RGM / AC Bonus Guide
Purpose and Report Contents
 Serve as an educational resource for HR and Finance within YRI BMUs
Outline design parameters for the implementation of the Yum RGM / AC Bonus
Provide detailed design steps and techniques for modeling the Yum RGM / AC
Bonus
Provide support for a YRI Q1 2005 implementation
 As such, this document includes the following sections
Bonus design and implementation process
Data to be collected as “pre-work” to modeling the bonus
Outline of principles and objectives of the bonus to assist in communication and
education within the BMU
Steps for modeling the bonus including an outline of design parameters for each
bonus component
 The examples and methodologies outlined in this presentation and Bonus Modeling
Tool are intended as a starting point for modeling; each BMU must consider what
makes sense for restaurant performance and objectives within the BMU
2
Bonus Design and Implementation Process
Bonus Design and Implementation Process
Q2
Q3
Q4
Q1
Mar - May
Jun - Aug
Sept - Nov
Day 1 Pd 1
Engage Finance
& Operations
Work with Finance
& Operations to
validate design
Execute
Communication
and training plan
Model the bonus
Tools
 RGM / AC Bonus Guide
 Bonus design tool
Outcome
 Proposed design
Test design within
TPM tool
 Become familiar with TPM tool
capabilities
 Experiment with design & data
 Experiment with reports
Tools
 TPM tool
 Report templates
Outcome
 Preliminary understanding of how the
bonus will be administered through
TPM
 Identification of issues/barriers
Go Live
Test design &
revisions within
TPM tool
Finalize design
and develop
communication plan
Gain BMU
Approval
Develop Fieldready bonus &
training materials
Tools
 US templates
Outcomes
 Bonus communication materials
 Training materials
4
Pre-Work
Pre-Work
 Collect a full year of data for the following key Yum! performance measures
Sales and Profit (RCP) data
Plan for 2004
Plan and Actual results for 2003
Flow-Thru
Results for 2003
Target for 2004
CHAMPSCheck
Results for 2003
Target for 2004
Results from Strategic Initiative measure
e.g., Team Member turnover results for 2003 and target for 2004
 To ensure you have a full year of data, you could collect current YTD data and estimate the
balance of the year (e.g., using plan data)
 Collect the data for each restaurant including restaurant number and area number
6
Pre-Work Tips
 “Clean” the data
The Strategic Component should be
determined by the BMU. For this example,
we have assumed Team Member Turnover
is the strategic component.
Use annual data for design work
Remove partial store periods and use “Full Store Periods” only
Remove extreme data points
 For example, sort the data by sales and delete extremely high or low sales
figures…repeat for RCP and other data points
The modeling technique outlined in this document uses full-year data, when validating the
design you may want to consider what the bonus will payout for each quarter
Actual (2003) and Plan (2004) Data
Area Store
Count ID
ID
1
2
3...
199
200
2003
Sales
Plan
2003
Sales
Actual
2004
Sales
Plan
2003
RCP
Plan
2003
RCP
Actual
2004
RCP
Plan
2003
2003
Flow- 2003 Flow
2003
Team
Thru
Thru to # of 100% Member
Results
RCP
CHAMPS Turnover
001
001
1,000
1,002
1,010,000
730,000
1,085,511
752,000
1,097,861
790,617
280,000
201,663
308,000
205,000
327,000
223,733
319,088
210,156
103.6
102.5
9
7
78
127
025
025
1,396
1,398
765,000
930,000
751,000
925,000
781,830
950,460
221,434
261,934
228,077
269,792
255,826
305,527
237,200
264,397
104.0
98.0
14
9
42
120
7
Bonus Design Principles and Objectives
Bonus Design Principles
 Motivate RGMs and ACs to meet and exceed performance target
 Aligned with other programs (e.g., BSC, PA) and across Operations & BMU
 Achieve a balanced emphasis on Customer, Sales, Profits & Strategic
Sales & Profit
Make Plan Matrix and Flow-Thru
Customer
100% CHAMPSCheck
Strategic
Strategic Initiative (e.g., Turnover)
