Left Behind in the Back of the House…

The minimum wage hike that was approved by voters in Nov 2014 was the final nail in the coffin of our sister restaurant The Abbot’s Cellar and we said as much at the time (even if it was misspoken and/or misunderstood). To be fair, at that point the coffin had a fair amount of nails in it already (I can tackle those subjects another day), but we foresaw that the passage of Proposition J (Minimum Wage Ordinance) would squeeze the industry over the next few years and force a lot of closings. We decided to get out early and get back to the bedrock of The Monk’s Kettle.   The greatest tragedy of it all however was that due to the Ordinance’s language and implementation, the problem of wage inequality would be exacerbated rather than solved.

When you ask a server or bartender how much they made on a certain shift, they will usually give you a number: how much they made in tips for the day. However, that server/bartender is leaving out their hourly wage. When you ask a cook or dishwasher, they will calculate their hours and multiply it by their hourly wage. The entirety of a cook’s compensation is that which was left out of a server/bartender’s assessment. And this exposes the huge disparity of income between front and back of the house employees that is real and is damaging. Servers and bartenders generally make about three times that of their counterparts in the kitchen and current policies ensure that this will continue.

Cooks’ wages have always been higher than minimum wage and they need to be in order to survive in this area. For context, the monthly salary of a minimum wage earner (at the current $13/hr) is about $2250, while the median monthly rent of a 1-bedroom apt is around $3500. The market rate for cooks has hovered a few bucks over the minimum wage and hasn’t changed all that much over the years. It may have gone up more (especially as living costs in the area have risen) but owners’ ability to increase it have been hampered by other rising costs, including the minimum wage hike that is blind to the not-insignificant income some restaurant employees receive from gratuities.

I want to make clear here that we do not begrudge anyone’s income. And to be even clearer: we are not against a higher minimum wage. In fact, we would like to see a living wage for all our employees. We feel the Minimum Wage Ordinance did not properly tackle the problem of the low wages of the kitchen workers, the lowest wage earners, where it should have been aimed. A hike in the minimum wage increases the wage of those who are already making minimum wage: in reality, those making “minimum wage” are those also making tips, those employees who already have the highest income. Any wage gain for the kitchen (already making a higher-than-minimum-wage) has been done voluntarily and at the mercy of individual restaurants’ financial ability to do so. This is where we need a solution that addresses the problem at hand.

We propose minimum wage reform that addresses this income disparity in a healthy manner. We’d like to shift some of the wages paid by employers from the front to the back of the house. We understand that California is one of a handful of states that does not allow for a “tip exception” (allowance of a lower minimum wage if an employee receives enough tips to make up the difference). That said we still believe it would be a workable solution. We believe the ideal situation would have been to increase the minimum wage for the non-tipped employees, while building into it a lower (or fixed) minimum wage for the tipped employees.  Without this offset, the assumption is that restauranteurs are wealthy enough to afford these rising costs. While this may be true in most cases, it certainly is not the case for the small businesses that San Franciscans say they love. The economics of the industry would change dramatically if restaurant owners could slightly lower the FOH (front of house) hourly wage if and only if an equal wage hike were paid to the BOH (back of house. This kind of wage policy would shift income from the top earners to the lower earners in a way that doesn’t threaten the industry itself.

It’s true that policy as it is written will raise cooks’ wages when the wage increases are implemented (an additional $1/hour hike is coming in July). It’s also true that the industry hasn’t fallen apart just yet. We can wait until the calamities hit and deal with the aftermath. But we in the industry are seeing major problems hit already (a shortage of cooks, a struggle to provide a living wage to all employees and a shrinking profit margin) that are only going to eventually reach a crisis point. Let’s implement smarter policy to ensure everyone’s success.

 

http://www.washingtontimes.com/news/2016/oct/10/minimum-wage-hikes-putting-restaurants-out-of-busi/

 


There is Something Afoot…

At a party this summer, a guy I met said, “Listen to what people say, but pay attention to what they whisper.”   I’d in fact been whispering that it has been a very strange year in the Bay Area restaurant/bar industry. We’ve seen strange levels of business and have heard from far too many people in the industry discussing the same. This has been the whisper of the industry since the spring and it’s now starting to hit the papers

Earlier this summer, a survey by the Golden Gate Restaurant found that 2/3 of the respondents (SF restaurants) have experienced a reduction of sales this year, and the decline from spring to summer was sharper than it historically is. The NY Times did a piece about it this summer as well, and just a few weeks ago we saw it more plainly on the page locally: the SF Chronicle’s Jonathan Kauffman wrote a piece titled “Rash of new restaurants folding in short order.” It feels inevitable that the landscape is about to change, perhaps dramatically.

This is not to say that there aren’t places that aren’t doing just fine, or even killing it. We are still seeing places open up by the dozen…for now. But what seems inevitable is an increase in closing announcements from restaurants throughout the region.   The truth is that it takes a million things coming together in the right way for a restaurant to succeed, and survival in these parts is dependant on the up or down tick of just a few percentage points. This could easily spell trouble for many. And having personally gone through a closing in 2015, I know how painful it is for everyone involved – ownership, staff, devoted customers, all – and feel compelled to shed a little light on the situation, to discuss it from this perspective.

Two forces are working against the industry right now, one internal and one external:

  • The internal force is the squeeze restaurants are feeling from the cost of doing business in SF (though the surrounding area’s costs have been catching up in a real hurry the last five years). Contrary to what is often the public perception, profit margins in this industry are extremely small, and these internal costs shrink that margin even more. The end result is that prices go up to cover theoe costs, and suddenly $18 is simply how much a top-notch burger costs in the city. It’s certainly not an impossible market to make a profit, but it’s a hell of a lot trickier to do so than it once was (and it was pretty tough back then).
  • The external force is the current economic climate in the area. Costs have also been increasing on the personal level throughout the region (million dollar condos, $18 burgers) and from the view of this industry, it just feels like everyone has less money left over than they used to. I say this knowing there are neighborhood-sized exceptions, and it’s not as if no one is going out, but the mere mortals among us are doing significantly less spending now because the bills just got too high. At the end of the day, it’s a smaller pool of money being shared between a lot more places than ever before.

When Umami announced its closing earlier in the summer, they wrote in a statement: “Call us another casualty of a changing San Francisco.” Going further, owner Nate Valentine gave a warning: “the city needs to be very careful not to erode away what made it great to start with.” The San Francisco Bay Area thrives on its culinary tradition—it is an industry that is integral to the fabric of this city and region—and there are major issues to address if we want it to continue to thrive. The recipe right now is not one that will work long-term, and we’d like to see a more sustainable path forged in the future.

In future posts, I want to delve deeper into several aspects of the situation: discuss some of the economic forces at work in the Bay Area restaurant industry, shine a light on the personal side of these larger issues and brainstorm about solutions.

 

Until then…

Written by Christian Albertson
Edited by Nat Cutler
Proprietors, The Monk’s Kettle