Ann Arbor restaurant announces it will split profits between owners and staff

Hugh Morgan, owner of Ann Arbor restaurant Satchel’s BBQ, recently announced a profit-sharing plan that will see the business' profits split evenly between ownership and staff.

Satchel’s, located at 3035 Washtenaw Ave., has been in operation since 2010. Morgan says one factor that led to the new payment model was the ever-present issue of high employee turnover in the food service business.

"[Food service is] a tough business with very low margins, and a very high failure rate," he says. "I don’t think there will be a situation where you don’t have any turnover at all, but it’s worth the fight to keep people on your staff."

Satchel's 13-year run led Morgan to ask his staff how to improve both employee and customer satisfaction. As with many small businesses, particularly during the COVID-19 pandemic, the issue of compensation arose. 

However, Morgan explains, there isn’t always money in a restaurant’s budget to provide pay increases to staff each year. Morgan was able to provide some relief on that front through the Payment Protection Program (PPP) loans administered by the United States Small Business Association during the pandemic.

When PPP ended in May last year, Morgan needed a new way to keep paying his employees appropriately. With his new profit-sharing plan, staff not only receive a cut of the business' profits, but they're also actively involved in decisions regarding the restaurant. Morgan describes the plan as a "two-way street," with expectations of both staff and owner changing for the benefit of the entire Satchel’s team.

"It’s created a really interesting dialogue between all of us," Morgan says. "More is expected of the staff and they benefit more, but more is also expected of me to provide specific guidance about what exactly great service looks like."

Morgan believes that if this model works in the restaurant industry, there is no reason it shouldn't work in every business. But if business owners want to utilize a similar profit-sharing plan, he says they need to be ready to be transparent about their businesses' financials.

"You can‘t have a profit-sharing plan if you don’t tell people exactly what the profits are, or how they’re calculated," he says. "Most owners generally keep some of that information private. I understand that, but you have to be willing to be honest with your staff about how the financials move in and out of the business."

"We’re all trying to think about all the different facets of the business, and what we can do to make this business as successful as possible."

Rylee Barnsdale is a Michigan native and longtime Washtenaw County resident. She wants to use her journalistic experience from her time at Eastern Michigan University writing for the Eastern Echo to tell the stories of Washtenaw County residents that need to be heard.

Photo courtesy of Hugh Morgan.