 Drive operating Blue Chips
Building people capability
Driving customer mania through 100% CHAMPS
Grow profitable sales
Improve RCP & margins
“Beat Year Ago”
9
Bonus Design Objectives
Design Objective
Design Element to Achieve Objective
Engage employees through short-term incentives
Quarterly payout
Higher volume restaurant = Higher value to Yum!
and higher rewards for RGM/AC
Volume-based financial rewards
Fixed $ payout based on satisfying customers
100% each time (RGM only)
Customer Mania focus
Flexibility to focus on strategic initiative
Business Unit focus
Performance-based
 Competitive payout for on-target performance
 Increased payout for exceeding target
 Limited payout for below target performance
Leveraged to encourage higher
performance
10
Aligned
F/T P&L Reports
RGM Bonus
Balanced Scorecard
Performance Appraisal
Customer
Customer
Customer
100% CHAMPSCheck
100% CHAMPSCheck
Speed of Service
BSC + Process (CER, 1-800)
People
BSC + Leadership/Culture
(Safety, Staffing, Team
Development)
People
Strategic Focus
e.g., Team Member Turnover
Sales
“Make Plan” Matrix
Profit
Turnover
Core Training
Retention
Sales
Net Sales to Plan
Flow-Thru
Profit
People
Sales
BSC + Leadership/Culture/Process
Profit
BSC + Leadership/Culture/Process
Profit to Plan Flow-Thru
Examples:
Long Term Incentive
Period: CHAMPS Cards
Quarter: Team Celebrations
Yearly: Champions Club Trip &
Prizes
11
Balanced emphasis on
People, Customer, Sales & Profits
 BMUs will adjust weights based on overall strategy
30
%
Profit
PA (60% for RGM & AC)
20
%
20
%
30
%
30
%
30
%
BSC
Sales
it
of
Pr
30
%
s
le
Sa
&
r
me
o
t
s
Cu
gic
te
ra
t
S
30
%
20
%
20
%
20
%
20
%
 Bonus will reward results and carries heavier weightings on financials compared to the
BSC to minimize funding risk
Strategic
Customer
Bonus
Long term
Short term
Process-oriented
Focused on business results
12
RGM Bonus Modeling the Bonus
RGM Bonus Steps in Modeling the Bonus
Step 1
Determine the target payout for each performance measure
Step 2
Calculate Sales growth
Step 3
Calculate average RCP and RCP growth
Step 4
Develop the Sales & RCP “Make Plan” Matrix
Step 5
Develop the Flow-Thru Chart
Step 6
Develop 100% CHAMPSCheck Chart
Step 7
Develop Chart for the Strategic Component
14
RGM Bonus Step 1 - Target Payouts
 The following are the performance measures and weight parameters
 BMUs should determine the appropriate strategic measure initiative and adjust
weights based on overall BMU strategy
 A bonus can be earned for achieving targets on each measure, separately
Weight Parameters
1
Sales & RCP Make Plan Matrix
30% - 40%
2
Flow-Thru
20% - 30%
3
100% Perfect CHAMPSCheck
20% - 30%
4
Strategic Initiative
15% - 30%
*Note: In markets that do not have Flow-thru, the Flow-thru component may be omitted from the bonus
design. The weight from the Flow-thru component should be redistributed to the other components.
15
RGM Bonus Step 1 - Target Payout
 Use market data to establish the overall bonus target amount
Market pricing – target Total Cash at the 50th percentile base salary and 75th
percentile bonus taking into consideration the following:
Appropriate “mix” of base pay and variable pay
Financial ability to pay at the desired market level
Tips and Advice
• Avoid major target
changes from year to year
Comparison of Yum! Total Cash to Market Total Cash
Annual Dollars (000)
$50.0
$40.0
$42.4
$44.3
$3.9
$5.8
$38.5
$38.5
$47.4
$46.0
$8.9
$6.0
$38.5
$40.0
In this example, Yum Total
Cash should be between
$44.3 and $47.4
$30.0
$20.0
Example Data
$10.0
0
25th Percentile
50th Percentile
75th Percentile
Market Data - Restaurant/Unit Manager
Base Pay
Yum!
RGM Average
Target Bonus Amount
16
RGM Bonus Step 1 - Target Payout
 Worksheet Tab in the Bonus Modeling Tool
1_TargetBonus
 Calculate the target payout for each bonus component using the weight parameters
From Market Assessment
Overall Bonus Target
Category
$6,000
Target by Category
Weight
Parameters
1

