Compensation | KRG Hospitality

AI-generated image of a $20 bill with a cheeseburger covering the president's face, in street art style

April 17, 2024by krghospitality krghospitality No Comments

Rocky Start to Cali’s Fast-food Wage Hike

Rocky Start to California’s Fast-food Wage Hike

by David Klemt

I instructed AI to draw a cheeseburger on a $20 bill, in street art style. Enjoy.

We’re barely two weeks into the $20-per-hour wage hike for fast-food workers in California and not everyone is happy with the results thus far.

That is, of course, if reports are accurate. However, the stories coming out of the Golden State are raising eyebrows.

On April 1, the minimum wage for fast-food workers in California jumped to $20 per hour. On the surface, AB 1228 appears to be a victory for hourly hospitality professionals employed by fast-food concepts.

Unfortunately, once we go beyond the surface, things aren’t that cut and dry.

Operators in California are implementing all manner of adaptations in response to the state’s minimum wage boost:

Increasing menu prices.
Cutting staff hours.
Reducing staff.
Decreasing operating hours.
Closing one or more days of the week.
Postponing updates and upgrades.
Focusing on delivery.
Introducing automation.
Putting items that require less labor on the menu.
Closing locations permanently.

It should go without saying but a wage increase doesn’t do much good if one’s hours are reduced significantly. Further, it does zero good if one’s employer shutters the workplace.

Per reporting, that’s precisely the situation team at one Fosters Freeze location is in currently. On April 1, workers at a Lemoore, California, location received a group text explaining that their restaurant was closing permanently. Understandably, some staff thought the text was an April Fool’s Day prank.

Certainly, the Lemoore Fosters Freeze isn’t the only restaurant closure related directly to the minimum-wage hike. Nor, it seems, will it be the last.

More Pain Points

When people hear about fast-food menu price increases, the assumption is that guests will reduce visits. Or, perhaps they’ll adjust their usual order. Alternately, some people anticipate guests will give their business to a different fast-food brand.

However, there’s another result that some fast-food operators in California are anticipating or experiencing already.

At a certain point, perception of value is affected negatively. Eventually, a consumer will perceive more value in visiting a full-service restaurant than a QSR or LSR. So, it’s likely that fast-food operators in California will lose guests to traditional “sit-down” concepts.

Should that possibility become a reality, traffic will drop. When the traffic drops, workers’ hours are reduced. Some operators, therefore, will lose staff to FSRs; people need to go where the work and money are, after all.

So, beyond the need to adapt to comply with the new minimum-wage law, fast-food operators must compete with FSRs to keep staff and guests.

What’s a Fast Food Restaurant?

Curious about how California defines “fast food restaurant” in AB 1228, I looked up the text of the bill.

The relevant parts are found under section 1474:

“(a) ‘National fast food chain’ means a set of limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service. For purposes of the definitions in this part, ‘limited-service restaurant’ includes, but is not limited to, an establishment with the North American Industry Classification System Code 722513.”

1474 also includes the following:

“(c) (1) Except as provided in paragraph (2), ‘fast food restaurant’ means a limited-service restaurant in the state that is part of a national fast food chain.”

Interestingly, there’s also this exemption:

“(2) ‘Fast food restaurant’ shall not include an establishment that on September 15, 2023, operates a bakery that produces for sale on the establishment’s premises bread, as defined under Part 136 of Subchapter B of Chapter I of Title 21 of the Code of Federal Regulations, so long as it continues to operate such a bakery. This exemption applies only where the establishment produces for sale bread as a stand-alone menu item, and does not apply if the bread is available for sale solely as part of another menu item.”

Further, AB 610 carves out more exemptions.

Accusations of Corruption

The bakery exemption is fueling accusations of corruption.

Per reports, the exemption is quite favorable for Panera Bread. Why is that particular chain being held up as an example of special treatment and corruption?

As it turns out, should reporting prove accurate, a Panera Bread franchisee and billionaire named Greg Flynn is a Governor Gavin Newsom campaign donor. It’s claimed that Flynn has donated more than $200,000 to Gov. Newsom.

