Driving Labor Efficiency and Employee Development in the Restaurant Industry

Tal Clark: Welcome to the Instant Payments Podcast. I’m your host, Tal Clark, CEO of Instant Financial. And we’re back for part two of our conversation with Matt Umholtz, the president of AllianceHCM. Matt, thanks again for being a guest on the show. Let’s jump right back in. We talked a little bit about, labor and the importance of labor and the cost of labor.

Let’s talk a little bit about, let’s dig into that maybe in a little more detail. The industry is facing labor challenges, right? And it certainly varies by state, right? We know we’ve got, there’s more cost associated with it in California as an example than other places, and competition for frontline talent is intense.

What does it look like when you hear the term “hourly first mindset,” what does that mean to you first, and what does it look like to adopt an “hourly first mindset?”

Matt Umholtz: Yeah, and I mentioned in our [00:01:00] last, our last segment, but the, I think first you have to understand the employee, right? And 33% of the restaurant business, it’s their first job and 60% are under the age 24. I think the stat is in the 60 percentile range of turnover related to they feel there’s no career advancement and there’s no development of them individually.

So if I’m an employer and I want to attract somebody and retain them, I’ve gotta fuel those two buckets. Like how do I give them a career path into the, into the restaurant world. And maybe that’s saying like, we’re gonna, if you become a general manager, we teach you to speak P&L and you can take that skill somewhere else.

It’s not, you’re not trapped to a kitchen for the rest of your life, but stick around a few years, and the other piece I think is, just around, general training and developing and helping that individual, become [00:02:00] a professional. Right? It’s, again, it’s their first job. They don’t, as I mean, just from working with, folks that are of the youngest generation, I mean, if you get a text message from my daughter, it’s like all lowercase with no punctuation.

It’s like, hey, you need to, text like you would actually write to somebody. It’s not texting to your friend. I mean, that’s a simple skill. That, we could teach, and it’s up to a restaurant manager and really the leadership to cascade that down of like, let’s teach these folks.

It’s their first job. Let’s teach them the basics, which is, show up on time. If you’re early you’re on time, if you’re on time, you’re late. If you’re late, don’t show up right? Like our parents taught us. But it’s, it’s, teaching those basics and understanding, it’s their first job.

I mean, they’re gonna, they’re gonna screw stuff up. How do we coach them to, be better humans and [00:03:00] better, employees for someone else down the line and having that commitment will drive, some, pride in the brand of like, hey, they helped me, right?

Tal Clark: Yep. Yeah, and I think that’s, we touched on a little bit in the previous episode as well, but when we look at employees and look at the opportunity and look at what we believe where we can help from earned wage access, it’s in all those things. I mean, we know that someone is more likely to show up if they know they’re gonna get paid today, right?

Matt Umholtz: Yeah. 

Tal Clark: We know that they are more likely to take an extra shift if they know they’ll have access to their pay today, and turnover is reduced. And so that’s really where we’re working with you guys and just really wanna make sure we get that word out. We view it as, hey, it’s your money.

You’ve earned the money. Right? You should have access to that money. You’ve been around Instant a little bit. You’ve heard our [00:04:00] story. It feels like we still have a ways to go though, and getting the word out. You’ve been in the payroll business for a long time.

What can we as Instant do better to make sure that people are aware of what we’re doing? And, it, it seems like sometimes maybe there’s reluctance on management and leadership to really adopt not just our technology, but other technology as well that’s new to the marketplace. How do we as businesses try to sell to these employers, communicate the way we need to communicate and emphasize the benefits of the solutions that we’re providing.

Matt Umholtz: Yeah, there, there’s still a misconception in the market about earned wage access and people hear that and they think payday loan, right? So they think, I don’t want to enable an employee to do a payday loan or to get money in advance, but reality, it’s earned wages. Or, one of my favorite products is your, your early, your tip out product, right?