Change to reflect your bonus
weightings.
Weight for
Example
$ Target
Sales & RCP Make Plan Matrix
30% - 40%
30%
$1,800
Flow-Thru
20%-30%
20%
$1,200
100% Perfect CHAMPSCheck
20% - 30%
30%
$1,800
Calculate a bonus target amount for
each component.
Strategic Initiative
15%-30%
20%
$1,200
6,000 x .30 = $1,800
100%
$6,000
Overall
2

17
3

RGM Bonus Step 2 - Sales Planning
 Worksheet Tab in the Bonus Modeling Tool
2_SalesPlan
3

2

Calculate 2004 Sales Growth
Calculate sums:
2003 Sales Actual
2004 Sales Plan
1

Collect Sales Plan data for the
upcoming year
(245,314,938 - 239,100,390)  239,100,390 = 2.6%
Make sure this number aligns to the BMU goal!
2

Calculations:
2004 Sales Growth
2

239,100,390
245,314,938
3

2.6%
Sales Data - 2003 Actual and Plan; 2004 Plan
Count
1
2
3...
199
200
Area Store
ID
ID
2003
Sales
Plan
2003
Sales
Actual
2003
Sales
vs Plan
1 2004

Sales
Plan
2004
Sales
Growth
001
001
1,000
1,002
1,010,000
730,000
1,085,511
752,000
107.5%
103.0%
1,097,861
790,617
1.1%
5.1%
025
025
1,396
1,398
765,000
930,000
751,000
925,000
98.2%
99.5%
781,830
950,460
4.1%
2.8%
 2004 Sales Growth will be used to set the minimum value at which a bonus will be
paid (“threshold”) for Sales vs. Plan on the Make Plan matrix
18
RGM Bonus Step 3 - Profit (RCP) Planning
 Worksheet Tab in the Bonus Modeling Tool
3_ProfitPlan
RCP Data - 2003 Actual and Plan; 2004 Plan
1

Collect RCP data for the
upcoming year
Area
Count ID Store ID
1
2

Calculate averages:
2003 RCP Actual
2004 RCP Plan
2003
RCP
Plan
2003
RCP
Actual
2003
RCP
vs. Plan
2004
RCP
1

Plan
2004
RCP
Growth
001
1,000
280,000
308,000
110.0%
327,000
6.2%
001
3...
198
025
1,002
201,663
205,000
101.7%
223,733
9.1%
1,394
464,785
478,728
103.0%
526,647
10.0%
199
025
1,396
221,434
228,077
103.0%
255,826
12.2%
200
025
1,398
261,934
269,792
103.0%
305,527
13.2%
356,713 
2 384,436
107.8%
2 410,420

2
Averages
6.8%
Tips and Advice
 Average 2004 RCP Plan will be used as a basis
for modeling on the Make Plan matrix and FlowThru chart
• Work with Finance to ensure that the
overall RCP growth percentage is
aligned to the BMU goal.
19
RGM Bonus Step 4 - Develop the Make Plan Matrix
Objective
Design Parameters
• Fuel “Beat Year Ago” mentality
• Sales vs. Plan is the Fair Pay measure
Plan assumes growth over prior year
Plan normalizes prior year peaks/valleys
and addresses quarterly anomalies
• Based on actual RCP results (volume-based)
• Bonus increases with increase in profitable
sales
• Quarterly calculation (i.e. payout based on
quarterly results)
• Weight of component can vary between 30% –
40%
Targets and Thresholds
• Business Unit establishes thresholds
• The lowest point for bonus payment (e.g., payout 50% for “nearly hitting plan”) should be set
such that performance exceeds prior year on a national basis
• Payouts will vary by BMU to fit strategy and financial planning
• % RCP pool figure will vary based on component weight and average RCP for the BMU
• 100% factor within the matrix should correspond to 100% Sales to Plan and 100% RCP to Plan
• 300% factor within the matrix is the maximum upside potential and should typically reward 5-10%
of performers
20
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
 Basic steps
Calculate the Make Plan bonus target as % of the average 2004 RCP Plan
This number will tell you the percentage of profit that should be paid for
achieving RCP and Sales plans
Set up the spreadsheet to model the matrix
Establish thresholds (the minimum level of performance for which a bonus will be
paid) and maximums on the matrix
Adjust Sales and RCP scales to determine the cost of the bonus
The modeling tool will calculate the average payout that the matrix will
provide compared to the bonus target that you are trying to achieve based on
prior year’s performance
Adjust matrix payouts to ensure bonus is affordable
Make sure to include your Operations and Finance partners to tailor your design to the BMU.
The information on the following pages is intended as guidelines to assist you in decision
making around the Make Plan matrix. Judgment is required to focus appropriate behavior
within the BMU.
21
RGM Bonus Step 4 - Develop the Make Plan Matrix
 Worksheet Tab in the Bonus Modeling Tool
4a_MakePlanMatrix
 Calculate Make Plan bonus target as % of the average 2004 RCP Plan
From Step 1
Calculation of Make Plan Target as a % of RCP
Sales & RCP Make Plan Bonus Target
Average 2004 RCP Plan
Make Plan Bonus Target as % of RCP Plan
1,800
From Step 3
410,420
0.44%
(1,800  410,420) x 100 =
.44%
 Make Plan Target as % of RCP Plan is the percentage of profit that RGMs would be
paid for achieving sales and profit plans. The number will be used as the basis for
calculating the payout on the Make Plan Matrix.
22
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
 Set up the spreadsheet to model the matrix
Worksheet Tab in the Bonus Modeling Tool
4b_MakePlanMatrix
2

