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California Minimum Wage Set to Increase to $20. What Should Your Restaurant Do?

Sep 13, 2023

Fast food companies and labor groups in California have reached a deal leading to a $20 minimum wage beginning in April for service industry workers in the state, pending approval by state lawmakers. This agreement prevents a costly confrontation between the companies and labor organizations, with the latter agreeing to withdraw a proposed ballot referendum and abandon a provision in Assembly Bill 1228 that would have held companies accountable for labor violations by franchisees.

The legislation also establishes a Fast Food Council with the authority to increase the minimum wage annually by up to 3.5% or based on the change in the U.S. consumer price index.

While labor groups and workers applaud this agreement, some businesses express concerns about additional regulations and higher wages potentially leading to increased consumer prices and restaurant closures.

 

What Does This Mean for Restaurant Owners?

The result of this legislation would undoubtedly raise menu prices for consumers as business owners pass on the cost to patrons. But is that always the right solution?

Raising menu prices can deter customers due to perceived lower value, price sensitivity, budget constraints, competition, psychological barriers, potential loss of customer loyalty, economic conditions, negative word of mouth, and the impact of inflation on affordability.

To mitigate the potential negative effects of raising menu prices, restaurants must carefully consider the timing and magnitude of price increases. They may also need to communicate any changes effectively to customers, emphasizing improvements in quality or service to justify the higher prices and minimize customer backlash.

value menu

Look for Cost-Saving Opportunities

Increasing your menu prices should be one of many potential solutions to consider with such economic changes. There are plenty of opportunities to enhance your restaurant’s efficiency that would help decrease costs associated with labor, hiring, menu sourcing and more. Times are more challenging than ever for operators, and Synergy has affordable tools to help your business thrive. Our three-day Operations Assessment will pinpoint improvements to your business and ensure its ongoing success. Reach out to us today to learn more: 1-888-861-9212 or email info@synergyconsultants.com.

 

Sources:

Patch.com
kcra.com
pressenteprise.com
openai.com

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Inflation, Wages, and Restaurants: What You Need to Know

May 24, 2022

Inflation has become a problem in 2022. It is at a 40-year high. It started with COVID –19 and related supply chain complications and has adversely affected significant businesses, including the restaurant industry. America has been anticipating a concerted effort from the government to relieve supply chain issues. Instead, the problem is getting worse. In a recent CBS/YouGov survey, 65% of Americans said President Biden wasn’t focusing enough on supply chain issues and subsequent inflation. His level of popularity has been plummeting. While Russia has attacked Ukraine, a major player in the world supply chain, the effects of inflation on restaurants have received minimal attention.

What Are the Solutions to the Inflation and Related Issues?

Raise the Wage Act of 2021 (HR 603) is one approach to provide a solution. This act increases the federal minimum wage to bring relief to American families. Five annual steps would raise the minimum wage from $7.25 to $15 by 2025. This would increase pay for nearly 32 million workers, about 21 percent of the U.S. workforce. The problem is that a federal standard does not comply with the standard of living in each state. The cost of living in San Francisco, California, is vastly different than in Miami, Florida. A $15 minimum wage floor is insufficient for providing real support for every location in the country.

Assembly Bill 1003 addresses wage theft according to the California penal code. In the past, employers have been sued or fined for withholding wages. Now employers can be held liable for grand theft if they intentionally withhold more than $950 from any employee, or $2,350 from two or more employees in any consecutive 12-month period. Withholding wages, gratuities, benefits, or other compensation, not paying minimum wage, offering overtime, or meal or rest breaks is a felony instead of a misdemeanor for an employer in 2022.

Relief for Restaurants and other Hard Hit Small Businesses Act of 2022 (H.R. 3807), addresses financial support for restaurants, arts and entertainment venues, and small businesses adversely affected by the COVID-19 pandemic. It passed in the House on 4/07/22 and will extend to 3/11/23, maybe longer. Made up of an additional $42 billion for the existing Restaurant Revitalization Fund, previous applicants who have not received a grant have priority. The Hard Hit Industries Award Program determines award recipients within the bill, with a maximum amount of $1 million being granted for each organization. Through this process, the Small Business Act (SBA) prioritizes organizations that have experienced significant pandemic-related revenue loss, prioritizing those that experienced a loss of at least 80%. The second priority is to those that experienced at least a 60% loss and last, a 40% loss. Funds may be used for operating expenses such as mortgage, rent, utility payments, and payroll.

