How mistakes across multi-location businesses quietly drain your profits
Have you ever looked at your financials and wondered why your labor costs feel higher than they should be? Or suspected that growing your restaurant group might be creating invisible expenses?
After working with restaurant owners for over 20 years, we see the same costly business decisions over and over again. And the most frustrating part? These problems often stay hidden until they've cost your business tens of thousands of dollars.
These aren’t obvious operational problems like equipment breakdowns or staffing shortages. They’re structural issues in how your business handles employees across entities, from how they're managed, paid, and taxed.
In this article, we’ll reveal five common mistakes multi-location restaurant owners make and how they might be silently draining your profits right now.
Mistake #1: Missing Overtime When Employees Work at Multiple Locations
This is the most common mistake we see.
Let’s say Sarah works 30 hours at your downtown location and picks up 20 hours at your suburban restaurant. She clearly worked 50 hours and should receive 10 hours of overtime pay. But if you're running separate payroll systems for each location, your systems don't communicate. Downtown sees Sarah as part-time with 30 hours. Suburban sees her as part-time with 20 hours. Neither system flags overtime.
Why This Costs You Big
- Labor law violations: Overtime laws apply regardless of location
- Audit risk: Multi-location overtime tracking is a common audit trigger
- Back-pay obligations: You may owe years of unpaid overtime with interest
- Penalties: On top of back pay, expect fines and administrative headaches
We've seen restaurant owners face five-figure settlements due to this issue. All because systems weren't connected across locations.
Mistake #2: Paying Double FICA Taxes on High Earners
Social Security tax (6.2%) only applies to wages up to $176,100 (updated limit for 2025) annually. After hitting that limit, you stop paying the 6.2% Social Security tax. But if you split compensation across two entities, each treats this limit separately. And this causes duplicate tax payments.
Let's say your general manager earns $200,000 split between two locations:
- Correct approach: Pay 6.2% up to $176,100 = $10,918 in Social Security taxes
- Wrong approach: Pay 6.2% on $100,000 at each location = $12,400 total
- Your overpayment: $1,482 per manager per year
Multiply this across multiple managers, and thousands of dollars go to the IRS instead of your business.
Mistake #3: Overpaying State Unemployment Tax (SUTA) on Shared Employees
Each state taxes unemployment wages only up to a certain amount (usually around $7,000–$13,000, depending on the state). But if employees split time between locations, you may end up taxing the same wages twice.
Here’s an example: Maria earns $25,000 working at two locations in a state with a $10,000 SUTA wage base:
- Location A: $15,000 earned, tax paid on $10,000
- Location B: $10,000 earned, tax paid on $10,000
- Result: Paying tax on $20,000 instead of $10,000
If your state unemployment tax rate is 3%, that's $300 extra per shared employee per year.
Mistake #4: Creating Administrative Chaos with Multiple Systems
We once worked with a restaurant owner who spent 12 hours weekly running payroll across seven locations. They were re-entering data multiple times, manually calculating overtime, and managing separate logins for each system.
Here’s What This Process Was Costing Them:
- Time wasted: 10+ extra hours weekly that could've been spent growing the business
- Extra fees: Paying separate monthly fees (x7) to payroll providers for each entity instead of one consolidated fee
- Employee confusion: Multiple W-2s for the same person
- Increased errors: More systems mean more mistakes
Every hour wrestling with payroll administration is time not spent growing your restaurant.
Mistake #5: Ignoring the Hidden Costs of Cross-Location Employment
When employees work across locations under separate entities, it creates a cascade of administrative, compliance, and HR complications:
Onboarding gets duplicated:
- Multiple I-9s, separate W-4s, duplicate employee files
- Separate benefits enrollments
- Confusion about who's the "real" employer
Benefits and compliance get difficult:
- Workers' comp
issues - Complex garnishment and COBRA administration
- Premium miscalculations
These might seem like "small" administrative tasks, but across dozens of employees, they add up to significant time and money.
When Small Problems Become Big Expenses
Each mistake seems manageable on its own, but the combined impact can be staggering:
- FICA overpayments: $1,482+ per manager annually (based on calculations above)
- Unemployment tax waste: Hundreds of dollars per employee annually
- Administrative time: Significant loss in productivity from inefficient processes
- Duplicate system costs: Multiple provider fees and errors
When you add up overtime violations, tax overpayments, and administrative inefficiencies across multiple locations and dozens of employees, these “small” mistakes represent substantial annual losses.
Labor audits are increasingly common, and auditors specifically look for multi-entity payroll violations. When found, they examine several years of records, potentially creating significant settlement obligations.
Why These Mistakes Go Undetected
Most restaurant owners don't notice these issues because:
- They use separate systems for each entity, creating limited visibility
- Payroll providers benefit from multiple entities with more fees
- Structures were set up years ago when the business was smaller and has never been revisited
- Owners are focused on operations, not payroll architecture
But not seeing these mistakes doesn't mean they aren't happening.
How to Stop the Financial Bleeding in Your Multi-Location Restaurant
These payroll mistakes are completely preventable, but you can't fix problems you don't know exist. The first step is understanding what these inefficiencies actually cost your business.
At Patrick Accounting, we've spent over 20 years helping multi-location restaurant owners restructure for efficiency, maximize payroll compliance, and stop money from slipping through the cracks.
Your restaurant deserves systems that support growth, not drain profits through preventable errors.
Want to know if these mistakes are costing your restaurant? Contact us today for a consultation to see exactly where you stand and what opportunities exist to improve your bottom line.
Related Resources:
- "The Best Entity Structuring for Multi-Unit Restaurants" — See how the right structure can reduce tax burdens and simplify operations as you grow.
- Podcast: "When to Use an Employee-Only Entity to Simplify Multi-Location Payroll" — Learn when a centralized payroll entity can eliminate overtime errors, tax overpayments, and admin complexity.