1

In the bonus modeling tool,
include your prior year Sales
and RCP data as well as
current year RCP Plan
4

3

Calculate estimated 2004
RCP Actual based on last
year’s result
1.1 x 327,000 = 359,700
Calculate .44% of 2004
RCP Actual for each
restaurant
.0044 x 359,700 = 1,578
5

Identify the appropriate
matrix multiplier from the
Make Plan matrix using
2003 Sales vs. Plan and
2003 RCP vs. Plan
2

3

Count
Store
ID
2003
Sales vs.
Plan
1
1,000
107.5%
110.0%
327,000
359,700
1,578
2
1,002
103.0%
101.7%
223,733
227,435
12
1,022
102.2%
90.6%
372,887
199
1,396
98.2%
103.0%
255,826
1,398
99.5%
2004
RCP
Plan
2004 RCP
Actual
.44% of
RCP
Matrix
Multiplier
305,527
Pay-Outs
4

2003
RCP vs.
Plan
103.0%
1,578 x 2.0 = 3,156
Estimated Pay-out if Last Year's Performance
1

200
Calculate payouts by
multiplying .44% of RCP
by the Matrix Multiplier
5

All
Receivers
200%
3,155
3,155
997
125%
1,247
1,247
337,806
1,482
0%
0
6
263,501 
1,156
60%
693
693
828
828
Create a column for
314,693
1,380
“Receivers”
and for those 60%
RGMs who earned $0
bonus, leave the cell blank.
23
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
 Calculate averages
Worksheet Tab in the Bonus Modeling Tool
4b_MakePlanMatrix
 There are two averages that should be calculated:
“All” is the average of bonuses paid to all RGMs, even those who received $0. This
number would be used to gauge the overall cost of the bonus.
“Receivers” is the average of the bonus paid for only those RGMs who received a
bonus (e.g., excludes those who received $0). This number would be used to
assess how competitive the bonus is relative to the labor market.
1

Calculate the average
payout for “All”, including
payouts of $0.
Average Payout for "All"
1

2,130
Average Payout for "Receivers"
2

3,183
Estimated Pay-out if Last Year's Performance
2

Pay-Outs
Calculate the average
payout for “Receivers”,
excluding payouts of $0.
Count
Store
ID
2003
Sales vs.
Plan
2003
RCP vs.
Plan
2004
RCP
Plan
2004 RCP
Actual
.58% of
RCP
Matrix
Multiplier
All
Receivers
1
1,000
107.5%
110.0%
327,000
359,700
1,578
200%
3,155
3,155
2
1,002
103.0%
101.7%
223,733
227,435
997
125%
1,247
1,247
12
1,022
102.2%
90.6%
372,887
337,806
1,482
0%
0
24
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
Guidelines - Setting Sales and RCP Scales
For setting both Sales and RCP scales, you may want to consider aligning the scales to the Balance Scorecard targets.


Set Sales minimum for payout – To ensure “Beat Year Ago” is achieved, the minimum should be set such that
achieving the minimum level of performance will result in improvement over the prior year. In this example, sales
growth is targeted to be 2.6% (from Step 2) so payment should be made only when that level of performance is
achieved (98% of plan).
Set RCP minimum level of payout – Work with Finance to determine the expected level of RCP if 98% of Sales is
achieved. A rule of thumb used in the US is to assume that RCP will be 33% of Sales. This number will vary based
on the country's margins. For example…
Formulas:
2004 Sales Plan x .98 X .33 = Expected 2004 RCP
Expected 2004 RCP  2004 RCP Plan = Threshold
The first increment is typically from the threshold amount (i.e., 98%) to 99.9%.

