[MN] Stillwater cafe owner's 'minimum wage fee' makes political waves


#1

From the St Paul Pioneer Press

The Oasis Cafe in Stillwater this week found itself at the center of the fiery national debate over the minimum wage.

The restaurant’s owner, Craig Beemer, began adding a 35-cent charge to every bill starting Aug. 1. Labeled a “minimum wage fee” on each customer ticket, it was intended to offset the added cost of Minnesota’s new $8 per hour minimum wage, which took effect that same day, Beemer said.

(snip)

Beemer says it’s only his servers who make minimum wage, adding that, with tips, they regularly take home between $20 and $35 an hour. Dishwashers and cooks start at $10 an hour and $12 an hour, respectively.

“We’ve always taken great pride in attracting good people and paying them well,” Beemer said. “I truly care about these people.”

I personally think it would be a very healthy thing if businesses broke down how much taxes impacted the prices of items that consumers buy. While a minimum wage increase is not a tax, it is a government mandate.

For example, it used to be very common all over the US to see labels like this on all gas pumps:


#2

Of course the restaurant owner will run into trouble if the restaurant next door decides to eat the 35 cent increase in labor costs instead of trying to pass it on to the consumer. Obviously businesses want to pass as much of cost increases as they can onto the consumer, but if the market is competitive enough they may have to take a hit in the form of lower profits.


#3

They aren’t going to “eat” the increase. It will either be passed on in higher prices or adjusted for with fewer employees, cheaper ingredients or fewer raises to existing employees. Unless it’s a very high end restaurant, the margins are not that flexible.


#4

Can you provide some evidence on what their margins are and how inflexible they are?


#5

Just think too, how many restaurants fail as new businesses. I have a friend who opened up a restaurant. I hope they can make it work.


#6

How many restaurants fail because of the minimum wage?


#7

7 x 70


#8

Underestimating the actual fully expanded labor costs is one of the main reasons new businesses, including restaurants, fail. It’s hard enough to succeed with good planning let alone when an unexpected expense hits, like a government required change to your business plan.


#9

Sure (it took about five seconds).

Profit margins, however, varied according to the cost of the average check per person. Those with checks under $15 showed a profit of 3 percent. Those with checks from $15 to $24.99 boasted the highest profit margin at 3.5 percent. Finally, those with checks of $25 and over had the lowest profits, at 1.8 percent.

smallbusiness.chron.com/average-profit-margin-restaurant-13477.html

Note, a “high” profit margin is only 3.5% with a range from 1.8 to 3 percent. That’s VERY slim and very tight. About a third of a restaurant’s total operating cost is labor.

Compare that to a manufacturing operation which has margins of 25 - 35 percent. Much more flexibility there.

smallbusiness.chron.com/average-manufacturers-gross-profit-percent-15827.html


#10

I’m poor but I’d gladly pay .35 cents more per visit to boost the wages of those who often need it the most.


#11

I don’t understand this response.


#12

In Seattle the City Council voted in a $15/hour minimum wage with some exceptions for training periods, teens and the disabled. Tips are counted at a reducing percentage for a number of years of employment. The biggest problem with the law is that the phase in is 3 years for businesses over 500 and these include franchises, while smaller businesses have a 5 year phase in. A cost of living adjustment is included that projects that by 2024 the minimum will be over $17 an hour.

Subway sandwiches were estimated to go up by a dollar a sandwich at $15/hour but owners said that employment & service would be maintained to compete unfairly with non-franchise competitors who’s wages didn’t have to reach $15 an hour until 5 years from this spring when the law took effect. Another problem is the $5.5 dollar difference across the city limits. Shops close to but inside the City may be the most negatively affected.

In the current, low inflationary economic period the net impact should be close to a zero sum, but over the longer term the effect of the increases is inflationary, when an inflationary period comes the minimum wage will increase disproportionately and cause a minimum wage that is not affordable. $15 is affordable $8 not a factor at all.


#13

source?


#14

This is not the profit margin for this particular restaurant. How much does this increase in the minimum wage affect the margins at this particular restaurant?


#15

Quoted from Matthew 18:21-22 because nonetheless, it is applicable. Businesses that go under are countless.

We already know how difficult it is for businesses, especially start-ups to make it.

A lot of these are entry level jobs.


#16

How do you know that the reason that businesses fail is because of the minimum wage and not incompetence on the part of the owner or some other factor?


#17

By stories like this.

Paying higher wages also takes the chance away that the owner may give jobs to others.

Obamacare has already made a lot of full time jobs part time.

This is like all of the times, Wal Mart employees can vote on Unionizing, what do they do? They usually vote against unionizing.


#18

This restaurant has not gone out of business and as the owner states, the minimum wage does not affect most of the workers.

Paying higher wages also takes the chance away that the owner may give jobs to others.

It could take away the chance that the owner could earn higher profit as well, and since we don’t know the books of the business we cannot really say one way or another. Anyway this is irrelevant to your claim, your claim is that all of these businesses are going out of business because of the minimum wage.

Obamacare has already made a lot of full time jobs part time.

I am not sure how this is relevant to the question of whether the minimum wage is the cause of businesses failing.

This is like all of the times, Wal Mart employees can vote on Unionizing, what do they do? They usually vote against unionizing.

What does this have to do with the question of how the minimum wage is causing businesses to fail.


#19

Is that because working at Wal Mart is already a dream job? I’m sure pressure from management has no effect. :rolleyes:


#20

I don’t happen to know this restaurant owner personally, do you? We were talking about restaurants as a group of businesses. If labor is 30% of the overall cost of doing business of a restaurant and the labor goes up by 10% as noted in the OP’s link, we are talking about an increase of about 3% of operating costs due to this increase. If the margins are in the 2-3% range, there is no mathematical way that this could just be absorbed. It has to be either passed on or offset by cuts elsewhere.

Even if this particular restaurant was beating the averages and somehow operating on a 5% margin, a 3% increase in operating costs would cut profits in half. Would you be happy to take a 50% cut in your income in order to support raising the minimum wage?


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