I think there’s a [00:05:00] rebranding that’s naturally happening that is related to earned wage access versus being a payday loan. Because it is not, it’s earned wages. We’re just giving them the wages that they earned in advance of a pay date. Right? Of you don’t have to wait till check date. I mean, I remember my first job, it was biweekly and you had to wait another week and I was like, wait a second.

So I worked this week and I gotta wait two and a half weeks. Like, I’m, I was a 15-year-old kid. I’m like, I, need some cash, man. So, I think it’s a bit of rebranding. but it’s also understanding the employee, going back to my first point of like, understanding, and it’s their first job, their average age, 24.

They’re different than you, in the executive suite. At a large operator, they’re different. They’re a different stage in their life and the stage in their life they’re at today is way different than when you were at that stage of life. Right? So, this is a tool, to enable them [00:06:00] to get the, wages they earned faster so they can, go to, the homecoming dance on Friday.

Simple stuff, but it’s understanding the employee, which is kind of like an HR thing that we talk about in the HR space, but it’s understanding the employee and caring, and like, hey, here are tools that’ll help you. And there’s education and there’s obviously technology that, that we have that can help them communicate that.

But you know, at first the executive suite’s gotta care.

Tal Clark: Yeah. Yeah. Well, you’ve been around the payroll space and the restaurant space for a while, and those are those, I think those messages are right on the mark. I’ve mentioned this and I’ve talked about in other podcasts and other people that, I’ve been in businesses that have started, back in 2001, 2005 or so, we were providing payroll cards.

And at the time, payroll cards are new, right? And, and we had the same sort of communication then, which [00:07:00] was, in talking to executive suites and leadership teams, no one could understand why someone would want a payroll card at the time. And the point was, is that: you need to understand there’s no banking access, right?

They’re showing up in the line at Kroger and having to write a check or pay cash, right? They don’t have access to a debit card or a credit card, and, and it’s just, and so it takes a little while for that communication, I think, to break through the leadership teams. And I think, if I, as I have the opportunity to talk to leaders in the restaurant space, I think to your point, we just need to encourage restaurant leadership to really understand their people and the needs of their people. And it’s not just in a restaurant space, right? I see this in all other verticals as well. In, in some cases when you’re talking about verticals outside of the retail space, you get into transportation and healthcare and some of those other verticals.[00:08:00] 

Management of those have a hard time believing that their employers need access to their wages. People tend to believe, well, if they work here, they must be good. And so I think that’s something that through communication, we try to overcome. I mean, any additional thoughts on that?

I just think it’s important for the space.

Matt Umholtz: I think you really can’t truly understand unless… we use a concept here we call bringing the outside in. And that’s, a lot of different ways. I mean, it’s competition of like, how do we, who do we compete against? How do we bring the outside in and educate our team? But, if, if a leader has never went into an inner city grocery store and stood and watched the Western Union line, they don’t understand their employees.

Tal Clark: Yeah, that’s right.

Matt Umholtz: We’re in South Texas, so that line on a Friday is full. A lot of those folks are sending money to their family in Mexico.

And if you’ve never stood [00:09:00] there and watched it, you don’t understand. And, walk a mile in my shoes is tough for people, right? Most of us as drivers lack empathy. So I literally have to go stand and watch to get it. But, if you see that, you really start to understand.

I mean, maybe that’s somebody who is a, a, frontline worker. Maybe it’s a bus person. Maybe it’s somebody who’s a dishwasher, right? But, it could be your best wait staff. I mean, you just never know. but without seeing it, I think it’s very hard to understand.

Tal Clark: Yeah, it’s all about access and that’s what we, we continue to try to work to provide on the tips on the earned wage access side. So aside from what, you guys are doing today or we’re doing today, what other technology do you see in the, marketplace, that is beneficial to, to restaurant operators that you’re seeing, maybe they’re on [00:10:00] the cusp of adopting as an industry or something that you anticipate that’s coming soon, that, is needed in the restaurant space that can help both with labor and some of the other challenges they’re facing?