 

restaurant relief act

 

In addition, the temporary practice of outdoor dining will continue. Many areas have noted the profitable impact outdoor dining had on the restaurant industry during the pandemic and are seeking legislation to allow it to continue. In Connecticut, Governor Ned Lamont announced House Bill 5271, allowing the rules on outdoor dining at restaurants established during the COVID-19 pandemic to continue for at least another 13 months. Approved in the House and Senate, these relaxed outdoor dining rules will continue to allow restaurants to impact the economy positively.

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Reducing Restaurant Turnover

Jul 31, 2019

Do you feel like you’re constantly on the look-out for new hires at your restaurant? You’re not alone. It’s been reported that the restaurant and accommodations industry had as 74.9 percent turnover rate in 2018. This is nothing new for the hospitality industry, particularly since many restaurants, for example, hire teenagers who usually see the jobs as something short-term. Further, seasonal hiring is very common in the industry as well, lending to such low job retention rates. According to the Cornell University School of Hotel Administration, the average cost of employee turnover is $5,864 per person.

So let’s cut to the chase. We know it’s costly to constantly be replacing workers.

So what are ways you can reduce employee turnover?

Low Pay: This is probably one of the top reasons restaurant workers leave–they simply aren’t making enough. This is particularly the case in states where tipped workers do not have to receive a standard minimum wage per the Fair Labor Standards Act. At this point, we can see how stress can mount for workers whose main pay actually comes from tips. So what can be done here? It’s worth taking a look at what other restaurants in your area are paying their workers to gauge how much you may need to raise your pay. Some businesses even forgo tipping altogether in lieu of higher base pay.

Poor Management: Have you noticed workers reluctant to follow restaurant protocol? Have you witnessed, or even been in, arguments with other staff? This is a clear sign of poor management. Are your physical work conditions sub-par? All of this can certainly lead to employee dissatisfaction. A great way to uncover problem areas is to conduct exit interviews or get into the habit of getting staff together for regular meetings where all feedback is welcome.

Uninspiring Workplace Culture: Do your staff members wake up looking forward to coming into work? You might find this to be a little laughable but a place with good workplace culture (and management) can mean all the difference, and can indeed be a place one feels excited being at. It starts from the top. As mentioned above, poor management needs to be fixed. But above that, examine what exactly is it that you sets your restaurant apart from the rest? Do you offer any employee perks? At Starbucks, employees are actually called “partners” and are entitled to full-tuition coverage to Arizona State University, medical benefits (for those working over 20 hours a week), 30 percent off food and coffee, and more.

Now that doesn’t mean that must to implement all these ideas–we know budgets vary widely. There are other economical ways you can incentivize employees. Recognition is key for any worker in any industry. Throw in the cherry on top to that kudos by awarding great employees fun prizes (movie tickets, amusement park passes, gift cards etc). Here are more great ideas on employee recognition via Toast.

For more information and tips on how to reduce employee turnover, check out these articles from Gallup and QSR Magazine .

 

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Is Your Restaurant Ready for Another Minimum Wage Hike?

Sep 11, 2018

In January the minimum wage in California is going up another dollar an hour! In Arizona, the start of 2019 marks a fifty cent increase in minimum wage. The harsh reality is that when this happens everyone’s wages get impacted. If you plan to pay a dishwasher $11.00/hour which will most likely be $12.00/hour (because you can’t find anyone to do that job for minimum wage), then you’ll need to pay a basic prep cooks $14.00-16.00/hour!  Everyone’s wages will need to go up. What’s a restaurant operator to do? They can’t just absorb the increase, but instead will have to pass it on to the customer by raising menu prices.

California Minimum Wage Across Cities and Towns 2018

Year 1-25 employees 26+ employees
2017 $10.00 $10.50
2018 $10.50 $11.00
2019 $11.00 $12.00
2020 $12.00 $13.00

Source: SwipeClock

Restaurant operators tend to get very nervous when they have to raise menu prices as it often leads to declining guest counts and consumers going to other restaurants to find a better value. How can a restaurant cope, let alone thrive in light of such challenges? Instead of blindly increasing menu prices, it is crucial a restaurant investigates other facets of their operation that are underperforming. Are you overstaffed? Is your menu too complicated? Is your kitchen optimized for cooking?

 

It’s not too early to get a head start to a profitable 2019.  As efficiency experts, Synergy Restaurant Consultants can find real solutions through innovative menu and labor optimization strategies. Synergy provides Productivity Assessments to analyze staff levels, understand labor performance and implement best practices that optimize operations, slash labor costs and boost productivity.

