Washington Restaurant Market Watch: Restaurateurs Find New Ways of Coping with Rising Costs

Washington Restaurant Market Watch: Restaurateurs Find New Ways of Coping with Rising Costs https://wahospitality.org/wp-content/uploads/2016/06/restaurant0616a.jpg

By Paul Schlienz

Costs of running a restaurant are going up. And there seems to be no end in sight.

Higher minimum wages, new technologies, paid family leave and numerous other expenses are forcing restaurateurs to find new ways of bringing in revenue.

“The cost of doing business is just crazy,” said Chef Hugh Acheson during a panel on adaptation at last week’s Food & Wine Classic, in Aspen, Colorado.

Tom Douglas, Seattle’s well known chef and owner of 18 restaurants, also weighed in on the ever rising costs of doing business at the forum.

“If we only had restaurants we would be out of business,” Douglas said, in reference to his cookbooks and line of rubs and sauces. “The restaurants would not be able to sustain this hit.”

Douglas describes margins for Seattle’s restaurants as “thin.” Due to Seattle’s new $15 minimum wage law, his payroll will be around $5 million more during 2016. This is on top of an impressive array of benefits he has long offered his employees, including health care. This year he also dropped tipping in his restaurants — customers were already leaving tips that averaged 19.1 percent — replacing those tips with a 20 percent service fee in an effort to reduce wage inequality between back-of-house and front-of-house employees.

Recently, he implemented paid time off and will soon add paid family leave to his benefits.

Due to Seattle being “a very expensive place to do business right now,” in Douglas’ own words, his company made the decision to sacrifice profits this year.

“It turns out that was a good plan,” Douglas said, “because that’s exactly what happened.”

The pressures Douglas labors under are not exclusive to Seattle.

“It’s so tough to live in Boston right now with rents and developers,” said Barbara Lynch, a James Beard Award winner who runs eight restaurants. “Believe me, I want to make money, but I don’t want to do another brick and mortar.”

Lynch is now looking at developing new revenue streams through cookbooks and e-commerce.

Technology is also impacting restaurants to the point that Douglas and Lynch wonder if it is really enhancing their customers’ experience with food.

Lynch, who questions spending on technology, including reservation platforms, because it “changes too quickly and is not consistent” is also not sold on data to give insights into customers’ preferences. She’d rather have her staff perform that function through interactions with her guests.

“That’s hospitality,” Lynch said.

With Uber Eats vehicles including ovens and fridges that guarantee five-minute delivery at lunchtime, 10 percent of Douglas’ business is now delivery.

“That’s where tech is taking us and it makes me sad, but that’s the reality,” said Douglas. “I can hardly keep up.”

Technology, labor costs, government mandates – they are all coming down fast on restaurant operators, and these pressures show no sign of abating.

Just this week, Washington, D.C., approved a new minimum wage hike, joining the ranks of a growing number of cities, including Seattle, which have enacted similar laws, profoundly impacting restaurants.

Like never before, restaurateurs have to be flexible and fleet on their feet enough to roll with the punches and adapt to the new realities.

“You have to keep going and reinventing,” Lynch said.