How Can Restaurants Support A Higher Minimum Wage?

In the United States and Canada, minimum wages are rising. By 2022, it’s estimated that 17% of Americans will live someplace where the minimum wage is $15 an hour. If you’re wondering how your restaurant can handle these changes, you’re in luck. Being creative and strategic about operational decisions can help you find ways to absorb the impact of these higher wages. The following tips will walk you through how to garner and redirect funds and reduce waste to support a higher minimum wage.

1.       Create A Blueprint for Sensible Pricing— A great way to make up for higher wages is to raise some select sales prices.  This doesn’t mean you need to enact across the board price hikes. Instead, examine your POS sales data and inventory and purchasing management tools to see which food and beverage items can handle a higher price. In addition, some restaurants are implementing tiered pricing with different pricing structures for different days of the week or tiered portion sizes for dine-in vs take-out. This tactic can increase take-out sales and traffic on non-peak days to provide additional revenue.

2.       Reexamine Pay Scales— Addressing rising labor costs means restaurants need to think outside of the box. When your tipped employees don’t meet the minimum wage, you’re left picking up the difference. Instead, think about using a tip pool, if your local governments allow it. If a line cook makes $15 an hour and your servers take home $40, then there are opportunities to redistribute earnings. This means that a line cook may also participate in serving duties, and servers can carry out more back-of-the-house tasks.

3.       Explore Using Service Charges— For some restaurants, traditional tips create more uncertainty than they are worth. These restaurants are moving to a service charge and commission model to help ensure their staff are competitively compensated in this environment. Tables are automatically charged a set service amount, with the option to add tips for exceptional service. The service charge is distributed to all staff and is considered earnings and wages. 

4.       Negotiate with Vendors—Negotiating with multiple vendors gives you the opportunity to lower costs and redistribute those savings to wages. Software can monitor vendor pricing and alert you to cost changes so that you can be sure you’re always getting the best price. Additional savings can come from larger bulk purchases and fewer shipments. Examine your inventory management to see if you can order more at once or consolidate your supplies to fewer vendors, and then talk to your vendors about any options or programs they might have to save costs. Don’t be afraid to make suggestions. Maybe they’ll be willing to grant referral credits, or knock the price down for a long-term contract or early payment agreement. 

5.       Reevaluate Scheduling— Overscheduling is costly, and with minimum wages rising, it’s move valuable than ever to reevaluate scheduling practices. Labor reports and analytics can help you determine which time to schedule the right amount of staff. Scheduling management software can help take the guesswork out of scheduling and save time and money. Did you schedule too many employees for New Year’s Eve? By utilizing predictive scheduling and labor management reports, you will be able to plan accordingly for this year. Predictive scheduling can identify peak days and times and use advanced forecasting methods to create an optimized schedule each time.

Higher minimum wages don’t have to be intimidating. Adjusting to changing labor costs is an opportunity for restaurant owners and managers to find innovative solutions. Whether it’s fine tuning scheduling or tiered pricing, restaurants can come up with new ways to make every dollar count. Your employees will thank you for it.

Restaurant Magic Software has been providing advanced software solutions to the restaurant and hospitality industry for over 20 years. The robust Data Central Management Suite, the flagship product, is a powerful and flexible application that takes advantage of the latest technology trends to offer premier processing and analytics. With advanced forecasting, predictive scheduling and mobile technologies, Data Central has something for every problem. To learn more about Restaurant Magic Software and its products, call us at 1(800) 933-4711 or visit the website at RestaurantMagic.com.