If you haven’t read this article series about what’s going on in the national restaurant scene, you should. Make sure you read all three parts. For years I’ve been saying exactly the same things that Mr. Alexander writes about in this piece for Thrillist. I saw, and am still seeing it, play out for the past decade. There are so many things restaurant owners have to deal with today that they didn’t have to just a few years ago. And it’s finally coming to a head. That’s not to say that the restaurant scene or business is going up in flames. Yet. But there are some major changes headed our way for multiple reasons.
Higher Minimum Wages and Healthcare Costs
I’m all for higher wages. But…. someone has to pay for them. There are a lot of people talking about paying all workers a fair wage and making sure everyone can earn a decent living on minimum wage. I’m for it. But I just hope that these same people will be willing to pay the real cost of a dinner out. “$28 for a steak? That’s expensive!” Well, if you think it’s expensive now, wait until the owner has to pay the dishwasher $15 an hour. That steak will have to cost closer to $35 or 38 for the restaurant to make it. Because on top of the $15 an hour are employer payroll taxes.
The same goes for healthcare. Most restaurant owners are good people. They are just trying to make a living like everyone else. They are not out to screw people over whether the public or their employees. If they could afford it they would make sure everyone had health care coverage at minimal cost to the worker. But it’s just not possible for most small restaurant owners. The cost is too high.
Many feel that the restaurant owner should be paying the server a fair wage, above minimum and that tips should go away. That’s great. But what is a fair wage? How is a fair wage for a server determined? In a high-end restaurant in my town servers probably make $25-35 per hour which includes the server minimum wage of $5 per hour plus tips. Is $25-35 per hour fair? Should an owner now have to pay the server $32 per hour? Of course not these people say. Just pay them a fair wage. So, what? $12 per hour? $15 per hour? What do you think is going to happen when an owner tells his servers that they are going to a no tipping policy and that they will be paid a flat rate of $12 per hour to start? That’s a $20 per hour cut in pay. The servers are gone. Why? Because they can make $12 per hour at a clothing or convenience store and not have to work as hard.
And how is the owner going to afford to pay servers $12 per hour? By raising prices which will drive people away. No matter how good the customers feel about the server getting a ‘fair’ wage most will not be willing to pay the extra money for a dinner out. Sure, they’ll go out on special occasions but not enough to keep many places in business. Getting rid of tipping will take a cultural shift that could take a generation.
Shortage of workers, mostly in the kitchen
I went to culinary school here in Vermont. I started in February of 1995. My tuition was about $14,000 a year. For six months of school! We went to campus, in this case a hotel, for 6 months and then went on a paid internship for 6 months. Fortunately, I landed a great internship that turned into a full-time job and then an extended internship in Italy. So, I never completed my formal culinary education at school. And I think it turned out well for me.
One reason I didn’t go back was because I learned too much in my first 6 months at school. They did too good a job. We were cooking every day. By the time I got to my internship I had already learned so much at school that I fit right in and excelled on the line. I was a bit older than my fellow students but others had the same experience as I did and many of them didn’t go back either.
The other reason I skipped out on my second year was financial. I could not justify paying another $15,000 or so when I could have an actual job making money and learning the same things I would have learned at school. And you know what? None of the sous chefs or the chef de cuisine had culinary degrees. That was eye-opening. After my internship was up I was offered a full-time job with the understanding that if I stayed another 6 months I would be hooked up with a couple of stages in Italy. A no-brainer.
The same thing is happening now all over the country. Culinary schools exploded in popularity in the last decade or so. Right as the Food Network was becoming popular. People saw celebrity chefs on TV and wanted in. Once in though, they saw the reality of $11 or 12 per hour, working in a hot kitchen on your feet for 10 hours with minimal breaks and being yelled at by a crazy sous or chef. So, saddled with upwards of $40,000 in debt a lot of cooks are leaving the business for greener pastures with better wages and ‘normal’ hours and conditions.
