This is part of NRN’s Executive Salary Survey special report, in partnership with HVS Executive Search. For the full report, see the Nov. 21 issue of Nation’s Restaurant News. The report is also available for purchase at HVS.
Also hear from HVS on what's behind the numbers.
Salaries for senior restaurant executives are on the rise, as companies rebounding from the economic downturn reward those individuals who navigated them through the crisis and others look to lure new talent with promises of more competitive compensation.
The 2011 Chain Restaurant Executive Compensation Study by HVS Executive Search and Nation’s Restaurant News found that total compensation levels for 13 out of 15 top-level positions rose, often quite notably, compared with the findings of the inaugural survey published in November 2009, when layoffs, bankruptcies and sinking sales plagued the industry.
“Total cash compensation is on the rise, and the primary reason for that is really because of macro-economic trends,” said David Mansbach, a partner in HVS Executive Search, North America. “The restaurant industry continues to stabilize, and where base salary was frozen and/or very few increases were provided to senior leadership in the downturn, now, more companies are open to providing salary.”
The position that registered the biggest salary increase was chief executive, with median total compensation jumping 50 percent from $500,000 in 2009 to $750,000 in 2011, according to the survey. Heads of sales and marketing also saw a big jump in pay, with median total compensation rising 31 percent from $194,528 in 2009 to $255,000 in 2011.
Along with an improving economic environment, the growth in salaries also reflects more realistic budgeting by companies, said Rodney Morris, chief people officer of Dallas-based Romano’s Macaroni Grill, a 224-unit casual-dining chain owned by Golden Gate Capital.
“When you meet your budgets, you always get your bonuses,” Morris said.
Higher compensation rates also reflect growing competition for talent, with companies of all sizes willing to pay more for those leaders they view as top notch, Mansbach said. The many private-equity firms entering the industry are helping to drive salaries up by offering executives equity interest, he added.
“It’s getting more fierce because private equity, both large and small companies, [is] entering the business,” Mansbach said. “Their mentality is different, and some get it and are providing equity.”
Meanwhile, more leaders faced with underwater options — or options with exercise prices lower than their current market value — and pervasive low employee morale are evaluating their potential opportunities, Mansbach said.
“Everyone is in reset mode,” he said. “They’re weighing the long-term viability of their concepts and considering their careers.”
That’s especially true for leaders of bigger and older casual-dining chains who are migrating to more vibrant segments, such as fast casual, Mansbach said.
“They’re looking at their career and thinking, ‘I’m either going to stay here and ride the next cycle out, or I’m going to work for someone else,’” he said. “Then, they are trading down in segment to fast casual, because that’s where the opportunity is.”
While compensation for most senior levels increased — only senior human resources, and compensation and benefits officials saw shrinking paychecks, according to the survey — the restaurant industry still pays senior executives comparatively less than other industries, making it difficult to recruit from outside the restaurant space, Mansbach said.
“That trend has been troublesome to me for a decade,” Mansbach said. “The skill sets required for the restaurant industry are restrictive from pulling people in. That’s why succession planning is so troublesome. Positions [in the restaurant industry] are very siloed; you grow up in marketing, operations or finance. The industry needs executives who can do more than a siloed function.”
In relation to succession planning, Morris noted that, following the reductions in workforce throughout the Great Recession, companies are now shifting their emphasis from simply retaining people to developing talent.
“Bench strength is critical now,” he said. “People are asking, ‘Who do you have next in position to fill your role?’ I didn’t hear that a few years ago.”
The gains seen in most salaries should bode well for strengthening a company’s ranks and pulling new blood into the industry, said Alain Ané, vice president, human resources for Fox Restaurant Concepts in Scottsdale, Ariz.
“I do think that base compensation for restaurant executives is finally more in line with other industries, and as a result, we are also able to consider/attract outside industry talent for those senior roles,” he said.
And Morris of Macaroni Grill agreed, pointing out that competition for top executives will only increase as business improves.
“People are willing to pay for talent,” he said. “You see it today, but it will become even more so because there will be more cash available. There’s talk of growth again, and two years ago, there was no talk of growth.
“The good news is that compensation has gone up,” Morris said. “That’s great news for our industry, I think.”
Contact Robin Lee Allen at [email protected]
Methodology
HVS Executive Search surveyed officials from 96 restaurant chains on their compensation practices concerning 15 senior leadership positions, ranging from chief executive and chief financial officer to head of franchise sales and head of purchasing.
The chains represented all segments of the restaurant industry and ranged in size from eight to 38,000 units, with revenue of $2.9 million to $24.1 billion. Fifty-nine respondents — or 62 percent — were publicly traded, while 37, or 38 percent, were privately held. Among the researched companies were Carlson Restaurants Worldwide, Papa John’s International, Golden Corral and Yum! Brands Inc.
Data was collected in August and September and reflects compensation paid in the past 12 months, with a focus on base salary; annual bonus; total cash compensation; other compensation, such as housing, cars or life insurance; long-term incentives; and total direct compensation.
To create a statistically relevant report, results are excluded if fewer than five organizations provided data for a specific position. Data is presented for each compensation component in a standard percentile format as a way to eliminate the effect of statistical outliers. A percentile measures the location within a distribution of numbers below which a given percentage of the data fall. The statistics presented in the following charts include the 25th percentile, or the point below which 25 percent of the data fall; the 50th percentile, also known as the median or middle, and the point below which 50 percent of the data fall; and the 75th percentile, or the point below which 75 percent of the data fall.
The survey was created with input from an advisory board of top restaurant industry human resources executives that included:
Alain Ané, vice president of human resources for Fox Restaurant Concepts
Chuck Davis, vice president of human resources for Cameron Mitchell Restaurants
Rich Floersch, corporate executive vice president and chief human resources officer for McDonald’s
Denise Flournoy, director of human resources and compensation for Ruby Tuesday
Rodney Morris, senior vice president of human resources and chief people officer for Romano’s Macaroni Grill
Sugi Randall, former vice president of human resources for Morton’s
Matt Riley, director of human resources for Bruegger’s Enterprises
Mike Speck, vice president of human resources and training for Qdoba Mexican Grill