What do you get when you combine an impressive minimum-wage increase with restaurateurs who aren’t sure how they’ll afford it and a dining population that won’t settle for second-rate products or services? Speculation on a long timeline.
The Seattle City Council’s recent decision to implement a $15 an hour minimum wage hike across all industries has been a real a head-scratcher for many restaurant owners trying to figure out how to deal with front of house employees who already average $35 an hour with cooks and dishwashers who are lucky to make $10 an hour.
The increase will have a slow rollout, with larger businesses such as Pagliacci Pizza and Tom Douglas Restaurants having to hit the $15 mark within four years. For smaller businesses, like Ethan Stowell Restaurants (Staple & Fancy, Red Cow, Tavolata, etc.), it’s seven.
It’s an unprecedented move that raises a lot of concerns for business owners, but what will it mean for the average diner? I talked to a few Seattle restaurateurs about how they anticipate the overall affect this minimum wage increase will have on their customers. Not surprisingly, they don’t all agree. Here are a few possible scenarios.
1. The $17 hamburger
First, dining out will be more expensive. “I think in five years we will be the city of the $17 hamburger,” says Angela Stowell, who co-owns a small restaurant empire with her husband Ethan. She says along with other restaurants, she will have to raise prices to absorb the higher cost of employees. She also thinks the higher prices will deter people from dining out.
On the flip side of the coin, Josh Henderson of Huxley Wallace (Westward, Quality Athletics) believes diners will pay for the spendy burger without batting an eye. “I don’t want to say I’m not worried about it, but I’m not worried about it. If all of the sudden my labor numbers are going up, I’ll raise my prices,” Henderson says. “And then if that doesn’t work I’ll be like, ‘We gotta figure out something else.’ I bet if you went into restaurants and asked people if they’d be back if the steak they just ordered went up $5, if it was a good experience, I think they’d say ‘yes.’”
2. Fewer freebies, more bars
While Henderson doesn’t discount the impact the higher minimum wage will likely have, he believes the effect won’t be as dramatic as some are predicting. The first casualties could be fewer freebies, such as complimentary bread and butter, chips and salsa, coffee refills, etc. “I think it’s a matter of how much people value those little intangibles,” he tells me. “All of a sudden the margins become that slim and I think you’ll find a lot more bars opening up because it’s easier to make money off alcohol.” Good thing we live in a city that basks in the glow of countless microbreweries, wineries and distilleries.
3. No more calculating tips at the table
The most noticeable difference that customers are likely to see in restaurants is the absence of being asked to fill in the dotted tip line on their receipt. In lieu of the traditional gratuity, many of the restaurateurs I spoke to prefer a service charge, finding it the most effective way to meet the minimum wage requirement. A service charge would basically require diners to pay a certain percentage on top of their bill, sort of like restaurants do now when they build in an 18% service fee for large parties. The exact charge and how it would be allocated would be up to the individual restaurant owners. They could chose to disperse it among their servers or use it to offset costs, or a little of both.
But service charges have been a hard sell over the years, according to Seattle’s restaurant godfather, Tom Douglas.
“People like the fact that they can decide whether or not their server is worth it. It’s been a tradition for a long time,” Douglas says. Plus he’s concerned a service charge will end up cutting into server wages. “One of the things I feel strongly about is that we have a very romantic, sexy, terrific profession, and I think sometimes restaurants are looked at like we’re all McDonald’s,” he says. “To me, it’s a little bit of a step backwards when you cut the pay of the service staff in half—you’re not going to attract as good a server.”
4. The hot openings will be in Burien
So, yes, dining out will probably get a little more expensive and traditional tipping may be nearing its demise, but the city may also see fewer restaurants opening in Seattle all together. “I don’t think you can just raise prices—that can’t be the only solution to the problem,” says Matt Galvin, owner of all 24 Pagliacci locations and co-owner of Macrina Bakery and DeLaurenti’s. “We’re going to have to think about [other] things…. Would you rather build a new bakery in the city of Seattle, or do you want to build a bakery where there’s no city involvement? Do you want to take a couple hundred jobs and keep them in the city of Seattle, which is really business unfriendly, or do you want to go to Burien or Renton, where they’re like, ‘Please come?’”
But ultimately Galvin thinks people are resilient and will figure out a way to save their business, whether it means buying cheaper ingredients or renegotiating their leases or raising their prices. “I like my chances in this battle.” For diners, it’s too early to tell what the impact will be, other than a slow price increase rollout and the possibility that more restaurants will open outside of Seattle, making the commute for its diners a potentially longer one. Arguably, none of these side-effects will really matter that much to the average diner. Restaurants, after all, are feelings-based business models; their success lies in your emotional connection to it. And what sort of price tag do you put on that?