Minimum wages are rising across the country, with well over a dozen states, plus many cities increasing minimum wages over the past few years. As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.
The Bay Area of California was one of the first regions to begin increasing minimum wages, and as of January 1, 2018, the minimum wage increased by 37 cents to $13.23 in Oakland, and in San Francisco it rose from $13.00 to $15.00 effective July 1, 2018.
One impact on the restaurant industry is the change from full service restaurants – with hosts and full waiter service – to counter service. Some restaurants have actually seen such changes result in significant sales increases – by as much as 20% – after the change from full service to counter service. And at the same time, being able to reduce menu prices due to the ability to cut staff due to the change to a counter service format. The downside here is that there are fewer jobs available to restaurant workers with owners focused on a lean labor paradigm. At some restaurants, cooks serve dual roles – both preparing food and delivering it to customers. Customers are also finding themselves taking on new ‘responsibilities’ such as being able to text additional orders rather than going back in line it they want more food than they originally ordered at the counter.
Thus, the increase in minimum wage has resulted in more satisfied employees (albeit fewer) earning a better living, increased restaurant industry innovation, and restaurants becoming more accessible to the population as whole as a result of lower menu prices.
Seattle became the first major city in the country to pass a $15.00 minimum wage law in 2014. Large restaurant groups and franchises were particularly concerned about the increase because employers with more than 501 workers were required to increase wages on a set schedule reaching $15.00 per hour this year. As a result, large Seattle restaurant groups and chains were forced to look for ways to adjust and innovate. Many felt that increasing menu prices was not an option because of concerns that such increases would result in lower revenue. So these restaurants did away with discretionary tipping and, instead, implemented set service charges of fifteen or twenty percent.
To offset rising labor costs, some restaurants add a surcharge of three to five percent to customers’ checks. In March of last year, the Wall Street Journal even ran an article entitled “New on Your Dinner Tab: A Labor Surcharge.” Restaurant owners found that raising menu prices lead customers to choose less expensive items than they normally would, and that the surcharge helped mitigate the increased costs of doing business.
In addition to raising prices, in order to deal with increased wages in the restaurant industry, some businesses often cope with minimum wage increases by firing staff. Earlier this year, Red Robin Gourmet Burgers announced it would eliminate busboy positions at 570 restaurant locations. Many single location restaurants have also had to eliminate busboys and other staff positions. Others have not been able to adapt and have had to close their doors. Some have turned to technology to compensate for the loss of labor and to reduce expenses. Large chains such as Chili’s, Applebee’s, and Olive Garden have replaced some servers with table-side tablets for placing orders and paying bills.
Technology has also helped other businesses expand. For example, popular online service, GrubHub, has reduced the number of customers dining out, as consumers can enjoy a restaurant style meal without getting up off their couch.
The takeaway for restaurants facing increasing minimum wages and labor costs? Scrutinize your budget and personnel and determine how to satisfy ever-changing employee and customer demands, and be willing to change.
For further information regarding this topic, please contact:
Jonathan M. Weis at firstname.lastname@example.org or 312-368-0100.
In approximately a dozen states and a number of smaller municipalities across the U.S., initiatives have been introduced that would allow state and local governments to dictate how restaurants (and retailers) schedule their employees. Some view this approach as interfering with employers’ rights to control the workplace, while others view it as a necessary tool to protect the rights of food industry and other retail workers. The impetus for the new rules – often referred to as predictive scheduling laws – emanates from the fact that workers often have very little ability to make adjustments to their work schedules in order to meet their responsibilities outside of work. Unpredictable and unstable work schedules have been fairly well documented in the food service and preparation industries, as well as in retail and custodial occupations.
Predictive scheduling laws and proposals generally include certain common provisions: (i) advance posting of schedules, (ii) employer penalties for unexpected schedule changes, (iii) record-keeping requirements, and (iv) prohibitions on requiring employees to find replacements for scheduled shifts if they are unable to work. In Congress, the pending Schedules That Work Act would require that schedules be provided in writing two weeks in advance with penalties for changes made with less than 24 hours’ notice. As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.
“On-call” or “predictive scheduling” activists argue that retail employers too often use scheduling practices that directly interfere with employees’ personal lives and ability to plan around their work hours, while others believe government intervention in the scheduling of employees through a one-size-fits-all approach intrudes on the employer-employee relationship and creates unnecessary mandates on how a business should operate. Many in the food service industry are concerned that predictive scheduling legislation will impede employers’ need to adapt to changing conditions in a store, particularly small, independently owned businesses that have limited staff and resources and may not be able to afford the penalties related to violations. Some employees have also voiced concern that they could lose some of the flexibility that attracted them to the food service industry in the first place.
There are a variety of common components of predictive scheduling legislation.
- Employee Scheduling Requests. Giving employees the right to make scheduling requests without employer retaliation. Employers would be required to consider scheduling requests from all employees and provide a response. In some instances (for healthcare issues for example), the employer would be required to grant the request unless there is a bona fide business reason not to do so—e.g., an inability to reorganize work among existing staff or the insufficiency of work during the periods the employee proposes to work. The right to request provision can be found in laws recently enacted in Vermont, New Hampshire, Seattle, Washington, and San Francisco and Emeryville, California. (Similar laws have been in place for more than a decade in the United Kingdom.)
- Shift Scheduling Changes. Requiring employers to be pay employees for a minimum of four hours of work or the minimum number of hours in the scheduled shifts, whichever is fewer, when an employee is sent home from work early without being permitted to work his or her scheduled shift. In addition, if an employee is required to call in less than 24 hours before the start of a potential shift to learn whether he or she is scheduled to work, an employer could be required to pay the employee a premium, equivalent to one hour of pay. This provision is found in eight states and the District of Columbia.
- Split shift pay. If an employee is required to work a shift with nonconsecutive hours with a break of more than one hour between work periods, an employer could be required to pay the employee a premium for that shift, equivalent to one hour of pay. Provisions like this exist in District of Columbia and California.
- Advance notice of schedules. When an employee is hired, an employer could be required to disclose the minimum number of hours an employee will be scheduled to work. If that minimum number changes, the employer could be required to give the employee two weeks’ notice of the new minimum hours before the change goes into effect. In addition, employers can be required to give employees their work schedules two weeks in advance and, if an employer makes changes to this work schedule with notice of only 24 hours or less, the employer could be required to pay the employee a premium, equivalent to one hour of pay. San Francisco, Seattle, New York City, and Emeryville, California have enacted laws to require employers to provide two weeks’ advance notice of schedules to employees in certain large retail and/or food service establishments.
In order to handle predictive scheduling mandates, business owners should explore software options and even retaining outside vendors that provide scheduling and labor management solutions. A lack of training or understanding of predictive scheduling can be detrimental to a business’ bottom line, and scheduling practices can have a dramatic impact on labor costs. As with most new legal developments in the food service industry (or any industry for that matter), training and education is key.
For more information on this and other issues, contact our office at 312-368-0100 or Jon Weis at email@example.com