Minimum-wage bump means tough choices for restaurant owners

Don White, owner of Skylark's Hidden Cafe in Fairhaven, works at his desk on Wednesday, Dec. 21, 2016, in Bellingham.
Don White, owner of Skylark's Hidden Cafe in Fairhaven, works at his desk on Wednesday, Dec. 21, 2016, in Bellingham. eabell@bhamherald.com

If you see furrowed brows on local restaurant owners in the next few weeks, it may be because they are trying to figure out how to adjust to some big changes when it comes to expenses.

With the passage of I-1433 by voters in November, the minimum wage will increase 16 percent to $11 an hour on Jan. 1. That’s a big change for restaurants, as many workers are paid around the minimum wage and rely on tips to generate extra income. Even for restaurants that already pay employees $11 an hour or more, expenses will increase. One example is higher food prices from distributors who need to raise wages for their employees.

The wage will continue to rise in the next few years, hitting $13.50 an hour by 2020.

The day after the initiative passed, Rich van Dommelen went on Facebook to ask his customers what he should do. As the owner of Jeckyl & Hyde Deli and Ale House, he has a small staff, but was concerned about the rise in prices for food and other items he buys. He posed a variety of options for his Facebook supporters, including raising prices, cutting staff or eliminating credit cards. His supporters overwhelming told him they would prefer a $1-$2 increase in the prices of menu items.

“Most said yes, raise the prices because the food is good (enough to make it worth paying for the increase),” van Dommelen said.

Don White also is weighing his options. White, who owns Skylark’s Hidden Cafe in Fairhaven, is pondering raising prices, investing in equipment that would reduce labor hours or even eliminating tips and factoring an increase into the menu.

Eliminating tips is something van Dommelen said he didn’t want to consider. Customers want to reward good service and he’s afraid he would lose customers if tipping weren’t an option.

It gets to the point where every aspect of the restaurant is examined. White, for instance, is pondering whether to buy pre-sliced cheese, which is about 50 cents more a pound. However, he now estimates that it’s less expensive than paying someone to slice it.

“Minimum wage increases are having a profound effect on restaurants,” White said.

Jesse Cantu, owner of the three Jalapeños restaurants and Luna’s Bistro in Bellingham, said he will be adjusting hours for employees and taking a wait-and-see approach in the first few months of 2017. Most of his employees are already paid more than minimum wage, but he does expect to see a rise in costs.

“I know a lot of restaurant owners are nervous about this,” Cantu said.

The options restaurant owners are pondering fall in line with what Anneliese Vance-Sherman, a regional labor economist for the state, would expect. Anytime there is a regulatory change, business owners face a number of choices in order to minimize negative impacts to remain profitable, she said.

The changes in the minimum wage have a big impact in Whatcom County. The Washington State Employment Security Department estimates 5,449 Whatcom jobs pay the current rate of $9.47 an hour, while 24,653 jobs are paid below $12.23 an hour (a level that, assuming 2 percent inflation, is equal to the $13.50 an hour the minimum wage will hit in 2020). Vance-Sherman said that statewide, the largest concentration of minimum-wage jobs is found in food service, accommodations and agriculture.

The increase could also mean raises for other workers. Many restaurants and other businesses are expected to raise wages for employees already being paid above the minimum wage in order to keep the more experienced workers, particularly if the unemployment rate remains low. In November, Whatcom County’s unemployment rate was 5.7 percent, ranking it among the lowest in the state. King County had the lowest unemployment rate, at 3.9 percent.

No matter what choices restaurant owners make, van Dommelen said he’s learned from his biggest supporters not to mess with the quality of the food.

“Many of my customers know they are paying for an artisan product,” van Dommelen said. “We just need to find ways to be even more efficient with the people we have.”

Dave Gallagher: 360-715-2269, @BhamHeraldBiz