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At Fast Casual Exec Summit: Why raising wages NOW is a good idea

Halving employee turnover and ensuring your business future are two key advantages that three veteran restaurateurs said they realized after raising their wages now, instead of waiting for what they believe is the "inevitable" to happen.

October 27, 2016 by S.A. Whitehead — Food Editor, Net World Media Group

If you could cut your employee turnover rate in half, would you do it?

Or, what if you could ensure future success for your business by paying your employees more?

Three executives discussed how they conquered both in a session, "Paying a Living Wage: Why it's Not Impossible," at this year's Fast Casual Executive Sumit in Dana Point. Blazing Onion CEO and Subway franchisee David Jones, Asian Box President and CEO Frank Klein and Boloco co-founder John Pepper weren't shy about sharing their thoughts on the subject of paying a higher minimum wage.

All three said federally and/or locally mandated higher wages were inevitable and that paying their employees more was also the right thing to do. Each has made the move already in that direction at their restaurant operations, including Jones with his 17 Subway restaurants around Seattle, where the minimum wage has already increased under local law to $13/hour this past January. It will grow to $15/hour this coming January.
 
Jones saw the writing on the wall and got ahead of the legally required higher rate by raising the wage for staff at his franchise locations well in advance. In his view, it was one of the best moves he could make. 

"I tell you to do it now," he said to the packed room of restaurant executives at the Marriott in Dana Point earlier this month. "Be ready. It's going to happen. But figure out a plan and move to it and then retain that (cost) culture. … It's working for us. … We cut turnover in half.”

The men suggested that all businesses should start moving in that direction now in order to work out the inevitable kinks encountered when taking operations to a new cost culture.

"I agree that we need to make decisions now on how to make up for these extra wages," said Klein. "So for instance, do we install kiosks instead of using employees as order takers? 

"It's going to create a different business model… which was very obvious to us that it was going this way five years ago. … We don't cut shifts, but we did some predictive modeling and looked at two things we sell and came up with a 9-man model. … Then we said, if we employ X number of people at this hour, what do we need to do with our business model to make that make sense?”

For instance, Klein said he augmented his staffing model by offering days off to employees who, for whatever reason, just don't think they will be productive on a particular day. The allotment of these days allows them to take that day off as a flex day without losing their jobs.

"We have a fund for this to pay them on those days," he said.

In essence, the men said they believed the restaurants that will survive the coming changes are those who take the luxury of the time they have now to start working up new plans to support a higher-paid workforce, while still retaining the basic culture they seek for their businesses. That means considering everything and the role it plays in the business, then figuring out ways to drive maximum results out of each factor in the existence of a higher-wage business model. 

"Don't just panic and cut labor," said Jones. "Keep your culture and service elements … and if anything, step up that culture. After the first two months (of instituting a new cost plan) things will settle down. …

"If I paid, for instance, what my competition is paying last year, I would make $1.2 million extra," Pepper said.  "But instead we lost $350,000 last year. But we are going to continue to pay these wages and stick with our plan and not react at the last minute and make big mistakes. My plan is not that — my plan is to thrive and I'm going to stay in business."

Other suggestions for those considering raising wages now from the panel included: 

• Consider adding catering if you don't already for added income.
• Charitable outreach is a great way to do great things and bring in new customers.
• Amp up your website, social media and online ordering to communicate better and reach missing demographics. 
• Consider iPad ordering in-restaurant.
• Pilot test new efficiency technologies.
• Re-evaluate training for opportunities to up-sell, expedite service and enhance on-the-job efficiency.
• Be transparent with employees and customers.

Register here for the 2017 Summit, Oct. 22-24 in Nashville.

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.