The restaurant industry is under relentless pressure not only from competition, but also due to regulatory changes such as minimum wage increases and new tariffs on imported foods, and pressure to re-examine work environments in the wake of the #MeToo movement and several high-profile cases of workplace discrimination and harassment.
Specialty Food spoke with three restaurant owners about how they are coping with these challenges.
Phillis Engelbert is the owner of The Lunch Room LLC, which operates The Lunch Room Diner & Canteen, The Lunch Room Bakery & Cafe, and Detroit Street Filling Station in Ann Arbor, Mich. Contrary to the position of many restaurant operators, Engelbert supports a higher minimum wage, and places employee compensation high on her list of priorities for the business.
Jill Weber is the owner of three restaurants in Philadelphia: Jet Wine Bar, Rex 1516, and Cafe Ynez, and she has been outspoken in her opposition to the new tariffs that are being levied on certain food products imported from Europe.
Danea Horn, who founded the plant-based Burger Patch restaurant in Sacramento, Calif., along with her husband, Philip Horn, is seeking to shift the gender equation in the restaurant industry. The Horns last year launched an initiative called #GrilPower, through which they are asking restaurant operators to commit to hiring women to fill half of their back-of-the-house and management jobs by the end of this year.
Phillis Engelbert, owner of The Lunch Room LLC, on Employee Wages
Can you describe your policies on employee wages and benefits?
We compensate our employees as well as we possibly can, and that changes over time. As the business does well, our employees make more. We also view compensation as more than the wage. At different times, when the business is doing well, we’ve had a choice to make: Do we raise wages, or do we give another benefit? More often than not, we’ve come down on the side of benefits.
For instance, early on we started offering earned time off. Our employees bank one hour of paid time off for every 30 hours of work. That comes out to about eight days a year, if you’re full time. We also, early on, offered a retirement savings plan [with matching contributions]. We want to be a sustainable and healthy employer so, also starting early on, we offered a fitness membership allowance. We’ll tack on $25 to each paycheck, so they get up to $50 a month, which is more than enough to pay for a membership at the YMCA, for instance.
The next big leap we took was two years ago, when we began offering full health and dental benefits. Anybody who’s working at least 30 hours a week for two months is eligible for a Platinum or Gold plan, depending on which one they select, which are two top-of-the-line health and dental plans. We charge them a minimal fee, taken out of each paycheck, to participate, but it leaves more money in their pocket than if they were to buy their own plan on the marketplace.
Our hourly employees share the tips, so the starting hourly pay is minimum wage plus tips, and tips come out to around $6 an hour. Coming in the door, nobody’s making less than $15 or $16 an hour, including tips. And all the benefits, except health and dental, are available starting day one. Then, after 60 days, they’re eligible for those, too. We also give our employees raises on a regular timescale. After the first three months, they get a raise. Six months later, they get a raise, and then every six months after that. Raises are at least 50 cents an hour.
We want to have a pool of employees who are compensated as well as possible, who are happy with their jobs, and the compensation they’re earning, so that they can live a sustainable and healthy lifestyle. We’re doing the best we can and want to continue to do more. If the minimum wage were increased, it would level the playing field so that all employers would be required to do more in terms of paying their employees. It would just create a better society for everyone, if people are able to make ends meet.
How does your compensation affect your cost structure?
Probably upwards of 55 percent of our net income is spent on employee compensation, which is high for the industry. It’s a choice we’ve made. If we’re able to end the year having paid all our bills, and with enough money in the bank to get a jumpstart on January’s bills and having paid everybody as well as we can, that is the end game. We’ve also opened three restaurants within six-and-a-half years, with no financial backing. We’re going into year three now of our newest restaurant, and our financial outlook is stronger than ever because most of our debt is now paid down, which is going to leave more money to compensate people better. We’re building this core of satisfied and committed staff members that are growing with the company, that are helping us grow into the future and become better and stronger.
How well are the managers paid at the restaurants?
Our managers make in the vicinity of around $40,000 a year, some a little more. They get their health benefits, they get 10 paid vacation days a year, 10 paid sick days a year, and the other various perks that I already mentioned. We also try to keep our managers to a reasonable schedule of around 40 hours a week. I know $40,000 is below the median income for a city, and we want to continually do better and more. This year, I hope to take a leap so that we can better reward our employees, including our managers.
How do you feel about the fact that a lot of restaurant associations have taken a stance against raising the minimum wage?
I disagree with them. We’re not members for that reason. I disagree with their philosophy. I think it’s shortsighted, and it’s looking at a narrow version of the bottom line for success when all you’re thinking about is reducing labor costs. Sometimes you can increase your success if you increase labor costs, which might seem unfathomable for some. But when you look at the big picture and retention, and you also are looking at the cost of training and hiring and interviewing and all that other stuff, I think that by paying people more, retaining them, and making them a strong element of your business, it’s a good business decision.
How about yourself? Do you take a salary?
I do take a salary. The first couple of years, that salary was zero, just to get the business going. My salary is $50,000, so I’m making just barely more than our managers. I don’t want to haul more resources than that out of the business until I’m able to better compensate our employees. I don’t have any food budget, because I eat all my meals in the restaurants. Being a small business owner is full of sacrifices, especially in the early years. If you believe in your project, you’re willing to do what it takes to make it go with the belief that there are going to be payoffs along the way. Not just financial payoffs, but all sorts of human payoffs.
Jill Weber, owner of Jet Wine Bar, Rex 1516, and Cafe Ynez, on Tariff Impact
How do you expect the latest tariffs to impact your restaurants?
