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How To Survive Minimum Wage Increase In Your Restaurant

The only thing worse than training your employees and having them leave is not training them and having them stay. Henry Ford

With the upcoming minimum wage increase in Washington state and others, many venues are looking for ways to survive.

The most common reaction venues take is to increase the prices and launch new menus. In this post, I want to discuss many alternative strategies and the unintended consequences that come with each one.

  1. Increase Prices: Increase menu items by X in order to bear additional labor costs.
  • Benefits – additional margin built into the price will help cover the extra labor costs.
  • Consequences –Higher prices per item means guests are going to buy less and visit your venue less often.
  1. Decrease Portions: Serve smaller sizes on your food offerings. Decrease your house liquor pours by ¼ oz, increase fillers, use smaller cocktail glassware.
  • Benefits – Your prices can stay the same and the unsuspecting customer won’t notice.
  • Consequences – When your guests find out what you’ve done they will feel slighted. It only takes a single Yelp review or social media post to let the entire community know. It’s a sneaky move, off-putting, and you might not get a chance to redeem your organization.
  1. Layoffs: Eliminate positions that are the least necessary and can be managed by everyone else when it becomes a necessity. The first jobs to eliminate are Hostesses, Bussers, Food Runners, Dishwashers, and Barbacks.
  • Benefits – Costs are immediately and exponentially reduced. Might be able to maintain the same prices on the menu so guests won’t spend less.
  • Consequences –Efficiency might be affected. There will be a learning curve for everyone to pick up the pace and discover new ways to become more efficient. Ultimately, your staff will adapt and become more efficient but they also might get burnt out. Find a balance and this strategy could help you survive.
  1. Sell More Liquor: Your best margins are in your alcohol sales, in particular, spirits and cocktails. Two ways to increase sales: 1) Produce the same offerings at a faster pace to turn tables at a faster pace. 2) Sell additional offerings guest otherwise would not have had.
  • Benefits – If a quarter of your FOH (front of house) staff sell 10% more alcoholic beverages per shift, then their extra productivity will cover their increased labor costs and some of the increased costs of your BOH (back of the house) staff.
  • Consequences – Selling more requires an increase in effort by staff when clocked on and clocked off. Increasing sales is easy when you have domain expertise over your products and how they pair well with the other offerings on your menu. To gain this domain expertise your staff must spend some time off of the clock and put their head in the books. This is cumbersome, for there isn’t a simple resource catered specifically to the products they sell. Finding content on their own takes additional time and discipline, this is why it’s rarely done. One way to mediate this is to enroll your reps with bringing products on that is easy to sell with other items on your menu. Do the products have great educational material that you can seamlessly get to your staff? What makes a product easy to sell? The product has to be easy and memorable to learn about. Something your staff can easily differentiate from other products without rote memorization. Also, don’t bring anything on board that doesn’t pair with other items in your inventory.
  1. Offerings and Menu Design: Eliminate offerings that aren’t moving and make no impact on your bottom line. An effectively designed menu allows guests to identify what they’d like in less time and reduces buyers regret. (The feeling of wishing they’d tried a different offering)
  • Benefits: Your tables will turn faster. Your staff has less to memorize and study. Your establishment requires less inventory.
  • Consequences: Great menu creation and design take a lot of considerate thought and money to print.

The ideal solution would be to have a combination of 3, 4, and 5. A more elite staff that make fewer mistakes and increased output would require less staff. A more effective and knowledgeable staff would ultimately result in a happier guest. A strategic menu design makes it easier for guests to make a decision. This positive cycle feeds itself.

Ultimately, in order to survive, you must adapt to the new economic environment, this is ever changing. Most establishments will not survive this and thousands of jobs will be lost. The ones that make the hard decisions and take action now have a better chance.

If you found this information to be useful, have other tips on surviving minimum wage, or find this post repulsive; please leave your thoughts in a comment below.

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