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One Fair Wage Plus Tips is Way to Go

Under the current system, tipped restaurant workers are paid a low base salary by their employer and collect tips to make up the difference to the non-tipped minimum wage. However, employers are responsible to make up the difference if the tips collected are not enough to get an employee to the local minimum wage.

Below chart from US Department of Labor’s “Wage and salary workers paid hourly rates with earnings at or below the prevailing federal minimum wage, by occupation, 2016 annual averages” clearly shows that unfortunately, restaurant workers are on top of the list.

In a restaurant, FOH (front-of-the-house) positions require the proper skills, knowledge, training and also require them to be overall presentable to the customer. They are not minimum wage positions.

Restaurant Opportunities Center whose mission is to improve wages and working conditions for the 14 million people who work in America's restaurant industry is campaigning for “One Fair Wage”.  One Fair Wage would require the restaurant industry to pay all of its employees at least the regular minimum wage.

 In addition to one fair wage, tips are necessary for ensuring above minimum wage pay, rewarding and promoting a better performance and create a balance between work load and the number of FOH staff in a restaurant.  For example, without the tips, employees won’t have incentives to work harder in a very busy shift, however, if the employees are incentivized to work for tips, their employers will be able to reduce the number of employees during expected slow shifts while controlling payroll and ensuring above minimum wage for the employees.

There are concerns about where the additional money will come from to pay for the increase to support the One Fair Wage concept. The answer is simple; menu prices should go up.  It is time for the industry that employs almost 10% of the US work force to start operating within a proper business structure. With 25-30% food cost, 35-40% labor cost, 10-15% rent, taxes, repairs and other operating expenses, not to mention paying 12% to over 20% to marketers/facilitators like GrubHub, most of the industry is struggling to reach 4-6% profitability.  Individual restaurants can be small businesses but the industry is not a small business and needs change. One fair wage would help accelerate this long overdue change.

What is the main reason for the restaurant industry's financial problem? What do you think the scout

There are many challenges for a restaurant to be successful. However, one particular challenge leads to many other problems and that is the inability to properly reflect the costs in the menu prices.

Having the proper funds for different expenses incurred in operating a restaurant is the key to staying in business. Goods, labor, location, marketing, repairs and improvements are the major expenses.

Pricing a restaurant’s menu is one of the most important tasks for a restaurant owner/manager. It is affected by fluctuations in food prices, labor costs, the prices of competing restaurants and customer demand. However, the most challenging one is the competing restaurants.

Competition is a great thing for any business. It pushes you to learn more about your customers and innovate. It can be difficult to better yourself without it. However, competition by inexperienced restaurateurs who use unsustainable menu prices forces many restaurants to adopt similar prices because customers don’t focus on a restaurant’s costs and what margins it needs to stay in business. A customers’ focus is typically the value.

Due to no barrier to entry, restaurant owners come from many different back grounds.  There is no experience, education or financial requirement to open a restaurant. For most of the inexperienced owners, a quick response to slow business is lowering prices, even when the costs are going up.

According to smallbusiness.chron.com “Restaurants should use cost-plus pricing to guarantee a profit. Cost-plus pricing includes all the overhead costs that occur when running a restaurant, including rent, wages for waitstaff and cooks, and gas and electricity to power the kitchen and dining room. Next the profit margin needs to be considered. The owner needs to earn a profit in order to make the business worthwhile to keep open. This profit includes wages for the owner, as well as the ability to conduct repairs on the restaurant and expand the restaurant, if necessary. Add the desired profit percentage to the overhead costs percentage. This percentage should be added onto the cost of any food item, leading to prices that pay for food and overhead costs, and result in a profit.

Restaurants are collectively shooting themselves in the foot. So, how can they collectively dig themselves out of the hole? Any suggestions?

 

Thinking about opening a restaurant. Must read before you decide...What it takes to be successful

I read an interview with Alan Stillman, the founder of Smith and Wollensky Group along with many other well-known restaurants and a global restaurant consulting firm. He was explaining that there are hundreds of elements that affect the success of a restaurant, and it is almost impossible even for an experienced restaurateur to do all of them correctly. When he was asked “if a person does everything right, can he be sure that it will be a success?”, his answer was “No, sometimes I see two restaurants in an identical location with an identical concept, both did everything right and one of them is full and the other one is empty. Even I cannot tell what the reason is. That’s the beauty of the restaurant business”. He doesn’t mean that it’s a gamble.  The point is that there are so many right decisions that you have to make; some need experience and some knowledge. Do not underestimate the requirements for success.

