Owners/managers: How have higher minimum wages affected your restaurant?

[Hassouni]

DC is soon to vote on an ultra-divisive initiative to eliminate the tip credit - i.e. when a tipped employee doesn't make enough in tips plus the tipped minimum waged, they must be compensated by the house equal to the non-tipped wage. If it passes, all staff must be paid the same, higher wage. I believe in New York something like this has already happened (please correct me if I'm wrong), with all increased costs passed on to the consumer. On my two 2018 trips to New York, I was a bit startled to find cocktails at the high end bars I used to frequent sitting pretty at $18, whereas even last year they were a few bucks cheaper. 

 

If you may not know, I'm about to open a bar/resto in DC. I'm paying my staff as a share of revenue rather than hourly rate (plus giving benefits), and that will exceed the minimums anyway, but my own view is that as much as I think the tipping system is stupid, it's so ingrained in the system, and as one of the few ways restaurateurs can operate profitably, that it's foolish to do away with it.

 

Hoping to hear from owners and managers who've dealt with this issue and how it affected your business.

[curls]

@Hassouni good luck with your new business venture! Please let us know when you’re up and running; I’d like to visit your bar/resto. What part of DC?

[Hassouni]

Thanks, it's gonna be in Adams Morgan, hopefully open in a month or so

[JoNorvelleWalker]

4 hours ago, Hassouni said:

DC is soon to vote on an ultra-divisive initiative to eliminate the tip credit - i.e. when a tipped employee doesn't make enough in tips plus the tipped minimum waged, they must be compensated by the house equal to the non-tipped wage. If it passes, all staff must be paid the same, higher wage. I believe in New York something like this has already happened (please correct me if I'm wrong), with all increased costs passed on to the consumer. On my two 2018 trips to New York, I was a bit startled to find cocktails at the high end bars I used to frequent sitting pretty at $18, whereas even last year they were a few bucks cheaper. 

 

If you may not know, I'm about to open a bar/resto in DC. I'm paying my staff as a share of revenue rather than hourly rate (plus giving benefits), and that will exceed the minimums anyway, but my own view is that as much as I think the tipping system is stupid, it's so ingrained in the system, and as one of the few ways restaurateurs can operate profitably, that it's foolish to do away with it.

 

Hoping to hear from owners and managers who've dealt with this issue and how it affected your business.

 

I am neither an owner nor manager but I am struck by the similarity to the arguments once made in the US in favor of slavery.

 

That being said I wish you much success in your new venture.

 

[pastrygirl]

The lack of tip credit is why so many restaurateurs on the west coast are trying various service charges. Here in Seattle minimum wage for everyone is $13/hr. Cooks are making $16-20, and tipping habits haven’t changed so servers are making more like $30+ with tips. Americans seem to love tipping, so service charges aren’t always well received. 

 

I dont have an answer, but it (labor cost shooting up) does throw a wrench into things and widen the front vs back of house divide. Good luck!

[Hassouni]

43 minutes ago, pastrygirl said:

The lack of tip credit is why so many restaurateurs on the west coast are trying various service charges. Here in Seattle minimum wage for everyone is $13/hr. Cooks are making $16-20, and tipping habits haven’t changed so servers are making more like $30+ with tips. Americans seem to love tipping, so service charges aren’t always well received. 

 

I dont have an answer, but it (labor cost shooting up) does throw a wrench into things and widen the front vs back of house divide. Good luck!

 

How long ago did that go into effect in WA, and have you noticed any businesses being adversely affected, or cutting staff, etc etc?

[pastrygirl]

Just now, Hassouni said:

 

How long ago did that go into effect in WA, and have you noticed any businesses being adversely affected, or cutting staff, etc etc?

 

I believe it was around 1999 or 2000 when I was at my first restaurant job.  I don't recall what changes may have been made, I was just a pastrygirl trying to figure out my plated dessert menus, not involved in management.  But yeah, I think you'd have to raise menu prices and cut a few hours of labor where you can.

[chromedome]

There have been conflicting reports about the Seattle experience, with restaurateurs anecdotally reporting layoffs and price increases. On the other hand, in studies by outside academics, prices and employment within the industry in Seattle seem to be moving in lockstep with those outside of its salary bubble. In most cases, you'll find people picking the narrative that fits their preconceptions and going with that.

 

In my case I paid above-average wages for my (admittedly minimal) staff, and also provided tip pooling for the back of the house (except me...that just would have been wrong).

 

When I took my first job, 40 years ago (and yes, it gave me a twinge to write that) I earned a whopping $2.75 an hour. The minimum wage in most of Canada now is somewhere between $10 and $11, so I've seen a number of increases since then. Every time, it's been the END OF THE FREAKIN" WORLD!!! until it wasn't. In fact, the same arguments were made against minimum wages in the first place, so I've come to be a bit jaded on the subject. Remember when the smoking ban was going to be the end of the hospitality industry? And yet, oddly, people are still going out to eat and drink. Go figure.

 

It'll certainly make things fairer for servers toiling at the low end of the market, where tips are the difference between starving and not starving (or at least, being able to starve slowly on one or two jobs, rather than two or three). In higher-end establishments, where servers already out-earn the cooks (my servers out-earned me, the owner), evening things out between FOH and BOH will be the big challenge.

 

How things play out in your case, in your jurisdiction, I can't say.

[CFO999]

Bottom line here is the industry will need to rethink the old financial models they are using and start to think out of the traditional box

 

Analyst predict a 20-25% reduction of all restaurant units over the next 18 months..........if you have not redone your financial model, you may become a statistic