart is the restaurant’s two-day orientation.
Sarillo says they don’t talk about making a pizza, or pouring a drink, at all. “It’s all about purpose,” he says. “It’s all about talking about our values. We want them to understand when they leave that this is why we’re here.”
The Chicago orientation was eye-opening in some ways, Sarillo says. “I can’t tell you how many times people pulled me aside and said, ‘Wow, I can’t believe this is actually a company that cares about me.’”
They talk about how to solve problems, issues, conflicts. It’s about offering tools to trust, communicate, and understand where and when to promote the company’s values. This is where Sarillo, who wrote a book entitled, “A Slice of the Pie: How to Build a Big Little Business,” says many organizations slip up.
“There’s that external side of take care of me as an employee, my pay, treat me well, and give me good benefits. The other part that I pay a lot more attention to that I don’t know a lot of businesses do is the internal part of health,” he says. “The health and wellness of the individual has an impact on the health and wellness of an organization.”
There is an external side to this as well, however. Much of what Sarillo deploys follows a “trust and track” management style. Basically, train employees to be successful and then trust them to get the job done.
It’s why training at Nick’s is so important. It takes form in three segments: Orientation; then 101 (kitchen training); 201 (training and certification for certain jobs); and 301, where an employee might want to become a trainer.
In the 201 section, employees can add certifications and raise their pay. For example, if you learn to make sandwiches, you get another certification. Six certifications results in a red hat to go with a pay bump. Nine is a black hat and another increase. Sarillo says this is a much more desirable approach to merit-based raises than forcing employees to come and ask for them. They invest in themselves by investing in their skills and the restaurant. Naturally, the more skilled employees the better the business runs as well.
If an employee decides to enter the 301 level, they can try to become a trainer, which holds a very important distinction at Nick’s. Those employees are eligible for profit sharing. This is key to future growth, Sarillo says, because those trainers are basically his body doubles in the business.
“They run the restaurants as though they were me,” Sarillo explains. “They have the same passion as me. They have the same values as I do. They’re managing the restaurant how an owner would. That’s why this model is so much more sustainable and so much more effective.”
The trainers have to achieve mastery in their certifications, based on a one-to-five scale, and then take a three-day course on communication and leadership. At the end, the employee gets a Leadership 301 Passport with a checklist of 30 behaviors they’re required to model or recognize in someone else. They have five weeks to jot down two incidents for each behavior and have a leadership member sign off on it. There’s another train-the-trainer course after that.
The profit sharing is based on whether each restaurant meets its five goals: food costs, beverage costs, guest comment cards, and a rotating topic. The last one, for example, was employee retention. Each goal is weighted 20 percent.
In other words, if a restaurant hits four goals, employees get 80 percent of the profit-sharing pot. Not only does this offer tangible motivation, it also improves engagement, deters employee theft, and helps with all of those categories, such as food waste and customer service. Nick’s doesn’t believe in performance reviews, either. Sarillo would rather employees “coach in the moment,” and provide feedback on the go.
Employees all start above minimum wage. The restaurant also helps with health insurance for employees who work at least 30 hours a week.
Using this base and strong cultural structure, Sarillo wants to open 10 restaurants over the next six or seven years.
“That’s why I spend so much time and so much money and so much energy in building a positive culture,” he says. “I needed to make sure that foundation was really solid before I grew. I’ve seen too many companies grow too fast, especially in this industry.”