This means not as many cooks to fill all the positions in all the restaurants that have opened in the past decade. And a lot of restaurants have opened up. Too many.
Too many restaurants
There are too many restaurants. There, I just said it 3 times in a row. There are not enough customers to support them all and not enough skilled cooks to staff them all.
I know, the cream will rise to the top. Well, that’s not always the case. You know: location, location, location. There are a lot of bad restaurants out there that do rather well because of their location. And there are a lot of really good restaurants that don’t do so well because of their location. But it’s more than that.
With so many restaurants it’s really hard to find good help both in the front and back of house. Sure, you can find bodies most of the time but that’s not enough. The public expects more now. So finding good help is hard and keeping them is just as hard. That means higher wages to keep someone around which cuts into the bottom line which means higher prices. See the circle.
Evan if all the restaurants are good some are going to suffer because they can’t fill their seats enough. If a restaurant is making a 5-6% profit they are doing well. Add some higher wages and a slight downturn in business and that is almost wiped out completely. The business is really, really hard. It gets even harder when you’re not making money.
There is also the fact the small, independent operators are competing with large chains that can beat them up on price. Have you seen the ad for Chili’s $10 3-course meal? How about Applebee’s where two people can eat for $20. That’s really hard to compete with when you’re an independent. The chains are packing them in by giving food away. They have the purchasing power to offer such low-priced fare. Independents don’t.
So, where are we headed?
I have a prediction. The restaurant landscape will change in the next decade. Mr. Alexander talks about it in the article. A whole category of restaurants will mostly go away.
Very high-end dining will stick around. I’m not talking just about the $200 and up prix-fixe meal kind of places. I mean the upscale, white tablecloth, special occasion places. The regular clientele will still go because they can afford it and others will go because it will be a special event.
A lot of the more casually upscale places will go away. These will be the places in the middle that suffer the most. These fall somewhere between the really upscale and the chains. The neighborhood, place with a good wine list, inventive food, nicely appointed. The price point is one that makes the place a bit of money but is always three bad weeks from going under. If they have to pay higher wages they’re done because they can’t raise prices enough to pay for it. It will be harder to keep skilled cooks and servers. They also will not be able to compete with the chains and the new breed of restaurant that will be opening up in the near future.
The new breed will basically be food trucks in a brick and mortar location. No more table service. No more table linen and fine glassware. These will be upscale, quick serve places. You’ll go in and place your order at a counter, you’ll pay for everything up front, get your beverage and sit down at an open table (if/when one is available). Your food, cooked to order, will be brought to you. You’ll eat and then leave. Simple. The space will be cool and comfortable. The food will be inventive, fresh and great. And prices will be reasonable. There will be no need to tip. Staff and overhead will be kept at a minimum. And the owner can pay everyone a fair wage and still make a reasonable profit.
And then there will be the chains.
This is not going to happen overnight but instead may take a decade. But, we already see it happening in larger cities where the higher minimum wage has already kicked in. There are many fast-casual places, even chains, popping up all over the place. Chipotle was the forerunner but it was just a model. The new ones will be nicer and the food will be better, more inventive and cooked to order. Maybe you already have a place, or places, like this where you live.
I hope you found this interesting and thought-provoking. I don’t want to sound like I’m predicting doomsday for the restaurant industry. I just wanted to point out some realities that owners of smaller, independent restaurants are facing and will be facing in the coming years.
I have spent over 25 years in the industry. I have done it all: dishwasher, busboy, waiter, host, manager, sous-chef, executive chef and chef/owner. I love the industry and it’s been good to me. But I do feel that big change is coming. I also hope that it’s for the best. I would like to see better wages for all, better working conditions and access to health care. I would like to see people look at all restaurant positions as professions and not just part-time gigs. How many times have you heard someone ask a server what they really did for a living? I think it will take some getting used to but I’m positive that good things will come.