For the last 30 years Synergy has helped hundreds of independent restaurant operators along with regional and national restaurant chains improve the productivity of their staff:

As the founding partner I promise you this:  if you engage us for a Holistic Operations Assessment

  • We will make you money
  • We will save you money
  • We will improve the overall financial performance of your business
  • We will help you to improve the overall  execution of your food, beverage and hospitality strategy

Dean Small

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California’s Minimum Wage Increase

Mar 31, 2016

Today, California Gov. Jerry Brown’s goal to increase the state’s minimum wage to $15 is a reality– as just this Monday a deal was reached between Brown and state legislators and was the measure passed on Thursday. This makes California the first in the United States to approve a statewide $15 minimum wage.

 

Under the measure, minimum wage would be gradually increased up until Jan. 1, 2022. New York Gov. Andrew Cuomo is also following suit for his state, pushing for $15 minimum wage in his latest budget. For full details click here.

 

While this news proves to be a victory for labor unions and many workers, it goes without saying how large of a negative impact the hike will have on restaurants. For example, hiring, employee hours and menu prices may all be affected in order to maintain the wage increase.

 

At Synergy, we implement strategies to help restaurants during these uncertain and stressful times. Please contact us to learn more about our programs.

 

Photo credit: The All-Nite Images license CC by SA 2.0

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Los Angeles Raises Minimum Wage to $15

May 22, 2015

There has been a lot of talk across the U.S. about the seemingly ever-changing minimum wage debacle. Just Tuesday, Los Angeles City Council approved the increase of minimum wage to $15 from $9 to be effective by 2020.

 

Los Angeles joins the rank with other major cities: San Francisco, Chico, and Seattle, which have also increased minimum wages to similar levels. The increase in wages will gradually occur over time, and business and nonprofit organizations with 25 or fewer employees have until 2021 to meet the increase.

This is going to have a huge impact for restaurant operators who already battle with slim profit margins. It further marks the importance of managing labor if restaurants want to remain in business.

 

Stay tuned for more updates on our blog about minimum wage hikes and what you can do about it.

 

Photo credit: torbakhopper CC by 2.0

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Obamacare, Rising Minimum Wage and Gluten-Free what on my menu?

Jan 08, 2014

By Joshua Korn

Appetizers:

Implementation of the 2010 Affordable Care Act passionately known as “Obamacare” could be one of the greatest challenges restaurant operators will ever face. The ACA will put significant cost and administrative pressures on employers as they prepare for massive changes in the health insurance system, including complex new reporting rules and penalties for so-called “large employers” who fail to offer full-time employees and their dependents the opportunity to enroll in affordable, minimum-value health plans starting in 2015. Restaurants are likely to feel the law’s impact more than many other businesses because they are labor-intensive, with low profit margins and millions of employees working flexible schedules.

 

Entrees:

2014 brings a new era in restaurant profitability, sustainability and controversy since Bills have been introduced in the House and Senate to dramatically increase the federal minimum wage. The Fair Minimum Wage Act of 2013 (S. 460, by Sen. Tom Harkin, and H.R. 1010, by Rep. George Miller) would increase the federal minimum wage from the current $7.25 to $10.10 over two years and three months—a nearly 40 percent increase—and automatically index the wage to inflation each year thereafter, regardless of economic conditions. The legislation also calls for increasing the minimum cash wage for tipped employees until it reaches 70 percent of the federal minimum wage. This means the minimum cash wage for tipped employees would triple, in stages, to $7.07 according to the national restaurant association.

 

Desserts:

Restaurants and food manufacturers who market food or beverage items as “gluten free,” must meet all requirements of a new, regulatory definition of that term, the U.S. Food and Drug Administration said in a final rule issued August 3, 2013. According to the FDA’s final rule, which was published in the Federal Register Aug. 5 2013, restaurants serving food or beverages  termed “gluten-free,” “free of gluten,” “without gluten” or “no gluten,” are making a food-labeling claim that should be consistent with the new regulatory definition for gluten-free.

 

The new federal definition, effective September 4, 2013 with a compliance date of August 5, 2014, would standardize the meaning of “gluten-free” claims across the food industry, the FDA said. In order to use the term “gluten-free” on labels, the food items must meet all of the requirements of the definition, including that they must contain less than 20 parts per million of gluten.

 

The FDA has broad discretion over food labels and since 1993 has held restaurants to certain standards if they make nutrient-content or health claims about menu items, such as “fat free” or “low cholesterol.” The agency has now added “gluten-free” to the list of FDA-regulated claims. In guidance accompanying the new “gluten-free” definition suggested that “any use of an FDA-defined food labeling claim … on restaurant menus should be consistent with the respective definitions.”

