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How Do I Prepare My Restaurant To Sell Amongst Mandatory Minimum Wage Hikes?

Posted By: Joe Ranieri, Business Broker: LA, Orange County Areas

A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Here is some advice in handling this new increase.

Tags: buying a business, for sale by owner, selling a business

This is a topic many small business owners are having with themselves these days. A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Here is some advice in handling this new increase.

This is a topic many business owners are having with themselves, and major franchises, such as McDonalds, are reported to already be preparing for $15 an hour minimum wage in California by installing ordering kiosks in their stores. A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Many business owners are concerned about dealing with a 50% increase in labor costs over such a short period of time, and not only will they be paying $15 minimum wage, but many workers, such as employees who have been with the company for a while and supervisors make a few dollars over minimum wage, and so they will be making $17, $18 or $19 dollars an hour. The minimum wage hikes coincide with record low unemployment, so business owners will be fighting amongst each other for good labor, increasing wages even more.

1. Audit Expenses - Focus on two things which you can control, food costs and labor. With regards to labor, look for sales peaks/declines during the day and staff accordingly, appropriate staffing will improve profitability - gone are the days when an owner can have employees standing around or having 2 employees doing the same job when one will do. As a past business owner, I've seen employees dealing in food, waste an unbelievable amount, and so an owner should be very focused on lowering food costs.

2. Research laws/regulations on tips regarding servers/staff - Make sure as a restaurant owner you are up to speed on the latest and upcoming laws regarding tip pooling/tip sharing and how it impacts minimum wage amongst servers. Some restaurant owners have been talking about including a service charge in lieu of tips, this is somethings one should investigate and see if it works in their personal market.

3. Hire smart - There's an old saying, "Slow to hire, fast to fire." An owner who pays more for labor should expect more from the employee. An owner should really analyze the qualifications of a recent hire, but if they find that they are not working out, be tough and send them on their way.

4. Upgrade technology - If it is affordable, consider automation or introducing kiosks. Computer tablets have never been more affordable and are great ways to lower costs by having customers order from them. According to a USA Today article published June 7, 2018 there are advantages to ordering kiosks vs ordering at the counter, "What we are finding is when people dwell more, they tend to select more," McDonald's CEO Steve Easterbrook told CNBC Monday. "So there is a little bit of an average check boost that comes with it." An owner should also invest in monitoring cameras in their store and have them be viewable remotely from either a laptop at home or their smartphone. Monitoring cameras goes back to controlling food costs because of internal theft.

5. Increase Prices - This is tricky, because an owner always wants to build their business, but if it's possible analyze where there is a possibility of increasing prices on food items. This can be accomplished smoothly with the role out of a new menu board or new menus.



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