Model the scales using the bonus modeling tool (see next slide)
Net Sales vs. Plan
0.44%
% of RCP Times




RCP vs Plan


Example of an average store
1,226,575 x .98 X .33 = 396,674
396,674  410,420 = 96.6%

98
--99.99
100
--101.99
102
--104.99
105
--107.99
108
--109
110
---
96
---
99.99
40%
50%
50%
50%
50%
50%
100
---
101.99
50%
100%
125%
135%
145%
150%
102
---
103.99
60%
100%
135%
150%
175%
200%
104
---
109.99
60%
100%
145%
175%
200%
225%
110
---
114.99
60%
100%
155%
200%
250%
275%
115
---
60%
100%
165%
225%
275%
300%
25
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
2

Average Payout for “All”
would be the number used
for accrual
Net Sales vs. Plan
RCP vs Plan
0.44%
% of RCP Times
98
--99.99
100
--101.99
102
--104.99
96
---
99.99
40%
50%
50%
100
---
101.99
60%
100%
125%
105
--107.99

1
50%
150%
108
--109
110
---
50%
50%
102

---
103.99
Actual Sales150%
vs Plan
100%
60%
175%Est. 2004175%
1,800
175%
Actual RCP vs Plan
102.4%
200% 102.4% 200%
107.8%
107.8%
104
---
109.99
60%
100%
150%
200%
Average Payout for "All"
1
200%
200%
2

2,124 
110
---
114.99
60%
Average Payout
for "Receivers"
100%
150%
200%
3
225% 3,173 225%

115
---
60%
100%
% of RGMs Receiving a Bonus
150%
Average Payout for
“Receivers” would be the
number to gauge how you
are paying for
performance. $1,800
should be the payment for
achieving plans. The
matrix is paying $3,183 for
exceeding plans.
2003
Make Plan Target
1
3

200%
225%
67%
250%
Estimated Pay-out if Last Year's Performance
Pay-Outs
1

Adjust scales to determine what
total spending would be and if the
program would be affordable
 Worksheet Tabs
4b_MakePlanMatrix
2003
Sales vs.
Plan
2003
RCP vs.
Plan
2004
RCP
Plan
2004 RCP
Actual
.44% of
RCP
Matrix
Multiplier
Count
Area ID
Store
ID
All
Receivers
1
001
1,000
107.5%
110.0%
327,000
359,700
1,578
200%
3,155
3,155
2
001
1,002
103.0%
101.7%
223,733
227,435
997
125%
1,247
1,247
199
025
1,396
98.2%
103.0%
255,826
263,501
1,156
60%
693
693
200
025
1,398
99.5%
103.0%
305,527
314,693
1,380
60%
828
828
102.6%
107.8%
410,420
445,374
2,124
3,173
Averages
4c_MakePlanMatrix
26
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
 If the bonus is not affordable using the current matrix percentages, consider changing
the matrix percentages
Again, the following are guidelines to assist you in decision making; judgment is
required to focus appropriate behavior within your BMU
See Next Slide for Matrix Graphic
Guidelines

Pay 100% target at 100% of RCP Plan and Sales Plan

If you must reduce cost, adjust from 300% down to 250% (adjust other matrix cells accordingly)

Pay a percentage of target for nearly achieving plan. To reduce cost, consider holding payment flat for increasing
sales but not achieving profit plan

Encourage both growth in sales and growth in profit

To avoid negative behaviors, consider maintaining a flat percentage for not increasing sales but increasing profit.

Encourage sales growth

Consider making the increase between these increments larger to reflect the fact that it is more difficult to achieve
these levels of performance. Reduce the matrix payouts below this level.
27
RGM Bonus Step 4 - Develop the Make Plan Matrix
(continued)
Net Sales vs. Plan
RCP vs Plan
0.44%
% of RCP Times
98
--99.99
100
--101.99
102
--104.99
105
--107.99
108
--109
110
---
50%
50%
50%
50%
50%
100%
125%
135%
145%
150%
96
---
99.99
40%
100
---
101.99
50%
102
---
103.99
60%
100%
135%
150%
175%
200%
104
---
109.99
60%
100%
145%
175%
200%
 225%
110
---
114.99
60%
100%
155%
200%
250%
275%
115
---
60%
100%
165%
225%
275%
300% 







