Minimum Wage Increase Benefits?
How some of the successful establishments in restaurant industry are benefiting from the increase in the minimum wage?
Factually you are going to need to pass this increase along to the guest. Most operators are fearful that if they add more pricing/charges to the guest check you have the potentiality of losing guests.
I do not disagree with this sentiment at all.
- If you do not do this (pass the minimum wage increase along to the guest) though then you are going to have to cut employee hours which is going to impact service.
- If you do not do this you cannot raise the pay in the kitchen.
- If you do not do anything then you will significantly lower your profits and jeopardize your business.
An associate of mine, Alisa Na, CPA, with offices in Edmonds and Seattle provided me with information on wages which is very relevant to this topic:
*Washington State – As a result of the passage of initiative 1433, the minimum wage will continue to rise from $11/hr for 2017 through $13.50 for 2021.
** City of Seattle have higher minimum wage rate. $13/hr for 2017
*Along with increasing the state minimum wage, the initiative requires employers to provide paid sick leave starting Jan 1, 2018.
Alisa is rated one of the top 19 CPA’s in Seattle and here is a link to her bio (https://www.expertise.com/wa/seattle/accountant-cpa).
Here are some Tips on making the Most of the Minimum Wage increase 2017 for your Business:
#1 Living Wage Service Charge
What is it?
It is an additional charge to the guest check of anywhere from 2.9%-5% of the guest check total.
What do you do with the money that you are going to get?
It is used to pay additional wages not only in the kitchen but to your service people as well.
How do I inform my guests?
You make a statement on the menu which might go something like this: “we support the recent initiative to amend the state minimum wage and benefits. A living wage surcharge of 2.9% (example only) will be added to all checks. Please ask your server if you have any questions. Thank you!”
How do I inform my staff on how to deal with this?
This is a longer discussion with the staff but my advice is to get a memo out to them discussing why this was done, visit with them in a team meeting to discuss and what the impact to the employees might be.
When asked by the guests how should I reply?
- Humbly
- We, the restaurant, have the need to mitigate the additional cost of a 16% increase in wages and benefits to the restaurant the restaurant can continue on.
- Any other items you feel you would like your staff to better understand.
#2 Review all of your costs to find potential cost efficiencies
Food
- Review portion size
- Talk to your vendor about not only pricing but using alternative types of raw ingredients
- Raise the prices slightly
- Review the amount of labor it takes to produce prep work as well as the production on the line
- This is a team effort
Labor
- Cross training
- Look for efficiencies
- Careful scheduling
- This is a team effort
Operating Expenses
- Do you need all of the items you are buying? Think twice about buying something.
- Do not defer maintenance!!
- Enlist your vendor’s support to help on becoming more cost efficient. They are glad to do so because if you are successful they are the benefactor.
We have found that by doing many of the items above we are seeing an actual increase in profitability. We have worked with several groups on the better utilization on the products (cost of goods), labor and operating expenses and this has enhanced the operator’s profitability and sustainability as well.
As another fall out from this increase in wages I have seen the operators looking more diligently at their business model than they ever have before.