When Peaceful Valley Maple Farms manager Barbara Kirk first heard about the increase in the minimum wage for tipped workers it was on the news.
Kirk said she immediately called her bookkeeper to find out if the increase applied to her business, which is open about 21 hours a week, serving breakfasts on Saturdays and Sundays and dinners Thursdays and Fridays. Her bookeeper told her it did.
“That was a very big surprise for me because we knew nothing about it,” she said. “When we opened up the tipped wage was at $4.50, then they went up to $4.65, then they went up to $5 then the last two weeks of the year last year they went up to $7.50.”
Kirk estimates the state mandated wage increase probably cost her between $75 and $100 per week.
“I’m going to have to cut down on my girls’ hours,” Kirk said. “Especially on weekends when the weather is nice. I’m going to have to run one girl less, starting this week. If I’m busy, then I don’t know. People are either going to have to be patient, or I just don’t know.”
The increase in the state minimum wage has affected restaurants in a number of ways. The tipped minimum has gone from $5 to $7.50 per hour, while the minimum wage for fast food employees, at chains with at least 30 stores, increased to $9.75 per hour in December 2015 and is set to go up again to $10.75 in December 2016 and increase one dollar per year until 2021 when it would reach $15 per hour.
The state’s regular minimum wage, which affects non-tipped workers at restaurants, for most of upstate New York is set to increase to $9.70 at the end of this year and then increase 70 cents each year until it hits $12.50 in 2020 and after that will be increased using a schedule set by the state Director of the Division of the Budget.
Jay Holland, the government affairs coordinator for the New York state Restaurant Association, gave a presentation to the Fulton Montgomery Regional Chamber of Commerce Monday, explaining different strategies that restaurants can use to cope with the changing minimum wages.
“There’s a lot of different things that all restaurants are looking at right now. First you have to look at price increases, if you don’t think your customer base can handle it, you’ve got to look for other ways to offset costs,” he said. “We’ve had members that used to give away free side salads, now they take that away and charge $2.50, so everybody is looking for ways to increase revenues to cover the costs and decrease costs. If you’re currently charging $1.50 for a coke, maybe you charge $2 now. You can’t have your operating costs go up and do nothing else because of our profit margins.”
Holland said the restaurant association estimates that most of its members have profit margins ranging from 3 to 6 percent and as high as 10 percent, “… if they are lucky.”
One way restaurants can claw back some of the wage increase is through offering meals to employees and charging them for the meal.
“If you have your employees taking their meal break during the designated meal period, then you’re allowed to charge them a meal credit of $3.10 for back of the house employees and $2.50 for front of the house employees, out of their paycheck, if you’re giving them that meal, you can charge those nominal amounts,” Holland said. “Over the course of a year, over many employee meals, those small amounts will add up.”
Mike McGrail, the owner of Big Mike’s in Gloversville, said when he first got into the restaurant business in 1975, free meals for employees was a traditional perk for the industry. He said he doesn’t want to bother with the state wage credit for meals because the bookkeeping would be too cumbersome, but the wage increases have forced him to offer meals at a discount to his employees.
“We do not do that anymore, the free breakfast, lunch, dinner and the sodas was always something that came along with the food business, but now – the way things are with our margins – we can’t allow our people to do that,” he said. “It hurts our bottom line. It’s against my teaching, my training and my beliefs, but it hurts our bottom line, so I have to do it.”
Kirk said she isn’t sure whether she’ll start charging her staff for meals.
“I feel like I’m taking something away from my staff, and they do work hard. They’re busy and they work very hard. I’m going to consider it,” she said.
Holland said another option for employers could be looking at the cost of allowing wait staff to be tipped via credit card. Holland said most credit card companies require restaurants to run customer’s credit cards twice, once for their meal and then again for any tip paid to workers, thus enabling them to charge two credit card processing fees. He said restaurants can deduct the credit card processing fee from the tips received by workers, but most don’t do it.
“If you save 5 percent on every tip that’s being made out of your restaurant over the course of the year, that could add up to a good amount of money,” Holland said.
Tablets and kiosks
One area some restaurants may look into is a concept known as “tablets at the table”, which is when computer tablets are used by customers to order food. The method could be used to reduce staff.
“Tablets at the table are going to be a reality at many restaurants in the very near future, especially the fast casual chains, they are already popping up in airports,” Holland said. “The small business and certain restaurant models, like fine dining, they aren’t going put tablets on the table. For one thing they are too expensive to install and for another their customers don’t want them. It doesn’t fit the business model. But in those fast casual chains, you can install a tablet for a fixed rate and all you have to do is maintain them for a low cost and that will take the place of a certain amount of your staff and you can go down to only runners and a server can cover more tables, people will order but they’ll interact with staff less. They’re already being installed and you’re going to see more and more of it.”
One local restaurant that already has tablets at the table is Applebees in Johnstown, which customers use to order appetizers.
Jim Landrio, the general manager of the Holiday Inn Johnstown-Gloversville, said his business has discussed the concept of tablets at the table but has decided against them.
“The problem is not everybody can understand how to order from a tablet and we live in an area where there is an older population and we think it would be very hard and cumbersome for people to do that. They would probably get very frustrated and just go someplace else where they don’t have to do that. The other big factor is part of the experience of going out to eat is service. That makes up the majority of why people go out and dine. When you start breaking down the service aspect, is the experience worth going out to eat? A business really needs to look at that.”
Another option some fast food restaurants may consider is replacing counter employees with kiosk machines that allow customers to order food themselves.
Jessica Woodburn, marketing director Hospitality Syracuse Inc., which owns 52 Taco Bells between Rochester and Albany, said her company is not looking at purchasing kiosk machines.
“We’re a franchise, so we’re an independently owned company, so we’re a franchise of Taco Bell, so we at our company, that’s not something we’re looking at, at this time,” she said. “It’s just not something that we’ve considered. It’s not something that’s been on the table for discussion at this time, at our company, Hospitality Syracuse, but I can’t speak on behalf of the brand.”
Holland said most chain fast food restaurants work on a franchise model of ownership, which means the individual franchise owners would need to purchase the kiosks themselves, which he thinks makes it unlikely a change to kiosks will happen anytime soon.
“I think it will happen in places where customers are not local, like maybe Thruway stops first, but it really depends on what happens with the fast food wage mandate,” he said.