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Fazoli’s Tackles Overtime Head On


With some 2,975 team members in its 123 company-owned restaurants and support center, Fazoli’s, the nation’s largest fast-casual Italian restaurant chain, estimates 210 employees are directly impacted by the Department of Labor’s new overtime rules. CSA spoke with company president and CEO Carl Howard about the chain’s strategy regarding the regulations, which take effect on Dec. 1.

How do you think the new overtime rule will impact your workplace?

Our biggest area of concern entails retaining an ownership mentality and entrepreneurial spirit among our assistant general manager ranks, which is the group being reclassified from exempt to non-exempt. This group comprises our future leaders, and we now must be even more efficient in making sure they can fully contribute to the success of their restaurant while also leaving sufficient time to focus on their own skill development that will lead to career advancement to the next level.

Fazoli’s chose to deal with the new rule head on. Tell us about your response.

Our objective in implementing new rules is to create a “win-win” for both team members affected by the new rules as well as the company. We felt the best approach was to neutralize, to the extent possible, any negative impact to individuals affected by reclassification from exempt to non-exempt status, either real or perceived, while also protecting our business model.

How are you complying?

Our primary tactics for compliance include the following:

  • Maintaining our general managers as exempt from overtime and, where appropriate, increasing base salaries to the new minimum threshold;

  • Reclassifying assistant GMs from exempt to non-exempt. In doing so, we are engineering hourly wage rates to ensure they earn the same base pay on an hourly basis as they did previously on a salaried basis; and

  • Implementing an incentive for GMs and assistant GMs in order to limit assistant GM hours to no more than 46 hours per week. Our greatest cost exposure as a result of the new overtime rule changes is the proliferation of assistant manager overtime.

How are you educating associates about the new rule?

We’ve undertaken an educational campaign entitled “Every Minute Counts!” to ensure all restaurant managers, both salaried and hourly, know and understand time tracking requirements under the Fair Labor Standards Act, including clocking in and out, break time, travel time and work conducted from home.

We have also developed a policy outlining when and under what conditions hourly assistant managers may conduct work from home or another off-site location, and we are providing a time tracking sheet to record and report these hours.

How can you ensure correct reporting of hours for those impacted by the rule and for maintaining that assistant managers stay at 45 hours per week?

The restaurant industry has a long tradition of promoting managers from within. Most restaurant managers came up through the hourly ranks and understand the importance of clocking in/out and recording and reporting hours properly. Our company culture also promotes absolute integrity in all aspects of our business and encourages reporting of any instances where integrity may have been compromised, including misreporting or manipulation of team member hours.

We have also provided our assistant general managers with a new “off-premise time tracking sheet” to be used to record and report any and all time worked while at home or other off-premise location.

Lastly, we have implemented a unique incentive plan whereby both GMs and assistant GMs will earn a bonus each fiscal period in which the assistant GMs’ hours fall between 44 and 46 hours per week.

Do you expect the new rule will affect Fazoli’s bottom line?

Yes. The estimated impact of the new overtime rules to our bottom line will be approximately $600,000 annually, or about $4,900 per restaurant. Coupled with other significant labor cost increases in recent years, including the Affordable Care Act and state and local minimum wage increases, most restaurant chains are finding it necessary to raise prices and cut costs in order to offset these increases and maintain margins.

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