Sous Chef Asking for Equity (2026)

A sous chef asking for equity after less than a year should hear no on ownership and yes on money. Equity means he'd own part of your business, and you shouldn't promise that now, not even with a start date 3 years away. Offer pay that beats what he makes with overtime, 15% of catering profit and a review in 12 months, all in writing. If catering hits the numbers you set, that review is where he can start buying into catering, not the restaurant.

Why vesting that starts in 3 years is still too early

What he wants is sweat equity: a share he pays for with work instead of money. Vesting means he earns that share bit by bit over time. At US startups, the usual deal is 4 years with a 1-year cliff. If he leaves in the first year, he gets nothing. After that, he gets a quarter on his first anniversary and the rest month by month.

His plan starts that clock in 3 years, which sounds safe. But the date isn't what you'd give away. The day you sign, you fix three things: the size of his share, the business it comes from, and his price, which is usually zero.

You'd fix all three before catering has sold a single tray. You'd also fix them with a cook you've known for less than a year, who hasn't worked a slow season with you yet. A late start delays the bill but doesn't change what's on it.

A clock also pays for the wrong thing: it rewards staying, not building. If catering flops and he stays, the clock keeps running, and in 2029 he owns part of a business that never grew.

A share of the restaurant is worse, because it comes out of the five years you put in before he arrived. Restaurants sold on BizBuySell from 2021 to 2025 went for 2.15 times the owner's yearly earnings, on average (BizBuySell, 2026). Owner's earnings are the profit plus the owner's own pay. Say your spot earns you $120,000 a year that way. It's worth about $258,000, so 10% is $25,800 of value you built without him.

Red flag or normal ambition

Most of what he's done is normal pushing from a good cook who knows what he's worth. One move isn't. Here's how to read each one:

• He agreed to a salary, then backed out because overtime pays more. That's math, not a lack of loyalty: your offer paid less than his hours do, as the next section shows. Once is fine, but backing out of a second written deal would be a pattern.
• He asked about equity at 6 months. Asking is normal, because many strong sous chefs want to own a place one day. Pushing for it before he has results isn't.
• He's "holding out" and says he'll leave if catering doesn't grow. This is the real warning sign. A threat as an opening move in year one shows how he'll push when he doesn't get his way. You can fire an employee, but not an owner.
• He'll take on more work only with a partnership path. You're right about the order: results first, ownership later. He's right that new work deserves new pay, so pay it in cash from the day he takes it on.
• He has carpal tunnel, a condition that causes pain and numbness in the hand and wrist. It's a health fact, not a sign he wants to work less. Keep it out of this decision completely.

Then watch what he does more than what he says. These signs matter more than any talk about equity:

• his SOPs, the written how-to for each task, and his order guides live only in his phone or personal email
• catering clients call or text him, not the restaurant's number
• he won't teach anyone else the ordering or the catering prep
• he brings up leaving again after you've put a written offer on the table

If you see none of these and he takes a fair offer, you've got a sous chef with big plans worth keeping. If you see them, plan for the day he leaves, whatever he says about staying.

Why he turned down the salary: the overtime math

In the US, a cook paid by the hour gets 1.5 times his rate for each hour over 40 in a week. Say your sous chef makes $24 an hour and works 50 hours a week, and your salary offer was $62,000 a year.

$24 an hour sits between two US medians: $17.98 for restaurant cooks and $30.03 for chefs and head cooks (Bureau of Labor Statistics, May 2025). $62,000 looked fair, because it's about what $30.03 pays for 40-hour weeks all year. For him, it was a $6,640 pay cut for the same 50 hours. He said no before the switch, which is the right time to say no.

A salary has to beat what he makes now with overtime, or it's a pay cut with a better title. You have two fair ways to pay him:

• Keep him hourly and put the catering profit share on top. It's the simplest choice, and he keeps his overtime.
• Make him your kitchen and catering manager on $72,000 a year, $3,360 more than he makes now. He runs the schedule, the ordering and catering, and his view on hiring counts. More planning and less line time also take pressure off his hands.

Check the US rules below before you choose the second one. A salary doesn't end overtime by itself.

What to offer a sous chef asking for equity

Put the offer on one page, and both of you sign it. It holds five things:

1. His pay, hourly or salary, from the section above.
2. A title that fits the job, such as catering chef or kitchen manager.
3. 15% of catering profit, paid every 3 months, only for periods that made a profit.
4. How you count catering profit, line by line.
5. A review date 12 months out, and the results that would open a talk about him buying a share.

Line 4 is where profit sharing goes wrong. Count catering profit as catering sales minus food, packaging, delivery, card fees, shared-kitchen rent and every hour of catering labor, his included. Count money that clients have paid, not money that's been booked.

Say catering sells $250,000 in its second year and keeps 16% as profit. That's $40,000. Here's his 15% share next to 10% ownership of the catering business:

The profit share pays him more cash than 10% ownership, and it ends when his job ends. Six months ago you fired a sous chef after several write-ups. If he'd owned 10%, firing him would have ended his job, not his share. He'd still get 10% of any profit you paid out, until you bought his share back.

If you want the rest of the kitchen on a bonus too, here are profit-share and bonus setups for a small team.

