How Will the 2015 Minimum Wage Increases Affect Your Restaurant?

Steve O'Connor2015 Trends, Employee Management, Marketing, Restaurant, Small Business TrendsLeave a Comment

A server holds two plates of modernist food.

2015 brings minimum wage hikes for a number of states, with more states to follow in the coming years. It may seem the only way to cope with this hike in labor costs is to raise the price of menu items and downsize your number of employees. These are not your only options to deal with this short-term hurdle.

The 2014 midterm elections brought on huge changes to the minimum wage discussion for many states, leaving small business and especially restaurant owners wondering how to compensate for the extra capital required for labor expenses. The United States Department of Labor posted its “Minimum Wage Mythbusters” in order to answer potential questions small business and restaurant owners may have regarding the minimum wage increases scheduled to take place this year.

A discussion about minimum wage would not be complete without addressing how federal tipped minimum wage – which has remained stagnant at $2.13 per hour since 1991 – fits into the upcoming changes in 2015. Lydia DePillis of The Washington Post goes so far as to call an increase in federal tipped minimum wage “devastating” for sit-down restaurant owners who have a majority of labor expenses in tipped wages, and would cause a huge number of job losses.The Department of Labor addresses this issue, citing San Francisco, California, where tipped employees must earn the state minimum wage of $10.74 before receiving tips. The DOL states, “Yet, the San Francisco restaurant industry has experienced positive job growth over the past few years according to the Bureau of Labor Statistics.”

Minimum Wage Increases By State

The National Conference of State Legislatures offers a list of nine states with a minimum wage increase that took effect on the first of this year, including Arizona, Colorado, Florida, Missouri, and Washington.

In addition to these nine states, four additional states (Alaska, Arkansas, Nebraska, and South Dakota) approved wage increases in 2014, with Illinois approving an advisory measure. These changes will take place over the next few years.

Compensating for Extra Labor Costs

If you own a restaurant in a state that either just had a minimum wage increase or will see one within the next couple of years, finding the right source of funding can be beneficial to maintaining your restaurant’s success. Over time, increasing minimum wages can have a positive impact on your customers’ cash flow, giving them more buying power. In the meantime, a capital advance can help overcome the payroll hurdle.

Taking advantage of a merchant capital advance can give you access to the capital needed to fund payroll without hitting your customers with increases in costs of menu items, which will inevitably turn them away. The restaurant cash advance offers viable alternatives to restaurant financing requirements and can keep your restaurant afloat while adjusting to increasing labor costs.

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