There is so much more that goes into the secret sauce for a restaurant’s success in addition to the restaurant’s financials. A restaurant owner should have following skills and attributes:

 

o             Market research and concept development

o             Purchasing/sourcing

o             Sales and Business Development

o             Marketing and Advertisement (today, it is mainly digital)

o             Food knowledge

o             Service knowledge

o             Bookkeeping 

o             Legal/compliance

o             Design (space, menu, food)

o             Construction/Repair and Maintenance

o             HR/talent management

o             Operations management

o             Problem Solving

o             High Physical Endurance

o             Ability to communicate with different types of audiences (customers, employees, vendors,etc.)

 

Most of these skills are careers just by themselves. An average restaurant owner should execute tasks that require these skills. It is very difficult to do that masterfully. That is why many restaurants fail.

Customer is NOT always right

Both customers and employees should like the restaurant for a good experience. Customers are right when they are right. Just because a customer buys a drink or food does not give him/her the right to abuse employees or unfairly take advantage of the restaurant.

A typical restaurant serves thousands of people a month and a few of them will be unreasonable, maybe sometimes even disrespectful.  Restaurant management should support the employees who work every day to represent the restaurant and its values and serve the customers accordingly. Managers and owners have to support them when the customer is out of line. This will in turn help to motivate the employees to do their best therefore making the restaurant a better a better place for the majority of the customers. It is the right approach and also a better business policy.

Of course, lack of proper training and a bad employee can lead into a lousy customer service but “customer is always right” policy dos not fix the underlying management problem, just masks it.

If the management puts the employee first, the employee will put the business first and that is the way to effectively build the business.

Are Health Departments using different standards for restaurants, food carts and food trucks?

Receiving a violation from the health department is part of being in the restaurant business. I am pretty confident that there are no restaurants who haven’t received a violation. 

Most of the health department rules are necessary and common sense, however, some of them are impractical and inconsistent. Throughout my career, I received violations ranging from not refrigerating items that should be served at room temperature to not having bussers wear hair nets. However, I always appreciated the health department’s efforts for maintaining a standard in an industry that does not have any barrier of entry.

When it comes to food trucks and food carts, the health department standards seem visibly lower. Pretzels, peanuts, shish kebabs, piles of cooked chicken or rice are all exposed to dust, exhaust gas, people walking next to it, etc.  Furthermore, there is no way to control the temperature of these foods waiting for hours and in some cases, all day.

Certain foods should be handled in a more controlled environment. That is why restaurants are paying a lot of rent and employing many people to maintain these standards. 

The Health Departments should revisit this subject and identify what kinds of food can be sold in cart or in a truck.

Eating, snacking, social life, millennials, generation Z, economy

After the 2008 recession, many industries started laying off employees. While people who were fortunate enough to hold on to their jobs, now 3 people had to do the work of 5 people’s job. Being exhausted all of the time became the norm.   People felt fortunate enough just to be employed.  The hope was that when the recession was over, more people will be hired and that everyone will go back to where things were prior to the recession.

Researches show that after the layoffs from the 2008 recession, productivity increased.  In other words, 3 people were doing a better job than 5 people used to do. Less cost and higher productivity, things were not going to go back to where they were before.

Twenty years ago, l was working in an Italian restaurant in New York City. We had a lunch crowd of regular customers; from office assistants to lawyers, 25 years old to 60 years old customers. Lunch was an hour long break with a social component.

Today, most of the young people and lower paid office workers either grab lunch under $10 or have it delivered to their office and go back to their computer to keep up with their work load.  Some even substitute their social time with texting, posting, shopping online or emailing their friends because they don’t even have time for that anymore.

What does that all mean for restaurants and restaurant workers? Quickly adjusting to the new realities and catering to this new life style. So, what’s the next?

Is Culinary School Worth It?

We saw this topic on Eater and wanted to share my view on it. So, the question is on-the-job training or culinary school education.

It is up to each individual and his/her carrier goal. Chefs and cooks learn their craft at different places; some work their way up with years of hard work in restaurants, some travel to different countries to learn the authentic cuisine, and some go to culinary schools and some combination of the above. However, two things are common in every great chef or cook, talent and passion. 

Culinary school builds a foundation that accelerates the advancement of one’s career.  Learning the right way of handling tools and equipment, properly cutting vegetables, preparation of soups and stocks, cooking classic dishes to creating new recipes, big volume to cocktails and banquets, ultimately, putting different techniques together that can lead to a dish can make all the difference and save years of time from trial and error.

We agree that the cost of a culinary school is not a chump change, neither is a college degree. That is why, the first thing I recommend is to make sure that cooking is your career. You shouldn’t make that decision until you’ve worked in a restaurant for some time and understand the lifestyle and what it takes to work in a kitchen. I have seen culinary school graduates who have changed careers after experiencing the demand of a restaurant life.

However, if cooking is or will be your professional life and you are passionate about it, then it’s worth every penny that’s spent in a great cooking school. It will pay off in many different ways of your everyday life.

“Learn the rules like a pro, so you can break them like an artist.”

? Pablo Picasso