28
RGM Bonus Step 5 - Develop the Flow-Thru Chart
Objective
Design Parameters
• Focus RGMs on maximizing profitability by
focusing on costs that they control
• Based on actual RCP results (volume-based)
• Flow-Thru reflects bottom-line controls by
adjusting for sales plan attainment
• Bonus increases with increase in profitable
sales
• Quarterly calculation (i.e. payout based on
quarterly results)
• Weight of component can vary between 20% –
30%
Targets and Thresholds
• % RCP pool figure will vary based on component weight and average RCP for the BMU
• 100% factor on the Flow-Thru chart should correspond to at least 100% RCP to Flow-Thru index
• All other percentages on the chart can vary based on BMU discretion
• BMU establishes thresholds
• Establish thresholds that ensure good long-term cost control decisions are made
29
RGM Bonus Step 5 - Develop the Flow-Thru Chart
 BMUs may have a different Flow-Thru calculation than the one outlined in the following
example
Consult with your Finance partner on how Flow-Thru works for the BMU
30
RGM Bonus Step 5 - Develop the Flow-Thru Chart
 Worksheet Tab in the Bonus Modeling Tool
5a_FlowThru
 Calculate Flow-Thru Bonus Target as a % of the average 2004 RCP Plan
From Step 1
Calculation of Make Plan Target as a % of RCP
Flow-Thru Bonus Target
1,200
Average 2004 RCP Plan
410,420
Flow-Thru Payout as % of RCP Plan
0.29%
From Step 3
Calculate the Flow-Thru Bonus Target as a %
of Average 2004 RCP Plan
(1,200  410,420) x 100 = .29%
 Flow-Thru Payout as % of RCP Plan is the percentage of actual RCP that RGMs
would receive for achieving Flow-Thru targets. The number will be used as the basis
for calculating the payout on the Flow-Thru chart.
31
RGM Bonus Step 5 - Develop the Flow-Thru Chart
 Set up the spreadsheet to model the matrix
 Worksheet Tab in the Bonus Modeling Tool
5c_FlowThru
1

2

3

Include estimated 2004
RCP data from “Make
Plan” Matrix modeling
Assume that 2004 FlowThru will equal 2003 FlowThru for each restaurant
Flow-Thru Bonus Target
1,200
Average 2004 RCP Plan
410,420
Calculate payouts by multiplying
.29% of RCP by the chart
multiplier
.0029 x 359,700 x 1.5 = 1,565
0.29%
Flow-Thru Target as % of RCP Plan
Estimated Average Pay-out
4

Identify the appropriate
multiplier from the Flow-Thru
chart (next slide) using
estimated 2004 Flow-Thru
1,362
1

2

Count
1
2
Area ID
001
001
Store ID
1,000
1,002
2003
Flow Thru
103.6
102.5
Estimated 2004
Flow Thru
103.6
102.5
Estimated
2004 Actual
RCP
359,700
227,435
199
200
025
025
1,396
1,398
104.0
98.0
104.0
98.0
255,826
305,527
3

4

Estimated
Estimated
RCP % (from
Bonus
chart)
Payout
150.0%
1,565
125.0%
824
200.0%
50.0%
1,484
443
32
RGM Bonus Step 5 - Develop Flow-Thru Chart
 Worksheet Tab in the Bonus Modeling Tool
5b_FlowThru
0.29%
(.0029) of actual RCP x quarterly multiplier
RCP versus
Flow-Thru %

Set 100% payout at 100%
RCP vs. Flow-Thru %;
Set at bonus target for the
component ($1,200)

Allow for threshold payment
for achieving within 2-3% of
the goal. Work with Finance
to determine the appropriate
RCP vs. Flow-Thru %.
104 
Quarterly Multiplier
Payout
200%
2,400
103
- 103.9
150%
102
- 102.9
125%
1,500
101
- 101.9
110%
1,320
 100
- 100.9
100%
1,200
 98
-
99.9
50%
600
97.9
0%
0

Set the maximum based on your
performance distribution and what
the BMU can afford (see next slide)

1,800

Based on the performance
distribution, create a logical
progression for payment (see
next slide). As a starting point,
you may want to align to
Balanced Scorecard targets.
33
RGM Bonus Step 5 - Develop the Flow-Thru Chart

0.29%
Use the modeling tool to determine the
appropriate breakpoints based on
what the BMU can afford
(.0029) of actual RCP x quarterly multiplier
RCP Versus
Flow-thru %
3

Adjust scales to determine
what total spending would
be and if the program
would be affordable
Quarterly Multiplier
104 
200%
103
- 103.9
102
- 102.9
101
- 101.9
110%
100
- 100.9
100%
98
-
50%
Flow-Thru Bonus Target
3
1,200 
Assuming Actual Flow-thru of . . .
100.3
150%

99.9
97.9
125%
0%

Set the maximum at around the 90th
percentile (e.g., only 5-10% of RGMs
should achieve this level of payment)
 Worksheet Tabs
Assuming Actual RCP of . . .
107.8%

