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Why the restaurant industry doesn't support minimum wage hike

The U.S. House of Representatives approved the bill to nearly double the minimum wage over six years, but it probably won't advance in the Republican-led Senate.

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July 18, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

The National Restaurant Association has stated its opposition to a proposed bill that would increase the minimum wage to $15 per hour passed Wednesday by the U.S. House of Representatives. Sean Kennedy, the association's executive vice president of public affairs, said a nonpartisan analysis by the Congressional Budget Office found that the bill, H.R. 582, would reduce salaries currently averaging $19-25 per hour and cripple small and family owned businesses.

H.R. 582 would increase the federal minimum wage from $7.25 per hour to $15 per hour in six annual steps, then adjust the wage each year thereafter to keep pace with the median hourly wage, according to the Congressional Budget Office.

The U.S. House of Representatives approved the bill on a 231-199 vote, fulfilling a campaign promise of Democrats who control the chamber, according to a Bloomberg report, but has lttle chance to advance in the Republican-led Senate.

Matt Ensero, CEO and founder of Wing It On Franchising LLC, a Waterbury, Connecticut- based fast casual chain, isn't a fan of the bill.

"The politicians supporting this bill either have no idea how an economy works or they are choosing to be willfully ignorant in order to appease their voter base," he said in an interview.  "The benefits they proclaim completely disregard the second and third order consequences in favor of short-term optics. An artificially manipulated wage increase forced upon restaurant and food truck operators that is not in lockstep with our economic reality will only result in an increased investment in automation and a reduction in the number of entry-level jobs offered.

"Unfortunately, another side effect of the government mandated wage hike will be reduced salaries and/or delayed raises for those in our industry who have worked hard to make it into management roles," he said. "Those receiving a $15-per-hour wage for unskilled entry level work will not see any increase in purchasing power as small businesses will respond by raising prices on many of the goods they purchase on a regular basis."

Wing It On! brick-and-mortar stores' average manager is paid $15 per hour while cooks are paid between $11.50 and $13.50 and cashiers get $10.10 to $11.50 per hour, Ensero said. One food truck manager receives $14 per hour with an end-of-year bonus equivalent to 10% of net profits, while three other food truck employees make state minimum wage of $10 an hour plus tips that bring their average pay to over $20 an hour, Ensero said.

"I fully support it if the general public supports paying $22 for sandwiches," Ketih Hill, co-owner of I Love Bacon in Huntsville, Alabama, who operates two food trucks and a brick-and-mortar restaurant, told Food Truck Operator. "We pay over minimum wage and cut our cooks in on tips, so they all make over the $15/hour mark now. But mandated wage increase will definitely increase prices for consumers." 

"This will definitely affect the industry because consumers do not realize that with this increase all expenses are increased," said Kyle Hollenbeck, co-founder of Aioli Burgers & Catering in Phoenix, which operates seven food trucks, a restaurant and a catering business     . "My payroll doesn't just go up, so do my purveyors which in turn increases the product I am purchasing from them." 

"We were paying $3 more an hour plus tips for our food truck staff before Arizona raised it to the current plan they have now  and it made it harder to be competitive with pay," Hollenbeck said.  "We currently charge around $7-$10s for a burger. If this (wage increase)  was to happen, I am sure the burgers would need to be sold closer to $15 a piece. We currently have 20-plus employees and we pay between $11-$15 plus tips. Their tips can be as much as $10 more an hour."      

Ten years ago was the last time Congress raised the federal minimum wage, but 29 states and Washington, D.C., have higher minimim wages with seven approving $15 per hour minimum wages. 

H.R. 582 is unlikey to make it to the Senate as Senate Majority Leader Mitch McConnell has already said he won't bring the legislation up telling Fox Business Network that it would "depress the economy at a time of economic boom."

Kennedy agreed saying that the bill was the wrong wage at the wrong time.

"It could end up having the unintended consequence of eliminating up to 3.7 million jobs," Kennedy said in a prepared statement. "Our industry's 15 million employees are our greatest asset and we support a commonsense approach to minimum wage that would benefit employees and ensure that restaurants remain part of the fabric of their communities."

About Elliot Maras

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Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.