Last month, Flynn, in response to what has been dubbed “PaneraGate,” stated that the minimum wage at his franchise locations would rise to $20 per hour. This announcement was, Flynn claimed, to remain competitive, and in no way a reaction to the controversy surrounding what many perceived to be a favorable exemption for a donor, high school friend, and past business partner.

Again, California is barely two weeks in to this mandated pay rise. To say it’s early days is an understatement. There will be further consequences and adaptations for months and years to come.

So far, however, while many workers and even business owners are happy with the new law, some are already sounding alarms and pushing back.

Image: Shutterstock. Disclaimer: This image was generated by an Artificial Intelligence (AI) system.

February 14, 2024by David Klemt David Klemt No Comments

TOTCF Unveils National Policy Initiative

TOTCF Unveils National Policy Initiative

by David Klemt

Yesterday, the Tales of the Cocktail Foundation announced the launch of their Policy Initiative, intended to update outdated labor standards and pay.

Along with advocating for both bartenders and servers, the initiative seeks to raise the subminimum wage to $2.13.

This news comes on the heels of the completion of an in-depth survey. The TOTCF surveyed more than 510 bartenders and other hospitality industry professionals about pay and other compensation.

In particular, more than half of bar workers want employers to provide health insurance. On the restaurant side, servers want to say increases in pay.

There’s much more, of course. Please visit this link to discover the finer details of the TOTCF Policy Initiative. Additionally, you’ll find TOTCF’s press release in its entirety below.

INTRODUCING THE TALES OF THE COCKTAIL FOUNDATION® POLICY INITIATIVE

TOTCF introduces a national initiative aimed at policy change in support of the hospitality community with first priority centered on improving labor standards for bar professionals

NEW ORLEANS, LA (February 13, 2024) — Tales of the Cocktail Foundation® (TOTCF) is pleased to announce the launch of the Tales of the Cocktail Foundation Policy Initiative, a multi-faceted effort designed to amplify and advocate for improved benefits and resources for hospitality professionals in the United States. The TOTCF Policy Initiative – which includes a robust nationwide survey and research project, coupled with support from the initiative’s advocacy committee members and partners – will catalyze an extensive campaign to create policy reform and positive change within the food and beverage community.

“Supporting an industry that has been historically underserved – from lack of industry research, common resources to educate and inform, and funding for coalitions – is crucial in breaking the cycles that have made it difficult to build a lifelong career in hospitality,” said Tales of the Cocktail Foundation CEO Eileen Wayner.

Intended to shift antiquated and subpar labor standards through industry support of positive policy action, the TOTCF Policy Initiative’s objectives include providing resources for employees and employers on labor standards and protections, conducting research and supporting efforts toward effective policy changes, information on healthcare access and benefits, sexual harassment training, and youth worker engagement – all with an emphasis on diversity and inclusion. The TOTCF Policy Initiative, along with its Bar Professional Policy Network Hub, will assist with the organization of grassroots development and advocacy efforts in industry professionals’ local communities, providing opportunities for advocates to be directly involved in policy and reform in their own communities.

“Given our unique position within the industry, we want to offer platforms and resources for productive conversations between policymakers, industry executives, bar owners and operators, and bar professionals, to ensure existing and future policy changes are reflective and inclusive,” said Tammera Catchings, Government Affairs Manager for Tales of the Cocktail Foundation. “For TOTCF, the process begins with supportive research data and intricate data analysis of bar industry professionals and their work.”

The Policy Initiative is centered around improving labor standards for hospitality professionals around the country and supporting increased protections that will help ensure bartending and serving are viable, long-term careers. One of the first priorities of the TOTCF Policy Initiative is to support efforts to increase the subminimum wage of $2.13 for bartenders and servers. Since 1990, employment in the hospitality industry has grown over 85%, while overall private-sector employment grew by only 24%. With more than one in ten U.S. workers employed in the hospitality industry, increasing the wage floor and improving labor standards would significantly improve the well-being of millions of Americans and their families and help reduce long-standing race and gender-based wage inequities.

