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The Minimum Wage Hike: Survival Tactics for Multi Unit Restaurants

Posted by Kira

Another Bite Out of Your Restaurant Profit Margin

It’s certainly not easy to own and operate a successful restaurant chain in today’s day and age. Take for example, a recent story about a small restaurant that placed a "minimum wage fee" on their customer receipts. The move was intended to shed a light on the raised minimum wages. While some customers understood and sympathized with the owner, others reacted harshly. Perhaps this was not the best way to handle minimum wage hikes.

Between high food costs and energy inflation, the unavoidable losses due to fraud, potential increases in state unemployment taxes, the ACA and now the imminent wage increases, restaurant operators are fraught with worry, more than ever, over keeping their doors open and their businesses profitable.

Restaurateurs maintain that higher rates will make it impossible to hire unskilled workers who are just starting their first jobs at entry level. What possible room is there for working their way up? What’s the motivation? Who can actually pay cooks and hosts $14 to $16 an hour and keep up with the profit margin?

It would appear that the wage increase wouldn’t seem so awful if the change (depending on your geographic location) was within reason and happened in a measured mode so that restaurant operators and customers alike could have the chance to adjust. Instead, it’s happening - now.

As A Result

Higher wages for personnel will lead to price increases to offset the financial burden for operators. Depending on the percentage of the wage escalation, the increase in food costs can be as high as 25-30%! Product size will likely be scaled back also. Therefore, customers will start paying a lot more for the hamburger that’s a lot punier than it used to be.

Many franchisees worry the increase will devastate their restaurant profit, stunting growth plans and shrinking employee counts.

Some Options to Save Your Business

Many chains are now using tabletop tablets or smart phone apps to enable customers to place their names on a waiting list, check on the status and length of their wait, place orders and pay their bills. The devices require fewer staff, allowing operators to shrink staff numbers.

Other strategies include:

  • Adding on significant service charges
  • Layoffs
  • Lowering hours
  • Automatic cashier machines, similar to self check out machines in grocery stores
  • Closing the restaurants during sluggish times

But wait, these seem like really harsh measures. Perhaps there’s a better, smarter way?

Business Intelligence Solutions and an Actual ROI

Now, more than ever, smart restaurant operators who want to remain in the restaurant business (and actually turn a profit), must utilize the right tools to keep their hard earned cash from walking out the door. They have to keep a watchful eye on the bottom line and keep much closer track of what is actually going on in each location.

Who is potentially stealing? Who is about to reach overtime? Did that last promotion make any money? Why is store #1 so much more profitable than stores #11 and #30? Why were November sales so much lower than October and December and also lower than the last 3 Novembers? These are the kinds of answers savvy business people need to seek out in order to be successful restaurant operators.


Thoughts?

What kind of reporting solutions are you using to measure success, analyze data and increase your ROI?

About Mirus:

Mirus Restaurant Solutions is a multi-unit restaurant reporting software used by operations, finance, IT, and marketing.

For more information, please visit: www.mirus.com

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