Starting July 1, business owners with 26 or more employees in Los Angeles, Pasadena, Santa Monica, and the unincorporated parts of L.A. County will pay their employees $12 an hour (up from $10.50).
Businesses with 25 or fewer employees will pay $10.50 (up from $10 an hour).
It's just the beginning of minimum wage fever throughout California. The state's minimum wage will rise to $11 an hour in January and will steadily increase each year till it hits $15 an hour in 2022.
We wanted to know how the wage hike would impact restaurant owners. They typically work on slim profit margins with high labor costs. It's clear the increase will impact most of them – nearly 77 percent of food service workers in L.A. alone will get a raise on July 1, according to a UC Berkeley labor study.
KPCC sat down with longtime restaurateur Selwyn Yosslowitz, co-owner of the Marmalade Cafe chain in Southern California. He shared what he is planning to do to offset his new labor cost, and he gave us the scoop on what other restaurant owners are doing, having just returned from a Santa Monica restaurant conference.
New dishes on the menu
Yosslowitz is experimenting with "menu engineering." Sounds fancy, but it just means eliminating some menu items that are time-consuming to prepare, and replacing them with speedier ones.
"We can’t have, like, 150 labor intensive items on the menu. If we can reduce it by 20 or 30 (items), and make (those) less labor intensive, we can save one employee in the kitchen. You have to find ways of being creative to stay in business."
Yosslowitz is working with a chef consultant to develop dishes with strong flavor profiles, but may not have complicated, heavy sauces.
A busier wait staff
"Say if a busboy leaves, we won't replace the busboy, we redistribute the responsibility," he said. In one of his restaurants, the staff suggested he not hire a new manager, and instead allow them to share the managerial responsibilities.
"They know what's going on. They see the costs involved, especially the servers who have been around for a long time. They understand, because we share our financial information with our managers," he said. "They see what the direct impact is of a change in the minimum wage from $10.50 to $12."
Higher valet parking
Yosslowitz recalled a recent phone call he got from one of his valet parking contractors. "He said, 'I cannot survive (come the) first of July.' I said, 'You have to push the prices up.'"
The parking will probably go up $1.
"I hope the customers understand it," he said. "These guys are independent, they have to survive as well."
Yosslowitz employs 450 people in his seven restaurants. So $1.50 more per hour adds up. He's done the math, and estimates it will cost him a half million dollars a year once the minimum wage is $12 throughout Southern California.
"What you do is you may think, for example, if someone comes in at 9 o’clock, let them come in at 9:30," he said. "So yeah, we have to think like that. Is that person really necded at 9 in the morning? Can we get by with the existing employees for that extra half hour to make that happen? In many cases, the answer is yes."
A new study out of the University of Washington shows that workers in Seattle have already seen their hours cut because of the higher minimum wage there.
Researchers found that the average low wage worker in Seattle lost $125 per month in earnings because of reduced hours. This study, however, differs from previous studies that found little downside to Seattle’s minimum wage hike.
Added surcharges on your tab
Other restaurant owners are planning to add a 3 percent surcharge to the tab to cover the wage costs, Yosslowitz said. This was the most common thing he heard at the Santa Monica restaurant conference he attended. Some are doing away with the standard tip and tacking on a flat 20 percent service fee.
He's going to try the staffing and menu changes instead.
"We have a really hard time putting a 20 percent service charge on, and passing it onto our customer because we believe the American customer still wants the control to tip with good service. Taking away that right from a consumer is a struggle for us," he said.