Washington, DC is about to step into relatively uncharted waters for restaurants in the United States. Unlike Europe, which has a long history of paying serving staff full pay with benefits provided by the government, thus taking that burden off individual businesses. The U.S. is different. It has clung onto to Jim Crowe laws regarding tipped wage workers and never made the transition off using tipped wages to pay for restaurant workers. DC voters have now fundamentally changed that landscape by passing a law that is removing the tipped wage and replacing it with a mandate that these folks be paid at least the state’s minimum wage, currently set at $16.10 per hour.
What does that mean for restaurants? Before answering that, there are some fundamentals of the business that most Servers and Bartenders do not know but should. They should know these fundamentals in order to understand what is about to happen. Most restaurants work on an insanely low profit margin of 10%. They take a business model of 90% costs: 30% Labor, 30% ingredients & 30% Overhead costs (rent, utilities, etc). For all you Servers and Bartenders who have told yourself that the owners are taking advantage of you (and some absolutely do), think about this for a moment. No other industry has this low an opportunity to make money. In taking on more labor cost for the services provided by Servers and Bartenders there are only a couple of options for the folks making business decisions.
The first option is to raise prices…which will definitely happen. There is zero chance that menu prices will remain the same once this law takes effect. But that’s not cover the additional cost. Why? Because the amount of increase needed to cover these costs would be too much of a shock to consumers. It would literally crack the industry. Because of that, other options on the table will have to be considered. Option two is to cut ingredient costs. With inflation impacting overall food costs, that is going to be very difficult. That leaves Option 3, cutting labor costs in other ways.
How this happens is going to take creative thinking. You will see a lot of people without the creative outlook to make it work in a way to keep support the way it is now. Look out for reduced management or server assistance in cutting the use of food runners and potentially Bussers as well. There are other ways, and the marker of a good group is one where the entire ecosystem is taken into consideration when reducing costs. Including ownership and their role in the company. Your responsibility to yourself is to ask questions and have an open mind about where the opportunities may lie within the new system.
Don’t forget that it won’t just be labor costs that will be reduced. Costs will have to be cut across the board, and when ingredient spending goes down, the interesting elements of a menu also decrease. This will put innovation and creativity of the menus in danger, without the help of the professionals throughout the entire system. If you want to represent diversity and creativity in menus, your skills in selling and adding 20% more in sales to every ticket will be essential. Especially if you want some of those items that are low hanging fruit for those ticket increases such as a very strong dessert menu.
Some staff members that are considered to be nice to have, but not essential such as Pastry Chefs, Sommeliers and that extra prep cook may get the axe. That’s going to constrain your ability to sell cool things, while also reducing the ability of the restaurant to serve guests in an appropriate fashion. It will also prevent the restaurant’s ability to handle unexpected situations that arise all the time. Chefs will be even more stressed than they are right now. Tightening belts have been a long-standing rule in restaurants, but that’s actually a sign of bad business practices rather than discipline.
It all sounds super grim, doesn’t it. And it can be if the mindsets that are currently in place remain the same. However, as with everything there are opportunities in this change to fundamentally modify our industry in a positive direction. One way to combat the nasty outcomes mentioned above is to increase your ability to sell as a Server or Bartender. The basic economics of any business is based on being able to sell higher dollar value items. Wine and spirits are a good opportunity here. Higher dollar value bottles of wine can definitely help. When you see a $30 bottle of wine on your menu, most of the time it is wholesale cost of the bottle times three. In DC these days, I’ve seen it 4 times or more though. So, that $30 is really providing the restaurant $20. The pricier the bottle, say those that are in the $100 range are bringing in closer to $60 per bottle. Hi! OPPORTUNITY!!!
Your ability to sell that higher priced bottle even to one table per hour means that you can help the restaurant pay for a Server Assistant for that hour. Now, I’m not suggesting aggressive tactics intended to push a guest to pay for something they can’t afford. However, reading your guests and moving them toward a bottle that is $10 more than the price point they originally are thinking of means you are a salesperson instead of just an order taker. It means that you need to get yourself more education and training. You can’t sell that $100 bottle without knowing what you are selling. As for cocktail land, learn how to suggest the liquor brand just one level higher than the rail. Do you know what those brands might be? Learn them. A few dollars more per cocktail will be a big difference in the ending bill.
Another opportunity is to look at your menu and really focus in on how to maximize sales throughout a meal. Go through and do the math of what it looks like to sell different combinations of items. Focus on the interest of those items together to make for a lovely meal. You may be surprised in the combinations that provide maximum economic outcomes. It may be that selling a table 2 appetizers and entrée and 2 desserts is more that 1 appetizer 2 entrees and no dessert. You are now a salesperson, so note how those combinations play out. Not every table is going to want that experience, but at least a few will.
Unhappy guests need to be handled differently as well. Learn how to handle problems before they appear, and when they do, learn what to offer that is a cost-savings tactic rather than simply taking items off a bill. It is always cheaper for the restaurant to identify issues early. Asking guest preference questions during the menu review will help to prevent the guest ordering something they will not enjoy. If there are unavoidable service issues that arise, providing a free beverage or dessert rather than taking an item off their bill is always the better choice. When you provide a freebie, you are adding to the experience rather than coming in at a deficit. Plus, being proactive lessens the likelihood of negative perceptions being a factor in the diner’s mind and those around that table.
Since you are no longer strictly tied to your tips for your income, the dynamic between yourself and guests, and yourself and your employer will be very different. You are no longer tied to trying to please guests under all circumstances. You are on better footing to defend yourself and the business. You are also more responsible for the side tasks associated with your position that are designed to make the business flow better. You are no longer going to be essentially a contract worker. The increased responsibility on your shoulders is also an opportunity to learn how to handle it all in a more functional manner. That is for another discussion. For now, know that with the massive changes coming with pay changes are food for thought and provide opportunities for growth. It's a chess game, and the rules are about to change, you can be prepared to crush it.
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