Extra Foam: Minimum Wage, Minimal Effects
Last week, Bloomberg reported that Seattle-based Restaurants Unlimited, with 35 eateries in Washington, Oregon and California including Henry's Tavern, Stanford's and Kincaid's, sought Chapter 11 protection.
A company spokesman said minimum wage hikes were partly to blame.
Restaurants Unlimited's chief restructuring officer David Bagley said "Over the past three years, the company's profitability has been significantly impacted by progressive wage laws along the Pacific coast that have increased the minimum wage."
The story continued: "'Wage increases in Seattle, San Francisco and Portland boosted the company's wage expenses by a total of $10.6 million through its fiscal year end 2019,' Bagley said. 'Revenue for the year ended May 31 was $176 million, down 1% from the prior year.'" A spokesman for the company declined to comment on how the restructuring might affect ther Portland restaurants.
The Business Tribune talked to some business owners in March 2016 and again January 2018 when the Portland minimum wage went up to $11.25 an hour. (It went from $9.25 to $9.75 per
hour in 2016, and will be $14.75 an hour in 2022. The federal minimum wage has been $7.25 per hour since July 24, 2009.) We revisited them last week as the minimum rose 50 cents to $12.50 an hour. Some are carrying on as normal but one sold his business, partially blaming the wage hikes for making him unable to operate his restaurant.
Kooroush Shearan, the owner and chef at Piattino, an Italian restaurant at 1140 N.W. Everett St. in the Pearl District, sold the business in May 2019.
He tried cutting back his paid staff to three plus himself and his wife, retaining a chef, a dishwasher and a server.
But the new minimum wage pushed their wages up.
In the end he was paying his chef $22 an hour, but when he factored in social security and covering the chef's monthly parking, it was costing him $28 an hour. His dishwasher was making $18 an hour. The server made $12 plus tips.
He says the minimum wage hike was around 40% of his reason to sell. Fatigue and other rising costs were the rest of the reason. He also didn't want to deal with the new delivery services, such as Postmates, GrubHub, UberEats, and he did not like dealing with the rating site Yelp!
"People like Postmates, you're supposed to give them money so they can do this?" he asked in disbelief.
Shearan said everyone had to work longer hours and he and his wife were exhausted. He and his wife are now resting and
enjoying not working for the first time in
14 years while they consider their next move. He says food preparation is in his blood and perhaps they will open casual
dining place near their home in Tigard or Beaverton. Rents might be the same as
the Pearl but he could get a bigger space and other expenses — such as the $1,500 a month he was paying for garbage removal — would be less.
New owners OK with increases
Shearan sold his business lock, stock and barrel to a trio of partners. They took the
recipes, the equipment, the décor (the building is rented) and what customer database there was. (They quickly changed the Point of Sale software to Square, because they
could harvest sales and inventory data with it.)
One of the three partners, Ajay Narayan, has a day job as a data analyst for a Bay Area software firm. He can work remotely in Portland and pull a shift in the restaurant when needed. Narayan serves customers and sometimes mans the pizza oven. He can cook 15 different cuisines, but Piattino remains an Italian restaurant.
The new owners kept on the three staff he inherited, and they are starting new servers on minimum wage plus tips.
"OK, we have a really expensive dishwasher, but he's a reliable and person!" he told the Business Tribune.
Narayan quit one full-time job in 2016 to launch a meal kit delivery service, Be the Master Chef, but shuttered it in May 2018. Now, when his Bay Area job allows, he enjoys making experimental martinis at Piattino. Like many hobbyist restauranteurs, the owners have the luxury of trying things out while knowing their bills are covered by their day jobs. (One manages a Red Robin in Tanasbourne, and his wife is an engineer at Intel. The other is a software engineer, whose wife is a dentist. She is now a full-time mom who specializes in the restaurant's digital footprint.)
He has no worries about future state mandated wage rises.
"It's a fine-dining restaurant so we can control expenses," he said. His data background gives him a facility to analyze sales. They control costs by keeping an eye on what other restaurants are charging in the same market, and by inventory control: not making too much of a dish that is unpopular. "We don't believe in wasting anything, and we don't want to compromise taste and quality."