The tariffs have not impacted our business so far because the importers have eaten a lot of the costs. The costs have not made it as far as the restaurant industry and the consumer yet. But obviously, when these tariffs go higher, then these companies can’t do that anymore.
Certainly, a lot of jobs will be lost because the added cost of bringing wine into the country will require greater capital at the start, and a lot of businesses won’t have that capital to pay initially. So, we will start to see fewer importers and distributors, and we will start to see fewer wines, and there will be a snowball effect, with lost jobs, lost choices, lost everything, basically. We’ll end up with a couple of wines on our shelves, and they will all be very expensive.
What about other products impacted by the tariffs, such as meats and cheeses?
It’s imported the same way. Importers will have to put out more capital, and the economics that people have spent lifetimes building will shift. They will be impacted, and again, the consumer will be impacted by higher prices.
How do you see the tariffs impacting the European producers?
For the most part, producers in Europe have other markets. We are going to lose out, because they are going to sell to places like China, which is a huge market right now, or other EU countries.
Then, are we going to get that back? Do they want to start a relationship again with us if tariffs might go up again in another five years? Part of what this industry is built on for importation and distribution is relationships. If you lose those relationships, you lose your business, and I don’t know how you get those back, other than build them up, painstakingly, again, over many years.
Have your customers been talking about this at all yet?
I have talked to some people about it a little bit, but not everyone is interested. I think the goal of targeting luxury goods—or seemingly luxury goods—was intentional on the part of the administration so that people would view it as just an “elite” problem. None of my customers have brought it up on their own. Some are aware, and some are less so. They are just going to think that we’re raising our prices, unfortunately.
Have you prepared to start raising prices yet?
It’s too early. We don’t know how the tariffs will pan out, and we don’t know who will remain in business. It’s so unknown as to what’s going to occur, and what products will actually be available, that I don’t know how to plan. What have you done to communicate about this issue to Washington? I have certainly written to my representatives, and communicated the issue as best I could, through op-eds, for example. I also had a conversation with a spokeswoman for one of the Pennsylvania senators at an event. I have been communicating about it, and a lot the people I know have been doing the same. Have you heard many concerns among other restaurant operators? Absolutely. People are terrified. They made life decisions—to have a family, to go into this business—based on the notion that they would be able to do what they have been doing, in terms of getting wine and importing it and distributing it, and now they are looking at the possibility of failure.
Danea Horn, co-owner of Burger Patch, on Equal Opportunity
What made you decide to launch #GrilPower?
Part of it was just that we were so proud of our staff, men and women, that they had been working hard and we wanted to celebrate what they had been doing and bring a larger spotlight and voice to the #MeToo movement.
You hear a lot about equal pay for equal work, but we hadn’t been hearing about that in the restaurant industry. We felt like, being the new kid on the block, maybe we could enter the conversation and prompt other restaurants to look in their own back-of-house and see if they were giving equal opportunities to their workforce, or asking people if they wanted the opportunity to be trained in back-of-house positions.
Statistically, especially in California, women of color earn 40 percent less than other workers. Only 37 percent of restaurant managers are women. Often higher pay is in the back of house, and people that are passionate about being in the restaurant industry should be afforded the same opportunities to learn those skills to move up in their restaurants.
What are your objectives with the initiative?
We call it 50/50 by 2020. We are asking restaurants to bring women into their back-of-house, so that 50 percent of their positions for skilled back-of-house and restaurant management are filled by women by the end of 2020. We also understand that organizations, cultures, and industries can be slow to change, and so at a minimum, we’re asking restaurants to start talking with their workforce and looking at the kinds of opportunities and the culture that they have in back-of-house. We want to start the conversation and empower females on every staff to start asking their managers for opportunities, because they exist.
What has been the reception so far?
The first restaurants that we had sign on to our 50/50 by 2020 had already met those initiatives. They already knew that the women on their staff were talented and wanted to create equal opportunities.
Outside of that, we know that a broader conversation exists around mental health in kitchens, and we hope that #GrilPower becomes part of that conversation, so that creating more equality in back-of-house can lead to a different culture that could improve mental health. The reception generally has been positive. We are hoping to reach some of those kitchen managers that may be running their back-of-house in an older style and start thinking about what their culture is and if there are any opportunities for improvement in this direction.
Why do you think the restaurant industry, in particular, has had a difficult time with these issues?
Change is hard for everybody, and things that have been long established just tend to persist. From what we were hearing from our employees, it wasn’t an overt lack of opportunity. It was small things—like, “Oh, just let the guys do that job”—and that sort of thing. When it’s less obvious, it’s probably slower to change because it feels like that’s just the way that things are.
On a broader scale, for instance, only five of the top 50 restaurants are owned by women. If you look at chefs and the way they’re portrayed on TV, we tend to think of men as chefs and women as cooks. There’s a much larger cultural norm around kitchens and restaurant management and leadership that is ingrained. We’re hoping to be a small piece of moving that forward.
Where do you see the connection between more opportunities for women and the issues around harassment in the industry?
When there is a long-ingrained culture, and if a back-of-house staff is majority male and is supporting that kind of culture, then one woman in that kitchen may feel intimidated or may not feel there’s an opening to speak up, especially if this is a job and an income that she needs. By shifting the balance to put more women in the back of house, something comes from having a group of people that are seeing what’s going on and shining a brighter light on it. Some empowerment comes from just having a stronger presence. If a kitchen does have an issue with the back-of-house boys’ culture, breaking that up by including more females on the staff can have a big impact.
Mark Hamstra is a regular contributor to Specialty Food.