How Does the Wage Debate Affect Your Restaurant or Small Business?

Steve O'ConnorBusiness Operations, Cashflow, Employee Management, RestaurantLeave a Comment

Worried about a potential increase in the federal minimum wage? So are many other small business and restaurant owners. How might you balance the need to satisfy customers with a potential labor cost increase? Read more.

As summer draws to a close and we reflect on the last of our Labor Day Weekend barbeques, employee wages are again at the center of legislative debate. At the same time, quick service restaurant workers have been organizing in demand for higher wages in an industry already marked by traditionally low margins. An August 2013 article in QSR says,

Operators, who by and large have very low profit margins—the typical restaurant has earnings before interest, taxes, and amortization (EBITA) of around 3 percent, according to the National Restaurant Association (NRA)—are left to figure out how much they can pay employees and remain profitable, while also helping them make ends meet and be satisfied with their jobs.

According to the NRA, labor and food costs are the two most significant line items on a restaurant’s balance sheet. Thus, the NRA says, any increase in the federal minimum wage would have negative effects on the small-business-dominated industry.

Today, many restaurant and small business owners are grappling with the question: what happens to my business if the minimum wage increases? The NRA foresees reduced employee hours, postponement of expansion and/or new hiring, and reductions in workforce.

Restaurant Cash Advance Offers Alternatives

While the NRA anticipates a reduction in workforce should the federal minimum wage increase to $9/hour, the reality that small business owners face is not so cut and dried. Reducing workers may mean reducing the number of customers you can serve, thereby reducing customer satisfaction. To many of you who’ve dedicated your lives to your small business, that’s simply unacceptable. You set up your business because you wanted it to survive—so you look for financial and cash flow alternatives to keep your business running at optimal capacity.

A restaurant cash advance, or merchant cash advance, offers one alternative to restaurant financing that can help your business overcome the short-term hurdles that a potential federal minimum wage increase may present. Instead of waiting for the wage debate to play out in Congress, many savvy restaurant owners are already exploring their restaurant cash advance options and securing those financing solutions before payroll concerns have a chance to hit their bottom line.

Unlike traditional small business loans, the merchant cash advance application process is simpler, faster, more straightforward, and less fraught with paperwork—helping restaurant and small business owners focus on the core business.  When access to cash is crucial (for example, when you need to fund payroll), the restaurant cash advance offers a viable alternative to restaurant financing requirements.

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