If catering works: a buy-in, not a clock

Give him a clear yes for later, tied to results. A buy-in means he pays for his share, and a fair one works like this:

• Put catering in its own company, an LLC, before anyone owns part of it. The restaurant you built stays 100% yours. It costs a yearly state fee and some accountant time, so set it up once catering is real.
• Set results, not dates. For example, ask for $40,000 of catering profit in the last 12 months, counted as paid. Add a second cook who can run an event without him, so he builds a team, not a job only he can do.
• Set the price rule now: two times the last 12 months of catering profit, close to the 2.15 average above. At $40,000 of profit, catering is worth $80,000, so 10% costs $8,000.
• Let him pay from his profit share. At $6,000 a year, 16 months of it covers the $8,000.
• Write the way out before the way in. If he quits, is fired, gets sick or dies, you buy his share back at the same price rule. Lawyers call this a buy-sell agreement.

A lawyer will likely offer two other tools. A profits interest gives him a share of catering's growth from that day on, not of what it's already worth. The IRS usually doesn't tax him on the day he gets it (Revenue Procedure 93-27). A sale bonus, sometimes called phantom equity, pays him 10% of the price in cash if you sell catering while he runs it. He shares in a sale without owning anything before it.

Equity earlier is fair in three cases: he puts real money in, he brings his own catering clients, or you plan to sell to him. The last one matters for you. Arthritis already took you off the line. The person running catering is your most likely buyer if you step back further in 5 years.

Protect the business before you talk

Do these whatever he says. The goal is a business where the recipes, the suppliers and the clients don't leave with one person.

• Copy every SOP, order guide and supplier contact into an account the business owns, such as a shared drive in the business's name.
• Send every catering inquiry, quote and invoice through the business email and phone, and meet the top five clients yourself.
• Train one AM cook on ordering and one on catering prep. In a six-person kitchen, one person leaving shouldn't stop catering.
• Know who you'd call if he gave notice tomorrow: a cook ready to step up, or a chef you already know.

Don't count on a non-compete to protect catering. A non-compete is a promise not to work for a rival, and many states won't enforce one, as the US rules below show.

What to say when you meet

Keep it short, and bring the offer on paper. Something like:

I'm not ready to talk about ownership this year. Your work on the ordering, the SOPs and catering has been great, and I want to pay for it now. Here's my offer: [his pay], 15% of catering profit every 3 months, and a review on [a date 12 months out]. If catering makes $40,000 in profit over 12 months and someone else can run an event, we'll talk about you buying 10% of catering. The price will follow a rule we agree on today. If that doesn't work for you, I'd rather know now. Tell me by [a date 2 weeks out].

If he pushes back, move the size of the profit share, never the ownership. If he turns down everything short of equity, thank him, agree on his last day, and use his notice to train the next person.

US rules to check before you change his pay (2026)

Salary and overtime

Under the federal Fair Labor Standards Act, the US Department of Labor sets four tests for managers. A manager on salary skips overtime only if he passes all four in 2026:

• a salary of at least $684 a week, or $35,568 a year
• his main job is managing the kitchen or a part of it, such as catering
• he directs the work of at least two full-time workers, or the same hours from part-timers
• his view on hiring and firing carries real weight

The tests look at what he does, not at his title. If he mostly cooks on the line and you make every hiring call, treat him as owed overtime. Chefs with a four-year culinary arts degree can pass a different test instead, the one for learned professionals (29 CFR 541.301).

Get it wrong, and he can claim up to 2 years of unpaid overtime, or 3 if you knew you were breaking the rules. A court can add the same amount again as damages.

Some states set a higher salary floor. Here's how the two offers above do in 2026:

"High enough" covers the salary test only, and the other three tests still apply. Check your state labor department's number before you write the offer.

Bonuses and overtime

If he stays hourly, a bonus you promise in advance usually counts toward his overtime rate (US Department of Labor, Fact Sheet #56C). When you pay a catering bonus for 3 months, part of it goes back into those weeks as extra overtime pay. Tell your payroll company before the first payout.

His health

The federal disability law, the ADA, covers employers with 15 or more workers, and many state laws cover smaller ones, the EEOC says. Base every decision about his pay and his role on his work, never on his wrists.

Non-competes

There's no federal ban. A court struck down the FTC's 2024 rule, and the FTC dropped its appeal in September 2025, so state law decides. California, Minnesota, North Dakota and Oklahoma ban almost all non-competes for employees, and many other states limit them for lower-paid workers. Ask a local employment lawyer before you rely on one.

If he becomes an owner

In an LLC taxed as a partnership, an owner can't also be an employee on payroll, the IRS says (Revenue Ruling 69-184). He'd be paid as a partner, pay his own taxes during the year and lose his right to overtime. In an S corporation he can stay on payroll. But profit goes out by share, so 10% of the shares means 10% of every payout, yours included. Ask your accountant before you promise anyone a share.

Do this week

1. Copy every SOP, order guide and supplier contact he made into an account the business owns.
2. Work out his real yearly pay: his rate × 40, plus 1.5 × his rate × his overtime hours, then × 52. Your offer has to beat it.
3. Look up your state's salary floor for skipping overtime before you offer a salary.
4. Write the one-page offer: pay, 15% of catering profit and how it's counted, a review date, and the results that open a buy-in talk.
5. Meet him, hand it over and ask for an answer within two weeks. Start training an AM cook on catering prep either way.