Small wage increases pose a major challenge to the restaurant industry in blue-chip states
January began raising the minimum wage in 21 states, and experts say rising labor costs are making it harder for some restaurants to keep their doors open.
January began raising the minimum wage in 21 states, and experts say rising labor costs are making it harder for some restaurants to keep their doors open.
About 65 cities across the country issued wage increases earlier this month. Cities in Colorado, Washington and California have some of the lowest wages in the US
According to the Economic Policy Institute, Tukwila, Washington, has the lowest tipped wages for workers since January at $21.10. Other cities with the lowest wages this year include Seattle at $20.76; West Hollywood, California, for $19.65; Denver at $18.81; and San Francisco at $18.67.
Jot Condie, CEO of the California Restaurant Association, said that for many restaurants, cost increases are unsustainable.
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“It’s not a coincidence that restaurants in those cities where you see these very high wages have struggled to survive and the rate of closings in those cities far exceeds, you know, the rates of closings in other parts of the state,” he said. .
Some restaurant owners say they compete with other hourly wages in their area. (Kennedy Hayes/Fox News/Fox News)
Condie said restaurants also have low pre-tax profit margins, some between 3% and 5%, leaving little room for error..
Food and labor costs are the biggest costs for restaurants, each accounting for about 33 cents of every dollar in sales, according to the National Restaurant Association.
Some Denver restaurant owners are still figuring out how to balance their budgets so they can keep customers coming in and employees happy.
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Joshua Miller is an employee at Sarpino’s Pizzeria in Westminster, a suburb northwest of Denver. Miller said he started doing pizza delivery and enjoyed his time learning skills in the kitchen. He added that making more than minimum wage helps him make ends meet despite the rising cost of living.
“The minimum wage helps with my rent. Fuel prices.” Miller said.
Samr Sawaged is the owner of Sarpino’s, and he said he pays all his employees above minimum wage. Sawaged said many businesses like hers offer higher wages than minimum wages.
Experts say that for many restaurants, large cost increases are unsustainable. (Kennedy Hayes/Fox News/Fox News)
“Our biggest challenge here is other pizza places,” he said. “People are fighting for hourly wages to get more.”
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Sawaged said he is finding other ways to help his employees financially with opportunities to receive bonuses.
Chi Lee is the owner of Chi’s Express, a Chinese restaurant in Denver. Lee said the restaurant has fewer than 10 employees, and that helps him balance his budget.
Experts say some restaurants are choosing to cut hours or staff to survive. (Kennedy Hayes/Fox News/Fox News)
“Because we have a smaller operation, a smaller menu, as you can see,” Lee said, “so our costs, our food costs will go down a little bit.”
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Lee said they have adjusted to inflation by increasing their compound food prices.
It takes about 12 employees to generate $1 million in sales at a restaurant, but it only takes about four employees at a clothing store to generate the same amount, according to the National Restaurant Industry.
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