 

Gluten-free
Gluten-free

Silver Linings Playbook:

Okay now breathe, it’s not all doom and gloom. Turn adversity into advantage. You are in a unique position with an opportunity to re-evaluate your business plan and fire up your teams! Develop new innovations that are more efficient and drive more value. Create long lasting brand recognition and brand awareness by providing new products and services to your current clientele and gain sales with new clientele ultimately increasing your revenue and maximizing your profitability! The bottom line is that change happens and you need to evolve and adapt to these conditions which are primarily out of your control. So here’s where innovation and entrepreneurship are essential.

You may be thinking “sure easier said than done.” Well here’s some thought inspiring questions to get you motivated. Whether you are a seasoned veteran or first starting your business think about what reasons led you to opening your business in the first place. Were you nimble and flexible? Were you able to adapt and move when the proverbial cheese moved? What’s to stop you now?

 

All the answers to these new challenges start and end with your menu. So get back to the drawing board and look at what your serving, how much your serving, how many laborers do you need to produce it, are they full time or part time? Can you leverage cost of goods? Can you join a buying group? When’s the last time you had a price increase? When’s the last time you looked at your asset base needed to create your menu. Are you depreciating or expensing those assets? Are you taking advantage of the new 15 year depreciation schedules? All these strategies can change your cash flow and add value.

 

I encourage you to seize your opportunity by taking control and capitalizing on your menu development in 2014. Implement a cost structure and product mix that will enable you to get ahead of some the challenges you are going to encounter in the New Year as Obamacare, Increasing Labor Rates and of course the Gluten Free phenomena take effect.

If you still have questions or need help navigating through these new challenges please feel free to reach out us make sure you are optimized for performance excellence!

 

 

 

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California’s Minimum Wage is Likely Going Up

Jun 10, 2013

In an aggressive state bill currently being considered by California legislators, employees in this state may be experiencing a substantial increase in compensation over the coming couple of years. On the table now is AB 10 which proposes an increase in the minimum wage of $.25 in 2014, an additional $.50 in 2015 and another $.50 in 2016 for a total of $9.25 an hour. By 2017 this bill proposes to index the minimum wage in CA from that point on. This unfortunately has passed the CA Senate this past week and the bill is now headed to the CA House of Representatives next week.

 

Originally considered unlikely to pass because of both the large increases in wages and the issue of indexing, there now appears enough support to make this pass. Recently the bill passed the Assembly Labor and Employment Committee which is where it was assumed this would stall.

 

Eighteen states have a minimum wage above the federal level of $7.25 an hour, led by Washington at $9.19 an hour and then Oregon at $8.95. Ten of those states provide for annual, inflation-adjusted increases. California’s wage ranks fifth-highest in the country.

 

The minimum wage in CA has not increased in six years so we are due and we understand that it is necessary to take a look at this. The Restaurant Association also understands that without action on the part of the state, individual communities will begin making their own rules – some communities in CA have already started. San Jose implemented a minimum wage of $10.00 per hour just last month while San Francisco did the same last year. The City of Sacramento is currently considering a similar proposal.  The problem is that this is potentially coming at the same time as the PPACA is being enacted. Doubling down on the costs to run your operations is dangerous but that doesn’t appear to resonate with the state officials.

 

Matt Sutton, Vice President of Government Affairs & Public Policy for the California Restaurant Association, said an increase in the minimum wage would benefit only its employees who earn tips as the added cost would force operators to hold down wages for hourly employees to absorb the mandated increases for those making minimum wage. We agree; these staged increases put pressure on the Heart of the House employees in that there is less to offer them after the increases for tipped employees are mandated. A majority of the Heart of the House employees in restaurants are currently paid at a rate higher than minimum. This minimum wage increase will likely keep them exactly at minimum given the upward pressure on costs that individual restaurants will face.

 

We are continuing our efforts to work with all legislatures from both sides of the aisle to come to an agreement on what makes the most fiscal sense – certainly this bill with indexing tagged on at the end does not.

 

Now would be the time to work through labor efficiencies, perhaps as you are also working through plans to implement the Patient Protection Affordable Care Act (Obama Care). No doubt smaller franchise locations and even medium size businesses will consider tight controls on the number of hours that employees who are deemed part-time will be working. Simultaneously in CA that may be necessary for a number of reasons, PPACA is only one of them.