LAT: Some restaurants face pressure to trim menus and staffs under California's wage hike

The LA Times writes:

A deal that would raise California’s minimum wage to $15 an hour was met with a mixture of joy and anxiety across the state Sunday.

Some workers and labor officials hailed it as a breakthrough in providing higher-wage jobs in fields where it’s a struggle to make ends meet. But some business owners feared the shift would hurt their bottom lines – and perhaps even put them out of business.

The debate is likely a preview for the weeks ahead as the minimum wage proposal works its way through Sacramento.

I’ve talked about this elsewhere … but Anthony Bourdain became a hero to me when someone at a Vroman’s book signing asked him what he thought of L.A. restaurants, and he launched into an angry rant about how our appetite for $10-per-head Chinese food was forcing most of our area’s kitchen staff to work two to four shifts per day just to be able to sleep four or more per room and live on staff meals – if there were any! And he was right. When we took some friends to 888 for dim sum, which they are used to eating in San Francisco, they were watching the chop marks pile up on the tab with some concern and finally offered to pay. I told them I had it covered. And when the check came, something like $67 for seven of us before tip, they were sure it had to be a mistake. But it wasn’t a mistake, it was merely an injustice …

If every restaurant in the state were to raise prices enough to pay a living wage, do we really think we’d all stop going out to eat? Yes, it would have some effect on how often we did it, but we would certainly adjust over time.


I’ve read maybe a hundred newspaper stories on exactly that theme. The one thing that was new to me in that one was a restaurant worker worrying that he might not be able to afford to eat out any more.

Will they close? Will staffs be reduced? Will prices increase? What about the add on charges for employee health care?

$15 an hour is probably more than what some of the owners make.


re: the add-on health care charges
imho, that is a scam designed to financially benefit the owners.
the monies collected in this fashion are completely controlled by the owners, taxes may or may not be paid by the owners.
the “transparency” is bullshit, and there is a pretty easy tax dodge that is easy to accomplish with this cockamamie structure.

re: the $15/hr
if an owner is competent, it shouldn’t be impossible to pay a living wage to BOH workers AND to continue to run a profitable organization.
the way that the owners are squealing like stuck pigs is ridiculous.
they need to reevaluate exactly how absolutely necessary it is for them to be located on abbot kinney and to pay the insane rents that are charged in that location.
they need to reevaluate exactly how necessary it is to serve some of their lower margin dishes or, alternatively, to reevaluate the prices they charge for those dishes. if dry-aged steak is a low margin menu item, maybe it’s time to raise the price that is being charged for it instead of squeezing the kitchen staff.
they have to reevaluate exactly how necessary it is to maintain an extensive, top-tier, wine cellar that accounts for only a tiny portion of their income. really, why does the dishwasher need to pay for the bragging rights the owner gets from this unprofitable expenditure?
and on
and on
and on


Hadn’t considered the wine cellar angle. Do you have any data on this?

On another site some time ago, the poster above was involved in several chats about the pending wage increase. The comments in the earlier message chain were less pointed. Maybe these above apply to the highest end of the restaurant business but they are unrealistic with respect to the middle or lower expense operations.
The average full service restaurant has a wage expense of between 30 and 40% of its gross. When this issue arose some months ago, several restaurant LA owner/operators indicated that their wage component was 35% when things were going well. They all felt that the wage increase would result in one or more of the following: price hikes, staff reduction, staff hour reduction, implement more mechanical solutions to control costs, lower profit, etc.
No one disputes that all untipped employees deserve more money. However, tipped employees, primarily the wait staff, not only get paid at least the minimum wage but also receive tips. Tips received can, and should be if the server is competent, be many multiples of the hourly wage. I guess the question is why should tipped employees also get a raise in their minimum wage since they are already earning above the minimum wage (there is no offset against minimum wages for tips received in CA).
Bear in mind that not only does the restaurant’s wage expense go up, most other expenses will also rise. Restaurant suppliers will have to increase what they pay their help and you can be sure that will be passed on to the restaurant owners. If the restaurant has a percentage rent clause, the rent component will also go up. Same for any operation that is in a mall or other location where the tenants share common area maintenance charge.
Maybe it will all wash out and the net result will be that everyone will pay more to eat out. I suspect, however, that at least for the next few years the average owner of a full service restaurant will wind up working a lot harder for significantly less.

