How Growing Wages Benefits Restaurants in the Long Run

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on Feb 26, 2019 9:00:00 AM
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Three years ago, Illegal Pete’s, a local restaurant in Denver, made a promise to its employees that they would raise their starting wage to $15 per hour by the end of 2018.

The restaurant made good on its promise. While most tipped employees saw a slight gain in their paychecks from the state raising the tipped wage to $8.08 per hour, Pete’s employees saw a 67 percent gain. This increase means Pete’s will pay nearly $3 million more in wages, while tipped employees take home approximately $1,000 more per month.

To some, this decision is ludicrous. That $3 million could be used to open more stores, or to pay out bigger paychecks to the owners of the business, they might argue.

Many business analysts feign wage growth as a death knell for restaurants. The margins are tight. The overhead is high. And worst of all, their products can inflate in price because of silly political misgivings on trade.

So, why would a business readily take on such an expenditure? This may be the only way restaurant owners can fight their most expensive enemy: turnover.

In 2018, restaurants experienced a 73 percent turnover rate, according to a report by Toast.com. Let that sink in. Nearly two-thirds of the employees at your favorite local eatery may not work there within a year.

And what does this cost restaurants? Numerically, this can cost nearly $500,000 annually, according to the report. But restaurants are losing much more than that. They’re losing experience. They’re losing a way to connect with their customers. And most importantly, they’re losing time.

Experienced employees are the backbone of any organization. They can help managers train new employees, have a firm understanding of their job, and can help set a positive work environment for all other employees. Keeping experienced employees around should be a top priority of any business owner, let alone a restaurant operator.

For customers, experienced employees offer a sense of stability and comradery from a business. Many customers grow attached to employees, allowing the employee to develop a rapport that can bring in new business. Having experienced employees is a sign to your customers that your business is treating them well, which can positively impact your image within the community.

Replacing experienced employees takes time. Not only to find the right candidate for the job, but to get them trained and up to speed on how your restaurant functions. This can cause stress for customers who are on tight lunch schedules and need to be served efficiently. Without that efficiency from your staff, you could drive away more customers than you attract.

These are just a few things to consider the next time you are thinking about raising wages in your restaurant. There are myriad ways that experienced employees benefit your business, so make sure you give them a reason to stick around.

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Topics: Capital, Staff

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