It looks like a Federal $15 minimum wage is finally happening. In 2019, after years of lobbying from groups like One Fair Wage and Fight for 15, U.S. House of Representatives passed The Raise the Wage Act. The bill pledges to lift the federal minimum wage to $15 an hour by 2025, but has sat mostly dormant until this week, when it officially garnered the support of President-elect Joe Biden.
Sure, there are still some more legal hoops to jump through – namely the Senate – before it becomes law, but let’s take a look at what the change might mean for you.
As operators, you want to do what’s best for your people and your business, and we want to help. This article is a brief crash-course in navigating the proposed new minimum wage, including a few independent venues who have successfully implemented the policy on their own.
What a $15 Federal Minimum Wage Mean For You
This one is obvious: higher cost of labor. There are a lot of whispers in the industry that the new minimum wage will lead to widespread collapse, but let’s not be hasty. Our industry is resilient – this is just another change operators (and customers) will adjust to, given time. Look at states with higher minimum wages, like California, Connecticut, New York and Oregon, as proof. Each one has a tipped minimum wage of at least $10 an hour.
How to Offset Higher Labor Costs
There are a few ways to make up for the higher labor costs associated with a $15 minimum wage. The most popular of which is to shift the cost onto the customer by raising menu prices or adding a service charge. In essence, their out-of-pocket cost will be the same as it was under a tipping model – but the sticker shock can be jarring at first.
In terms of staffing, you can pair back to a skeleton crew on the floor and bring in contractors as needed. And finally, consider automating where possible. It doesn’t have to be a robot making coffee, just something as simple as an online ordering system so your team isn’t bogged down at a register when they could be better used elsewhere.
Restaurants Already Operating at $15 Minimum Wage
Venues around the country have voluntarily adopted a higher minimum wage model. Here are four single-unit operators, and how they’ve made the higher labor cost work for them.
Abrusci’s Fire & Vine
This husband-and-wife owned pizzeria in Denver adopted a no-tip policy months before Danny Meyer and Union Square Hospitality Group did. While Union Square Hospitality Group has now gone back to a tipping model, Abrusci’s Fire & Vine has stuck with their living wage model for over five years. They added a 20% added service charge, the revenue from which is shared amongst the staff. Despite initial pushback, they say the policy has been a success, lessening the income gap between front and back of house and providing living wages and healthcare to their employees, which in turn has lead to better service. Cash tips are accepted for exceptional service.
Chef-owner Amanda Cohen has been a long-time advocate of the no-tipping movement. Her popular Manhattan vegetarian restaurant adopted the model in 2015, implementing a 20% service charge and removing tipping completely. Cohen has been transparent with her customer base, explaining that the fee provides her team a consistent salary and a better quality of life. She defended her stance to Grub Street earlier this year, “Tipping is inherently a really sexist, racist system. To have your customer base paying half your employees’ wages — it doesn’t work for anybody.” Her community handled the change well, with little to no hesitation from servers and customers.
This Austin cocktail bar recently switched over to a living wage model. Owner Jessica Sanders went into detail about the decision in our exclusive Evolve interview (watch On Demand here). She described 2020 as the year they “got wise” and committed to taking care of their people in a way that’s tangible. The Covid-19 pandemic forced her to evaluate her business model. Drink.Well adopted a $15 per hour minimum wage in June, 2020 by incorporating a 20% service charge into the bill. Sanders likes the transparency of the service charge over raising menu prices, because it’s transparent and lets the customer know where their money is going. The change has allowed her to provide healthcare, subsidized mental healthcare and PPE to her team; tipping is still optional and many of her customers continue to do so.
Another Austin institution, L’Oca d’Oro is an outspoken advocate for One Fair Wage. The Italian restaurant includes a 20% pre-tax service charge to each bill, and that money is distributed throughout their entire staff to provide a base salary of at least $8 an hour and access to health services. In February 2019, co-owners Adam Orman and Fiore Tedesco testified before Congress in support of The Raise the Wage Act. As part of their testimony, they listed out some of the many positives they’ve found from the practice, “This approach allows us to stand out in a crowded labor market; professionalize the jobs of traditionally tipped employees like servers, hosts and back waiters; create a positive, team-oriented culture; and, as employers, we can determine how much our employees earn rather than leaving their income up to the whims of customer tips.” You can hear more from Chef Fiore in our Austin Evolve session (watch On Demand here).