How Are Fellow Restaurateurs Coping with the Minimum Wage Increase?
San Francisco’s minimum wage met Oakland’s on Friday at $12.25 an hour, and in preparation for the increase, we asked you to tell us how you are dealing with the increase. The results of the poll are as follows:
- 59% Raising prices
- 9% Switching to all-inclusive pricing
- 9% Increasing surcharge
- 18% Some combination of the above
- 5% Nothing yet
As expected, most restaurants either have already raised their prices, or will be doing so in the near future. Additionally, some restaurants will be increasing their surcharge; most surcharges seem to be in the 4–6 percent range. A surcharge can be implemented for any purpose, but if it is labeled for health care expenses, 100% of that money must be spent on healthcare.
A newer approach in the industry is all-inclusive pricing, which incorporates service and sales tax into the price, eliminating tipping. Popular because of the one price simplicity it offers for customers as well as the flexibility it provides for employers for redistributing wages. However, it does take some calculus to figure out the wage structure and sales taxes, and there is a risk of initial sticker shock to customers as well as the preference by many to determine what they’d like to pay for service. And then there’s the concern that front of the house staff might revolt due to the loss of tip income, even though this approach provides a guaranteed hourly wage higher than the minimum wage. Still, some early adopters have experienced successful implementation.
Lastly, many restaurateurs are doing a combination of increasing prices and adding or increasing their surcharge, and other things like cutting portions and employee hours. Only 5% of respondents are not taking any action as of now.
GGRA will be hosting a two day Industry Conference on July 26-27, and the topic of tipping and coping with escalating costs will addressed. Please save these dates as this will be an opportunity to hear from peers about their tactics.
Finally, if you are located in San Francisco, remember to replace your minimum wage posting. Please also be sure your payroll company is aware of the increase. Lastly, do not forget to account for other cost increases in budgeting, including workers compensation, taxes, etc. If you have any questions, feel free to email us at email@example.com.