Restaurants and the Minimum Wage

For the last year, the national minimum wage has dominated conversations in the U.S. The debate centers on the repercussions a raise to the minimum wage would have across the economy. Globally, the minimum wage varies from country to country, which is influenced by a number of socio-economic factors too complex to condense succinctly. Restaurants and the minimum wage are often discussed hand-in-hand as a staple of global fiscal policy, —they’re often the frontline for low-paying workers. Historically speaking, increasing the minimum wage is inevitable, so how can owners and operators respond to these increases without increasing costs or losing valuable employees?

The Debate

Advocates for the minimum wage increase argue that raises would directly impact impoverished workers to enhance their quality of life. Others fear that these increases can lead to inflation and job losses. In February, the National Restaurant Association released a study of more than 2000 restaurateurs, who reported that increasing the national minimum wage would dramatically impact staffing levels. The organization One Fair Wage countered with its own study that indicates that declines in staffing levels were already happening irrespective of increases to the minimum wage already. 

The History of the Minimum Wage

In 1894, New Zealand was the first country to institute a national minimum wage and among the most recent to raise it, a 5.82% increase from 2020 to 2021. Countries around the world slowly began to follow suit, with the U.S. adopting its first national minimum wage in 1938, following the passing of the Fair Labor Standards Act. Since then, the U.S. has raised the minimum wage 29 times, with three times this century. The current minimum wage in the U.S. is 7.25, which was instituted in 2009. Modified for inflation, that wage now has 17% less buying power as of 2019.  

The Tipped Minimum Wage

Gratuities are a phenomenon that varies widely across cultures. For example, in the UK it’s customary to tip between 10-15% in restaurants, although it’s unexpected to tip in a pub. In some countries, tipping is not only uncommon but considered rude. In the U.S., tipping is not only an expectation in most service and hospitality positions but a part of the economic structure. Workers who receive tips are subject to the tipped minimum wage, which is often lower than the national minimum wage. The expectation is that through tipping, that difference can be made up.

A separate, but comparable issue of U.S. economic debate is ending the national tipped minimum wage, which currently sits at $2.13 dollars per hour. As with the national wage, advocates for ending the tipped minimum wage believe this will elevate impoverished communities. Detractors are concerned about the impact on the restaurant industry. For restaurants and the minimum wage, whether it’s the national or tipped wages, finding a cost-effective path can gird your business against potential challenges.

Onboarding/Automation

As pandemic restrictions loosen in the wake of vaccinations around the world, people are slowly returning to work. In the U.S., there have been challenges to finding workers, who have taken the downturn to examine their next steps. According to LinkedIn, the average cost to onboard a new employee is $3000. That cost adds up, especially given the high turnover rate in the restaurant industry. The Bureau of Labor and Statistics reports that in 2019 the industry had a 78.9% turnover rate, followed by a whopping 130.7% turnover in 2020. Before we move on, let’s do the math.

Suppose we take a conservative estimate of a 75% turnover rate in your 20-Employee establishment. That’s 15 employees lost over the course of the year, at an average cost of $45,000 for onboarding, training, and recruitment. There are some easy, low-tech ways you can address employee retention, including mindfulness and fostering a healthy environment. Fortunately, there are technological solutions that can enhance and automate your operations. 

Training

A substantial component of onboarding is the training costs. Training takes time that pulls available staff away from their routine responsibilities. Whether it’s your host stand or your back-of-house (BOH), you likely have tools already that can help train your employees. Front-of-house (FOH) guest and reservation management systems are designed to work as advertised, to enhance the customer experience and manage the influx of traffic. You can program certain systems with reminders to prep new or old staff on their daily expectations. For example, you might input a prompt to refill sanitation products every few hours or to perform other non-kitchen tasks.

For the BOH, a recipe viewer is critical to maintaining your overall quality. An appendage of a kitchen display system (KDS), recipe viewers ensure the continuity of your foodservice, making every order consistent and high quality. You can include additional instructions like cleaning protocols or other reminders for your BOH staff. 

Contactless Tech

While guests are increasingly excited to return to dine in traffic, enhanced sanitation remains a must. The obvious solution is to train your staff to focus more on cleaning surfaces, maintaining and sanitizing your hardware, and keeping sanitary stations for guests available. Those viable options, which you can easily supplement with technology, can lead to savings.

There are several varieties of contactless technologies that include:

• Contactless Waitlisting
• Smart Ordering
• Order Ready Screens

In each of these examples, technology fills a niche that frees your work staff up to pursue other activities. Through QR codes, guests can get on a waitlist and even place their order through their smart device, decreasing your overall staffing needs. From ghost kitchens to automats, companies are increasingly looking for ways to separate guests and staff for safety and convenience reasons.

Kitchen Technologies

Saving money in your kitchen is integral to balancing your restaurant and the minimum wage. With the right kitchen display system (KDS), restaurants can avoid the clutter of paper tickets, which can be lost or misinterpreted. Food waste is an incredibly expensive cost that hits every restaurant operation. Misunderstood tickets can lead to more food waste, hurting your bottom line, while lost tickets can lead to customer dissatisfaction and atrophy. There is so much more than a KDS can do for your BOH needs; let’s examine a few below. 

Bin Management

Every year, U.S. restaurants spend around a collective $162B in food waste. By employing bin management, a function of a robust KDS, you can better account for and mitigate those losses. Bin management reminds BOH staff when to prep common ingredients, which you can identify through data analytics. You can make better use of your available resources, by only using only what you need when you need it.

Capacity Management

Given the popularity (and necessity) of off-premise dining in 2020, capacity management has become an integral component of a rich KDS. With capacity management, an operation can balance in-house and off-premise orders preventing bottlenecks in traffic. During Mother’s Day, an important business day for restaurants, balancing onsite and off-premise orders became daunting, with orders piling up and causing havoc for customers expecting a quicker, more efficient turnaround.

Because many kitchens were unable to prioritize orders, substantial wait times led to angry, unsatisfied customers. Capacity management uses real-time data to assess the bandwidth in your kitchen. When you communicate these to the customer, you set realistic expectations. 

Data Analytics

Another approach to balancing restaurants and the minimum wage is by utilizing restaurant data analytics. With data analytics, restaurateurs can make informed decisions about their day-to-day staffing needs, by pulling from historical data. By parsing sales and inventory information, you can see what works, when it works, and why. You can plan accordingly, engineer the menu, or take the steps that you need to keep your operation lean and organized. 

Restaurants and the Minimum Wage Conclusion

History tells us that wherever you fall in the debate over the minimum wage increase, that it will happen again. If the pandemic has taught the industry anything, it’s to remain as agile in staying ahead of the unknown. Now is the time to prepare. You can manage the tension between restaurants and the minimum wage by investing in technologies that maximize your efficiencies and inform your future decisions.

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About the Author

Syd was a content marketing specialist, which are fancy words for writing pretty to tell a good story. He likes writing things about food, drinks, and music. He’s a musician himself, a father of two, and loves his wife a whole lot.