Nice summary. I wonder if there is some sort of workaround the owners could come up with. Make the waitstaff independent contractors and pay them the equivalent of their current hourly wage?

I feel like this is a real problem.

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this will never fly from a legal/tax perspective.

Yes, as I was typing it I realized there were legal issues. OTOH, given low wages paid to undocumenteds, the issue of legality has often been overlooked in the resto biz.
How about if you raise prices and eliminate tips entirely? (Obviously, folks could still leave some cash that would not be declared.)

yeah except the 1099/W2 issue has been extremely highlighted by the proliferation of on-demand companies - I don’t think it’ll work in the restaurant industry unless they want to outsource things like janitorial staff.

that said, I do think that 1099’s will become much more pervasive in other industries due to increased minimum wage.

How about if you raise prices and eliminate tips entirely?

I personally believe that parts of the entire industry have to move in this direction in order for it to work, because…

At the start of 2015, Thad Vogler decided to eliminate tips at his two San Francisco restaurants Bar Agricole and Trou Normand and raise prices by 20% to help bridge the pay discrepancy between the tipped staff and the kitchen employees.

The no-tipping policy brought a pay raise to the kitchen staff and servers no longer relied on tips as part of their compensation.

Vogler said the staff seemed on board when he introduced the new policy. But as it played out, the sentiment began to shift among formerly-tipped workers.

“They became more and more disgruntled, and we started to experience turnover,” he said. “We were spending a lot of time and energy hiring and training, and rehiring and training.”

He estimated he lost about 70% of his tipped staff – or 30 people – during the 10 months the policy was in place.


iirc, this is also being done in some of the higher end restaurants in nyc.

of course, the irs will no longer be able to jack the restaurant owners around by having them calculate the “allocation” of tips.

there will be a firm number upon which the owners should be able to rely. . .

you are correct in that my comments are primarily aimed at the high end of the spectrum-- the end that uses tax preparers.

Ns1: this makes perfect sense.

when i was in sales and i was making the “big bucks,” (national territory living the life of a road-warrior),
i had a pretty clear idea about how much i was “worth” in the market.
if i got paid in salary, or i got paid in bonus, or i got paid in commission, i made sure that i got paid WHAT I WAS WORTH.
it made no difference to me how my employer wanted to structure my pay, but the structure had to yield the proper compensation if they wanted to keep me on their team.
why, if one is a professional server (i.e. not doing the job on the way to doing some other job), would you not expect to get paid what you’re worth in the market?

what was Vogler thinking?
just because he would like to change the compensation structure to better pay the BOH, wouldn’t mean that the FOH would be willing to give up money that they are worth, the money that they need to support their own family, for this purpose.

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Restaurant owners and managers typically get reports breaking the business down by segment, so they know whether lunch, dinner, beer, wine, cocktails, etc. are each making or losing money. If the chef has some lower-margin dishes on the menu, they’re almost certainly there because they believe they’ll increase overall patronage and/or spending per customer. For example, they might know that the dry-aged steak they’re not making money on pays off in high-margin wine purchases.

Because FOH servers are currently overpaid due to consumer guilt.

Sorry, I don’t really think I should be responsible paying the restaurant’s employees via tips; that should be on the restaurant. Charge me a price and call it a day, like every other service/good on the market.

::dons flame suit, runs away::

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it also will never fly as long as the server is competent enough to get another job.

indentured servitude went out some time ago

I didn’t know $20++/hr was considered indentured servitude.