Susan Thomas, the manager owner of the Cascadia Coffee Pub at 2010 N.W. Front Ave., also co-owns the classic Coffee Time on Northwest 21st Avenue, and has weathered the storm. The customer base for both stores has grown as new offices and apartments have opened up around them on Front Avenue and Northwest 21st Avenue.
"There's been no pushback," Thomas said recently. "Last time, we put the prices up by 10 cents, some things by 25 cents."
She added, "It's great seeing our employees making more, they're always very thankful. I do raises in January and July, and just divide the minimum increase between those two dates."
She now starts new servers on minimum wage, $12.50. They get a 25-cent-per-hour raise after three months, then more after one year. "Over half my employees have been with me at least three years. We have a low turnover because what affects them is giving them more hours and more days off in a row. It's a quality of life issue. Doing four-hour shifts five days a week is not enough to live on."
Cascadia has also hugely developed
its cold-brew coffee business. It wholesales Cascadia Cold Brew to 200 locations in
bottles and kegs. Coarse ground coffee is brewed overnight in a large bucket of
cold water. It lacks bitterness, can be tapped with nitro to look like Guinness,
and could be a substitute for sweet energy drinks.
"We're launching a CBD cold brew at the end of July," she adds, referencing a trend in mainstream cannabis byproducts, "And single-serve options for coffee, like tea bags."
Caffe Umbria has expanded throughout Oregon's minimum wage lift off — and Washington's and Chicago's. Co-owner Pasquale Madeddu now has seven Caffe Umbrias, and a thriving coffee roasting business selling coffee to high-end hotels and restaurants. They are opening another café in South Beach, Miami this September.
In 2016, his 12 staffers started at $9.25 with most on $10 an hour plus tips, which they share. They were making an average of $15 an hour. In June 2017 he raised all coffee drinks and sandwiches by 25 cents.
Madeddu is one of the founders of Torrefazione Italia, which was an espresso pioneer on Northwest 23rd Avenue and was bought out by Starbucks. He told the Business Tribune he now has over 100 employees, 70 of them working in the cafes.
The minimum wage in Chicago, where they have two cafes, went up to $13 this month.
Across the company, everyone who has worked there more than 13 months is getting a 50 cent raise in July. In Portland, servers on $12.50 an hour will get a 50-cent raise, while new servers will start on the minimum, $12.50.
"We're raising rates for everyone because you have got to keep the same distance between them."
However, he is not planning to raise food and drink costs right away, unlike in 2018.
"We want to wait and see what happens, how it's going to affect our bottom line.
"It's getting to be pretty high. An espresso is already $3, a cappuccino is $4.75 to $5."
In the café, coffee is 70 to 80% of sales. Pastries are the rest. They are bought from three or four other vendors. Those other vendors he has talked to are also dealing with the raised minimum, and say they will have to pass it on by raising their prices a nickel or a dime.
The minimum will go up again in Seattle next January. "It's important for people to know the price raise is coming and has to be passed on."
Madeddu says it is also getting harder to attract good people to work in a café. They offer two levels of health insurance. One
covers 50% of the cost. The other, for those working more than 35 hours a week, covers 75%.
They're also looking at covering staff transportation expenses with transit passes. "That can be $50 a month, for a barista that's a good chunk of money.
"With this wage increase it's really going to hit us. We're going to see it at the end of the month."
Has better pay resulted in more productive workers?
"Honestly, not really, and that's always been the case."
He says they get a lot of high school seniors and college kids, "We try to train them as best as possible because we'd like to retain them for the next four years of college. That's the perfect model. In order for them not to go anywhere else, you have got to compensate them fairly."
Caffe Umbria has an office and barista classroom at Northwest 17th Avenue and Marshall Street where they train people from scratch over two weeks.
He has mixed feelings about the raise.
"It's a great thing for these kids. Unfortunately, as usual, the cost gets passed on to the public."
Reporter, The Business Tribune
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