"The Tipping Point," Feature, 2/18
I'm Losing Sleep at Night
Nice job on this piece. We're in interesting times, for sure, and growing transparency and understanding of wage structures, minimum wage, tipping for service, wage equity between workers in restaurants, etc., is awesome. I would add a few comments after reading this: The restaurants I'm in contact with who are attempting to find ways to narrow the gap between service employees and kitchen workers are serious about that gap. Doing away with tipping is one path toward this goal, but creating tip-share structures that allow kitchen employees to benefit from those tips is another way (one that is legally poorly defined, and worrisome because of its vagueness).
Also, even in my casual restaurants, our servers are better compensated than our kitchen workers, despite the fact that our kitchen workers' hourly wages are substantially higher. Minimum wage increases affect our service staff much more than our kitchen, because those employees derive much more of their compensation from tips. This is a fact in most restaurants, regardless of model — the size of the gap varies, but there is almost always a gap.
Measure FF also includes a mandatory sick time requirement for all employees, which will raise all wages by 3 percent (one hour per thirty worked in paid time), even for our highest paid workers. When payroll percentages — in relationship to total expenses — in restaurants range from the high 20s to the high 30s (ours is on the high end of this scale), this is also a significant increase in cost. One thing that many non-restaurant folk miss is that there are several associated costs that many restaurants must pay on each dollar of either sales or wages, including things such as:
• rents, loan payments, investor dividends or other charges based on percentage of sales
• employee-paid payroll taxes (based on dollars of payroll)
• workers compensation insurance (based on dollars of payroll)
• business tax (a percentage of sales)
• credit-card processing fees (a percentage of sales)
All of these additional overhead charges compound so that a single dollar that needs to go to the bottom line (to pay increased wages) requires much more than a dollar in sales.
Also, there is a real elasticity in pricing — when we raise prices, customer spending patterns change. We won't know what the longterm impact of this is for quite a while. I suspect that in my restaurants, we'll be tweaking prices for much of this year to regain stability. This is a pretty constant exercise, by the way, payroll and food costs are the two largest costs in restaurants, and we all live or die by making those numbers small enough as a percentage of revenue that we can eke out a profit at the end of the day.
When I modeled our wage increase in October, before I signed on as a supporter of Measure FF, I saw what looked like a payroll increase of roughly 10 percent. Going back more recently as I mapped out wage strategy for our restaurant, I modeled a number closer to 13 percent. This changed because our mix of service employees to kitchen workers increased (we've been expanding our table service offering), the mix of salaried and hourly workers changed, and my model got a bit more sophisticated (accounting for payroll tax loading, workers comp increases, and maintaining my required gross margin).
When I initially wrote my piece in support of Measure FF, I thought I could get by with a 5–7 percent price increase, but now we-re shooting at a 9 percent increase. I wrote that folks might pay $1 more for a burger, and I think that's about right. This is a scary big increase for me. I wouldn't do it if I could afford not to.
I take price increases seriously. They literally keep me up at night — I haven't been sleeping all that well recently because we're in the midst of a series of price adjustments in various parts of our menu, and I'm worried that we'll get something wrong as we go. The alternative is to change all our prices at once, which would be even more nerve-wracking. I am highly motivated to provide good value to folks who visit my restaurants.
On the other hand, I take my profit margin seriously as well — if I didn't, I would go out of business. I read a piece somewhere a couple years ago that was talking about restaurants being always doomed to facing unfair competition from others who will eventually go out of business because they set their prices too low to run sustainably. I can't make that mistake, so I set my prices where they need to be, and adjust service, food quality, and other factors until there is a balance between customer willingness to pay and our ability to deliver while making a profit. In the best of times, this happens and everyone goes home happy. In harder times, not so much. Enough out of me.
Sal Bednarz, owner of Actual Cafe and Victory Burger, Oakland
It's About Paying People a Living Wage
Sal Bednarz and others, as long as you keep serving quality food and employee friendly people I will keep patronizing your businesses, even with a 15–20 percent increase, because as a nation we really need to get better at paying people a living wage.
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