Estimated Average Pay-out
2003
Count Store ID Flow Thru
3
1,373 
Estimated
2004
Flow Thru
Estimated
2004 Actual
RCP
Estimated
RCP %
(from chart)
Estimated
Bonus
Payout
1
1,000
103.6
103.6
359,700
150.0%
1,578
2
1,002
102.5
102.5
227,435
125.0%
831
199
1,396
104.0
104.0
255,826
200.0%
1,496
200
1,398
98.0
98.0
305,527
50.0%
447
100.3
100.3
100%
1,373
5b_FlowThru
Averages
5c_FlowThru
90th Percentile
104.6
34
RGM Bonus Step 6 - Develop 100% CHAMPSCheck Chart
Objective
• 100% CHAMPS =
Satisfied Customers
Design Parameters
• Every CHAMPSCheck score of 100% is rewarded
• Every customer provides RGM with opportunity to generate
more sales and bonus
• Fixed $ payout assumes similar level of complexity in
delivering 100% CHAMPS, regardless of volume
• Period calculation (i.e. payout based on period results)
• Weight of component can vary between 20% – 30%
Targets and Thresholds
• Targets should be set to motivate improvement over prior year
• Work closely with your CHAMPS team to ensure that you have a good prediction of 100%
CHAMPSCheck in the base year and the year for which you are planning
• BMU establishes threshold for payment
• Payouts vary by BMU to fit strategy
35
RGM Bonus Step 6 - Develop 100% CHAMPSCheck Chart
 Worksheet Tab in the Bonus Modeling Tool
6_CHAMPSPlanning
From Step 1
CHAMPSCheck Data - 2003 Actual and Estimated 2004
2003
Actual
CHAMPSCheck Bonus Target
Average Number of CHAMPSCheck per Year
% of Total CHAMPSCHECKS at 100%
Average Number of 100% CHAMPSChecks
Bonus Payout per 100% CHAMPSCheck
1
16
53.8%
9
2004
Estimated
1,800
1
16 
2
62.8%
3
10 
1

Enter the average number of
CHAMPSChecks per year
2

Enter the 2004 CHAMPSCheck
target
3

180.00 
4
Calculate the average number
of CHAMPSChecks needed to
achieve the goal
16 * .628 = 10
4

Calculate the bonus payout per
100% CHAMPSCheck score
1,800  10 = 180
36
RGM Bonus Step 7 - Calculate Strategic Component Chart
Objective
Design Parameters
• Align to BMU strategic objectives
• Must be measured on Balanced Scorecard
Summary or Balanced Scorecard Detail
reports
• Business Unit can change strategic
measure each year although we
recommend balancing “year of initiative”
with consistency
• Example - BMU could use People Measure
(e.g. TM Turnover to drive people capability
mindset) to balance Financial Measures
• Calculation timeframe can be period or
quarterly (we recommend that you pay
quarterly)
• Fixed $ or volume-based
• Should be a recognized strategic focus for
BMU and YRI AOP
• Weight of component can vary between 15% –
30%
37
RGM Bonus Step 7 - Calculate Strategic Component Chart
 Worksheet Tab in the Bonus Modeling Tool
The Strategic Component should be
determined by the BMU. We recommend
a People or Customer measure to
balance the Financial measures.
7a_StrategicPlanning
 Example: Team Member Turnover data
Team Member Turnover - 2003 Target and Estimated 2004
2003
2004
TM Turnover Target Pay-out
1

Calculate the Average TM Turnover for the
prior year
1,200
Average TM Turnover Target
117%
1

Improvement
100%
15%
2

2

3

Enter the Target for 2004
3

Calculate % of improvement
Count
Area ID
Store ID
2003 Team
Member
Turnover
1
2
3...
199
200
001
001
1,000
1,002
78
127
025
025
1,396
1,398
42
120
2004Team
Member
Turnover
67 
4
108
36
102
(1.14-1.00)/1.14 * 100 = 12.3
4

Use % of improvement to calculate
the estimated 2004 TM Turnover by
restaurant
78 * (1-.123) = 68
38
RGM Bonus Step 7 - Develop Strategic Component Chart

Leverage
Projected
Annualized Turnover Payout Multiple
0 - 54.9 
Set the maximum at around the 10th percentile (e.g., only 5-10% of RGMs should
achieve this level of payment). Payment can be up to 300% depending on what
the BMU can afford.
Calculate the estimated bonus for each RGM using 2004 Team Member Turnover.
For example, 69 falls into the 55-74.9 category yielding a bonus of $2,400.
3,000
250%
55 - 74.9
2,400
200%
75 - 99.9
1,500
125%
100 - 114.9
1,200
100%
TM Turnover Target Pay-out
115 - 129.9
900
75%
Estimated Average Pay-out
0
0%
130 +

Adjust scales to determine what total spending would
be and if the program would be affordable. As a
starting point, you may want to align to Balanced
Scorecard targets.