Matt Umholtz: I would say two areas of focus. One is, on the scheduling front, you do have scheduling compliance. You’ve got schedule optimization. I don’t see a ton of companies that are fully to where they’re integrating same day sales, looking at weather and historical information and like actually optimizing the schedule.

A lot are saying they’re doing it, but we haven’t seen somebody that’s just really knocked the socks off of an operator. And it’s hard. I mean, you’ve got 150 point of sale systems, so which ones do you integrate with? Or is it all of them? Right? So you’ve got a lot of complexity there.

But I do think, in the near term, something has to crack there and somebody will take the lead. [00:11:00] From the other viewpoint, so you’ve got scheduling and then you’ve got P&L impact of the general manager. And a general manager is not gonna go into a payroll system and run a report. So the, future of reporting within the HR technology space is, and, think about an AI layer behind a series of, prompts. So like you have a little chat feature and it’s. hey, what was my turnover ratio last month or six months? Can you give me a time to hire? Time to fill?

Like you can, ask it and prompt it in plain language. So I wouldn’t expect a restaurant manager to say, time to hire, time to fill. Like, how long does it take us to hire someone, right? Like it’s time to fill and, [00:12:00] turnover ratios and all that stuff should be at their fingertips and accessing data tables on the backend and returning an answer.

And then let’s say they want to post that. So, can you create an Excel output and put in these headers or whatever? I mean, it, it shouldn’t be as hard as I gotta go click and drag and run. And I have to understand intuitively the data tables of the system, right. Which, you and I have been in this space a long time and understand that’s how it is today.

But in the future I don’t expect it to be that way. And I also think that you’ll see companies moving towards, data warehousing. So they’re allowing their data to sit in a data layer and to access that data later. Maybe you have to pay something for it, but now my reporting can take into account sales.

Same source sales and other data that is in this data [00:13:00] layer that is not payroll, HR data.

Tal Clark: Okay. Okay.

Matt Umholtz: So then we’re at, now I can say unit economics, and I can layer a turnover rate to unit economics, survey scores to unit economics, and I can start to bake in a more full picture for an operator versus hey, your turnover.

And they’re like, oh, thanks, I knew that, right? Like, but how does it relate to the other pieces? And now I can make strategic decisions. So I don’t know if that makes sense to you or not…

Tal Clark: It does. And as I’m listening to you, I’m sitting here thinking, when we started this back in the first podcast, we talked about, your background and the business and how you guys put them together. What we didn’t talk about, I don’t remember, I don’t think is, I mean, 30 seconds or so, or a couple minutes on the specifically what AllianceHCM does.

Because there may be someone listening here that doesn’t know what you guys do, so why don’t you, why don’t you do that for me and then I’ll lead some [00:14:00] other things, and I apologize for not doing that earlier.

Matt Umholtz: Oh, completely okay. Yeah, I mean, I’m here to help restaurant operators. I mean, what we do is secondary, truly. But, yeah, so we predominantly focus, on the HR technology side, and I’ll go into the little pieces, but with multi-unit operators. So think about the restaurant industry and other industries like long-term care and things like that.

So businesses that have multiple locations and distributed environments. I have employees all over the place. We work in the mid to enterprise space, I think a couple hundred employees up to the 10,000 plus employee range. And our product’s really been built and optimized for that world. The pieces of the puzzle we touch so everything from an applicant applying to the business, onboarding to the business, electing their benefits, those benefit elections, going to a carrier, using the system for time and paid time off. [00:15:00] Or they would obviously use their point of sale for time and then all the way through to expense management.

So I have a restaurant location that ran out of a product and this person has to run to the store and get flour. Real story, I’ll, I can tell a different day. But, and then they can put it through the expense management system by taking a picture of the receipt. It uses technology to scrape it and put in the amounts.

