Minimum wage hike closing Seattle restaurants

[Clocker]

Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”

Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” Seattle Magazine,

“Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”

Common Core math problem: How much is $15 x 0?

http://shiftwa.org/more-seattle-rest...ge-approaches/

[ArlJim78]

wow, who could have foreseen this?

[Izzy2742]

According to the online Seattle Times, the wage increase is a step-process.

Currently, the minimum wage is $9.47
April 1, 2015, that increases to $11.00

It increases to $15/hr by 2021

[JustRalph]

Originally Posted by Izzy2742

According to the online Seattle Times, the wage increase is a step-process.

Currently, the minimum wage is $9.47
April 1, 2015, that increases to $11.00

It increases to $15/hr by 2021

Why lose money until 2021? I'm sure that's how they feel. Many of these small places run on a razor thin margin. Getting out before everybody else has advantages too.

The customers will absorb the costs for those that stay.

[lamboguy]

i never liked mandatory minimum wages and other government mandated rules, but this one seems to have some good side effects by closing down these restaurants.. Mickey D's and Burger King has successfully lowered life expectancy and helped raise medical cost's. they should go up to $20 an hour and wipe out all of them.

[Izzy2742]

Originally Posted by JustRalph

Why lose money until 2021? I'm sure that's how they feel. Many of these small places run on a razor thin margin.

The same article suggests a 4% profit for restaurants currently. I don't know how any restaurant can survive, even before the wage hike.

[Clocker]

Originally Posted by JustRalph

Getting out before everybody else has advantages too.

Like finding a bigger sucker to sell it to.

[JustRalph]

Originally Posted by Izzy2742

The same article suggests a 4% profit for restaurants currently. I don't know how any restaurant can survive, even before the wage hike.

Many mom and pop places are only providing jobs for locals and that's about it.

You would be surprised how many chain stores lose money but are kept afloat by the other stores in the company. Btw, many chain stores are actually broken up into different divisions or multiple companies. Sometimes the real profit comes from one division of the company selling products or services to the other.

I know of one Rest. Company that is a majority owner in the actual wholesale food company that they buy almost all of their food from. The restaurants make a minimal profit the wholesale food company makes about double the margin. Add the two together and the entire system makes money, including providing tax advantages.

I knew of a company that actually invested in the trucking company that delivered the food product to their stores because they discovered a huge tax advantage in the trucking business.

There are also places like Cheesecake Factory who own their own "Cheesecake Factories" and those portions of their business are separate companies. They sell to retail stores and restaurants. The real estate portion of the business is huge. And complicated. But very profitable sometimes

[Clocker]

Originally Posted by Izzy2742

The same article suggests a 4% profit for restaurants currently. I don't know how any restaurant can survive, even before the wage hike.

A lot of restaurants of the type they seem to be talking about are run by one person or a family who really enjoy the business. And the 4% could be accounting profit after the owner pays himself a salary.

[JustRalph]

Originally Posted by Clocker

Like finding a bigger sucker to sell it to.

Especially if you are liquidating. Your equipment brings a better price when there are less options and you're not competing with other shut downs. Used restaurant equipment is big business

[JustRalph]

Originally Posted by Clocker

A lot of restaurants of the type they seem to be talking about are run by one person or a family who really enjoy the business. And the 4% could be accounting profit after the owner pays himself a salary.

If they are lucky.

[TJDave]

I'd like to know where they got the 4% from. That's not typical of my experience or my friends/clients. I'd guesstimate double to triple that. And, yes, you always pay yourself.

[thaskalos]

Originally Posted by Izzy2742

The same article suggests a 4% profit for restaurants currently. I don't know how any restaurant can survive, even before the wage hike.

4% profit? Golly-gee...imagine if they had to pay their waiters out of their own pockets.

[Clocker]

Originally Posted by TJDave

I'd like to know where they got the 4% from. That's not typical of my experience or my friends/clients. I'd guesstimate double to triple that. And, yes, you always pay yourself.

In what part of the country? Washington state already had a minimum wage of $9.19. That might explain lower profit margins there.

[TJDave]

Originally Posted by Clocker

In what part of the country? Washington state already had a minimum wage of $9.19. That might explain lower profit margins there.

California, for one...now at $10 before burden. I don't care about minimum wage. I'm concerned about labor cost as a percentage of sales. Utilizing labor effectively is the key to maintaining profitability. Smart operators will shrug this off and keep on chugging. The real challenge is finding decent help.