While restaurant workers in New York City have won the fight for $15, many small NYC restaurants are struggling to provide for both their employees and customers. Businesses in the city with a staff of 11 or more are already required to pay employees a minimum wage of $15.00 per hour. As of December 31, 2019, however, this rule will apply to all businesses — bumping the minimum wage for those with a staff of 10 employees or less from $13.50 per hour to $15.00 per hour.” As this change takes effect, smaller restaurants are likely to feel the biggest impact.
Many restaurant owners are not against paying wages that are able to help workers keep up with the cost of living. In fact, many restaurateurs have seen the negative effects of low wages in recent years as many of their former employees have been priced out of the city. However, finding ways to maintain profit margins amid rising expenses has proven difficult for those who have already gone through the wage hike.
While some restaurants have tried to cope by increasing the cost of their menu items, most have found this solution to be unsustainable. There is always a limit to what customers are willing to pay for a meal, and sales tend to decrease when prices increase.
Other restaurants have closed storefronts, fired staff, and cut back hours as a way of accommodating rising payroll costs. Additional savings measures include reducing professional development programs and removing labor-intensive dishes from the menu. These cuts come with additional costs, however. When staff attempt to do more with less, quality suffers. Customers will take notice of a change in service, and are unlikely to return if their expectations aren’t met.
Additional restaurants have found that their best solution to the issue of increased minimum wages is to move to a smaller location. New York restaurant owners already know how to make the most out of small spaces, making this a viable option for some restaurants currently operating out of a larger location. For restaurants offering more casual dining experiences, market-style operations are also an option. Operating a stall in these communal areas allow vendors to share the cost of rent and require less staff to operate the storefront.
Since the $15.00 minimum wage hike took effect for larger businesses last September, many restaurants have been hit hard. One study of 324 full-service restaurants by the New York City Hospitality Alliance found that over 76 percent of respondents had reduced employee hours as a result of the mandated wage increases. Over 36 percent of responded had eliminated jobs as a means of coping with increased costs. At the time of the survey, an additional 47 percent of respondents anticipated eliminating additional jobs in response to minimum wage increases.
While the minimum wage hike for small businesses doesn’t take effect until the end of the year, many small restaurants are already bracing themselves for the impact. Based on what’s been learned from larger businesses already affected by wage increases, restaurant owners will need to find creative ways to maintain their profit margins without losing efficiency or customers.
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