Calculate the overall average payout.
1,200

 1,338
2003 Team 2004Team
Member
Member
Turnover
Turnover
Count
Area ID
Store ID
1
2
001
001
1,000
1,002
78
127
67
108
199
200
025
025
1,396
1,398
42
120
36
102
Estimated
Cost
 2,400
1,200
3,000
1,200
 Worksheet Tabs
7_StrategicPlanning
7_StrategicPayouts
39
Putting it all together...
1
2
Sales & RCP Make Plan Matrix
Flow-Thru
0.29%
Net Sales vs. Plan
RCP vs Plan
0.44% % of RCP Times
98
--99.99
100
--101.99
102
--104.99
105
--107.99
108
--109
110
---
96
---
99.99
40%
50%
50%
50%
50%
50%
100
---
101.99
50%
100%
125%
135%
145%
150%
102
---
103.99
60%
100%
135%
150%
175%
200%
104
---
109.99
60%
100%
145%
175%
200%
110
---
114.99
60%
100%
155%
200%
115
---
60%
100%
165%
225%
3
100% Perfect CHAMPSCheck
 $180 payout per 100% CHAMPSCheck
(.0029) of actual RCP x quarterly multiplier
RCP Versus
Flow-thru %
Quarterly Multiplier
104
200%
103
- 103.9
150%
102
- 102.9
125%
101
- 101.9
110%
225%
100
- 100.9
100%
250%
275%
98
-
99.9
50%
275%
300%
97.9
0%
4
Strategic Initiative
Projected Annualized Turnover
Payout
0
---
54.9
3,000
55
---
74.9
2,400
75
---
99.9
1,500
100
---
114.9
1,200
115
---
129.9
900
130
---
0
40
Validation
 To validate the bonus design, the following should be taken into consideration
On an average basis, consider how the plan is paying out for the level of
performance that is achieved
Is the overall cost of the bonus affordable for the BMU
Average
Average
Payout
Payout "ALL" "Receivers"
Total
Projected
Cost
Category
Target
Sales & RCP Make Plan Matrix
$1,800
$2,124
$3,173
$424,717
Flow-Thru
$1,200
$1,362
$1,702
$272,353
100% Perfect CHAMPSCheck
$1,800
$1,809
$1,809
$361,728
Strategic Initiative
$1,200
$1,338
$1,565
$267,600
Overall
$6,000
$6,632
$8,249
$1,326,398
41
Validation
(continued)
 When calculating the projected cost of the bonus, the following should be taken into
consideration:
This bonus modeling technique is modeled on annual data. To validate the bonus,
you may want to model the cost of the bonus for each quarter of data to ensure that
you are not under or over funding the plan.
The model assumes that all stores will be open for a full year. Work with Finance
to determine the appropriate assumptions to apply to the total cost figure.
 The model assumes that no RGMs will forfeit the bonus by terminating
employment. Work with Finance to determine the appropriate assumptions to apply
to the total cost figure.
 The model assumes that restaurants will perform at the same level to plan as they did
in the prior year.
42
Validation
(continued)
 To test the bonus, calculate bonus payouts for different performance levels and
restaurant volumes
Does the payout level appropriately reflect performance?
Category
Sales and RCP Make Plan Matrix
Restaurant 200
• Almost achieved Sales Plan
• Achieved RCP Plan
• Almost achieves Flow-Thru target
• 10 of 16 100% CHAMPSChecks
• Achieves TM Turnover Target
Restaurant 13
• Achieved Sales Plan
• Achieved RCP Plan
• Exceeds Flow-Thru target
• 8 of 16 100% CHAMPSChecks
• Achieves TM Turnover Target
Restaurant 161
• Exceeds Sales Plan
• Exceeds RCP Plan
• Achieves Flow-Thru target
• 6 of 16 100% CHAMPSChecks
• Achieves TM Turnover Target
Receives 73% of bonus target
Receives 118% of bonus target
Receives 215% of bonus target
Restaurant
200
Restaurant
13
Payout
Sales vs. Plan
RCP vs. Plan
Estimated Actual RCP
Matrix Multiplier
Flow-Thru
Estimated 2004 Flow-Thru
Flow-Thru Multiplier
100% Perfect CHAMPSCheck
Number of 100% CHAMPSChecks
Strategic Initiative
Estimated Team Member Turnover
Estimated Bonus Payout
Target Bonus
% of Total Payout
Restaurant
161
Payout
Payout
99%
103%
314,693
60%
$828
100%
103%
426,447
100%
$1,870
116%
112%
627,982
250%
$6,885
98.0
50%
$443
105.6
200%
$2,473
104.0
200%
$3,642
10
$1,880
8
$1,520
6
$1,160
102
$1,200
$4,351
$6,000
73%
106
$1,200
$7,063
$6,000
118%
104
$1,200
$12,887
$6,000
215%
43