It’s easy all the way through. To now I get a payment and we obviously do payments and then, the information has to flow into a general ledger package somewhere. So it flows into Restaurant 365 or QuickBooks or Sage Intacct and that full flow. And then at our core, we built the system to be really natively open.

So open API, which is often a misused term, but the system is open, meaning we, connect to the systems that are very important to a [00:16:00] restaurant operator. So, point of sale, or if I’m a McDonald’s, I use a product called McHire. We integrate with that and that’s their applicant tracking system. So, depending on operator will connect to their systems and optimize it to work with Alliance.

Tal Clark: Super. Well, that’s, yeah, that’s a great summary. And again, I apologize for not doing that earlier. It probably would’ve been a great way to start. But let me ask you this so, so as far as innovation from your perspective within AllianceHCM, is there anything that, that, we should be looking for or looking out for?

Is there anything you care to share That’s like coming soon?

Matt Umholtz: I mean, we are really laser focused on leveraging AI within the new customer onboarding process right now. So to eliminate friction and make it simpler, for a new customer to, join our company. That will bleed over into the support [00:17:00] world just to make sure that things are most efficient for a customer.

I’m a massive believer in the quote of “systematize that which is predictable.” So you can humanize the exceptional. It’s an old Four Seasons quote. But, if we can systematize all the predictable stuff using technology, then we can humanize the way we work with our customer and it will be focused on that relationship.

I think the restaurant operators are in the same space, right? Like they’re, I mean, there are restaurants that are now using AI robotics to make food. In the future, I, and we talked about, wage increases. I think those, advancements will happen in areas that have the highest average hourly rate. Because again, that’s the one cost we’ve gotta control, but it, it’s not gonna replace the worker.

It’s gonna enable them to focus on making the [00:18:00] actual experience like something special. Right.

Tal Clark: Yep.

Matt Umholtz: I, if somebody smiles and asks how my day is versus handing me a bag out of a window, like, it just feels a little better, right? So, and then from the product standpoint, I talked about reporting and being able to, put reporting behind an AI chat layer. We are focusing our employee facing products on the, multi-unit operator and the multi-unit manager. So think, how can we give them the data and the simplicity within our tools in the most efficient and effective way to help them do their job and make the right decisions?

That’s where our development effort efforts will continue to focus. How do we make their life easier? How do we drive profitability? And a lot of that includes, of course, AI, but it’s looking at user [00:19:00] interface, user experience, eliminating clicks, making it simple. And, yeah, using modern tech to make their life easier.

Tal Clark: Great insight. That’s good stuff. So, let’s, some of this is, we’ve covered a little bit, but we’ll a little bit different angle on some of it too. We’ll go through a round of rapid fire questions here. You touched on AI, but ultimately, will AI help or hurt the QSR industry?

Matt Umholtz: I think AI will absolutely help the QSR industry. Back to my, previous point, I think there’s a way to automate a lot of things. There’s a way to, again, remind somebody, hey, you were here two weeks ago, you bought this, you want to buy it again. So there’s a, way to connect to the buyer in a more effective way, but, I think at the end of the day, it allows them to humanize the exceptional.

Tal Clark: Super. That’s great. I, love that comment as well. So what is one routine or a habit that you would recommend restaurant managers build every single day?[00:20:00] 

Matt Umholtz: Build connection to their team. Like if I’m in a full service restaurant, there’s something called pre-meal, and, Will Guidara talks about this in his book called Unreasonable Hospitality, and he thinks it’s the most waste… he thinks it’s the most wasted moment in any restaurant.

And coming from a restaurant background, I’ve seen it happen where, you stand up there and you’re like, all right, here’s what we got. We’ve only got X amount of these, so we’re gonna 86 when we get 10 orders. You’re, hey, here’s the special for the day, right? And he talks about telling stories and bringing the outside in, like real life experiences and bringing in connection to the business. And I think, a restaurant operator, doesn’t do that enough to build connection to why we’re here. Right? It’s why we’re here. And then it’s the how, right? So, hey, remember we’re here [00:21:00] today to provide a great experience and blah, blah, whatever it is. And, you know how we’re gonna do that is we’ve got these pretty cool specials tonight, right?

And, I mean, it’s, simple, but it’s hard.

Tal Clark: Outstanding. So, great message there. We’ve talked about a few. but let’s be, maybe be specific here if you can. What is the most important metric you look at when evaluating the operations of a restaurant?

Matt Umholtz: It is, I’m a believer in the P&L tells the story, man. So you’re looking at, P&L impact profitability, which drives unit economics. If you look at unit economics by location, all of a sudden, you get signals of operational excellence and discipline across the locations. So if it, if, unit economics looks like this, okay, we’re not scaled well. We don’t have good discipline, we don’t have good operating metrics across these locations. [00:22:00] Maybe we chose locations haphazardly. If it’s pretty like steady and there’s one blip, okay, we have one problem, but it’s not a organizational issue. but when you look at that, which is a blend of same source sales and, food costs and labor costs, and it’s how well they’re managing those locations.

But if you look at a trend line across a hundred locations, and again, it looks jagged, then we’ve got discipline issues and scale issues. 

Tal Clark: Okay. That’s perfect. Good thoughts there. Last but not least, what is one piece of advice you’d give to someone who’s looking to work as an operating in a restaurant industry? We need people in the restaurant industry and it’s, we’ve talked about the labor challenges, but that person who’s considering it, is interested in it. What advice would you give to someone that wants to work as an operator?

Matt Umholtz: I would say the first thing, go work in a darn restaurant. Learn, work back of house, work front of house. I mean, [00:23:00] really sit in a restaurant and understand it if they haven’t yet. One of my, one of my favorite restaurants who’s a customer not far from us, he was a waiter and then he ended up buying the location from the, from the actual owner at that time.

So he worked inside it and he bought it because the other wait staff were kind of career wait staff, and he wanted to provide a great place for them to work. Is like heart was in the right place. But I think working in a location, but then understanding the economics of a business. I mean, the stats, most restaurants that are started, it’s, somebody loved to cook, they understood how to make a great meal.

But I could make you the best meal on the planet and lose my tail.

Tal Clark: Yeah.

Matt Umholtz: I can’t charge you enough, I was making pizzas this weekend, [00:24:00] from scratch, and I told the kids to go, to the grocery store and get everything. And they’re like, dad, we could have made these pizzas for like $8 a piece.

And I said, yeah, so why couldn’t you? Because you asked us to get truffle oil and it was $24. 

Tal Clark: There you go.

Matt Umholtz: Well, I mean that’s, yeah, so I mean, it was great, but I couldn’t charge for it.

Tal Clark: Truffle oil. I’ll have to remember that. So do you what do you have the crust and need to put the truffle oil on the crust before you put the rest of the ingredients? Where are you using the truffle oil?

Matt Umholtz: Yeah. So the truffle oil, if you use it before you put high heat on it, it dissipates a little bit of the flavor. So I finished the pizza with truffle oil. Yeah.

Tal Clark: Oh wow. Okay. I will have to, I, might, you might have to text me that so I understand it. But, hey, Matt, this has been great. thank you for joining us on the Instant Payments podcast. It’s been great getting to know you a little bit better and talking about the business, and look forward to, the next opportunity we have to talk.

To our listeners, you can learn more about Matt’s work at alliancehcm.com and follow along with new podcast episodes at instant.co/podcast. Be sure to subscribe and leave a review wherever you get your podcasts. Also, to give one more plug to the new Workforce Warriors Award. If you know an hourly worker who goes above and beyond, visit instant.co to nominate them for this award and they can win a thousand dollar gift card.

Thanks to all of our listeners for tuning to the Instant Payments podcast.