Launched in spring 2022, Phase One of the Policy Initiative consisted of a robust research project, which culminated with an industry-specific data collection completed by more than 500 bartenders and servers nationwide, targeting topics such as job quality, compensation, tip culture, health benefits, and more. This research, which was analyzed by Dynata, the nation’s largest first-party data company, resulted in a compilation of data that highlights key trends in the hospitality community. By effectively utilizing the survey data to start a progressive dialog amongst hospitality executives, politicians, and advocates, the TOTCF Policy Initiative will encourage significant changes in the economic and labor standards for all bartenders and servers in the country. Research results will be published as analyzed on the Tales of the Cocktail Foundation Policy website in April 2024. In Phase Two of the initiative to support positive policy reform, TOTCF is partnering with Florida International University Chaplin School of Hospitality and Tourism Management to conduct further research and analysis into industry labor standards, culminating in research publication at the end of 2024.

TOTCF Policy Initiative Committee Members

TOTCF is pleased to share the collective of industry professionals who are dedicated to advancing and overseeing the Policy Initiative:

Zen Castro: New Orleans, LA – Espiritu Mezcaleria Restaurant, Bartender; BeachBum Berry’s Latitude 29, Bar Back
Jayanthi Daniel: Los Angeles, CA – Restaurant Workers Community Foundation, Executive Director
Lauren Darnell: New Orleans, LA – Made IN New Orleans, Executive Director
Amanda Gunderson: Los Angeles, CA – Another Round Another Rally, Co-Founder
Kaiden Hope: New York, NY – Beam Suntory, Multicultural Portfolio Associate
Alex Jump: Denver, CO – Focus on Health, Co-Founder and Director of Operations
Jesse Maguire: New York, NY – Beam Suntory, U.S. Trade Engagement Manager
Lynnette Marrero: New York, NY – American Bartender, Mixologist, and Philanthropist
Robin Nance: Albany, IN – Strategic Branding Expert
John Reyna: Dallas, TX – Texas Hospitality and Non-profit Law Center, Managing Attorney

Government Affairs Manager

Tammera Catchings, J.D., M.S.: Ridgeland, MS – Tales of the Cocktail Foundation

To learn more about the Tales of the Cocktail Foundation Policy Initiative and get involved, join the Bar Professional Policy Network. You can learn more about The Foundation via the Tales of the Cocktail Foundation website, Instagram, Twitter, and Facebook.

About Tales of the Cocktail Foundation

Tales of the Cocktail Foundation is a non-profit organization that educates, advances, and supports the global hospitality industry and creates lasting impact in our host communities. Tales of the Cocktail Foundation is the global leader in spirits education and a platform to tackle issues facing the industry. The pillars of the Foundation are to Educate, Advance, and Support the hospitality industry through programs that benefit individuals and organizations in the community and to make a lasting impact in communities that host our events. This year, TOTCF hosts its 22nd Tales of the Cocktail® (TOTC) conference in New Orleans from July 21-26, 2024, and celebrates the theme Inspire.

Image: Cory Fontenot

January 17, 2023by David Klemt David Klemt No Comments

American Trends 2023: Technomic

American Trends 2023: Technomic

by David Klemt

Foodservice research firm Technomic has some interesting predictions for the hospitality industry in the United States of America this year.

On the topic of operations, Technomic foresees more negotiating power among workers. Additionally, the firm looks at both the economy and pent-up guest demand.

When it comes to food, the US and Canada have a trend prediction in common. And as the image atop this article signifies, a particular color may be a hit on menus in 2023.

Before we jump in, Technomic’s 2023 Canadian trend predictions are here. Last year’s Technomic predictions for America are here. Curious readers can review the firm’s 2023 predictions in their entirety here.

Okay, let’s go!

Think Pink

I want to address this prediction first. According to Technomic, pink is going to be the F&B color of 2023.

As they explain, the color is fun, nostalgic, and photogenic. Yes, operators must still consider the Instagram-worthiness of their menu items. That may change one day, but it’s not today.

Per Technomic, pink also signals that a food or drink may have antioxidants.

Some of the items the research firm names specifically: pink pineapple, pink salt, pink celery, cara cara oranges, and schisandra berries.

Pickle It

This is the culinary trend that, per Technomic, Canada and America will share in 2023.

Along with fermenting, pickling gives the kitchen and bar teams a unique experimentation method to explore. So, encourage these teams to get creative and add pickling and fermentation to your next menu update.

Of course, that’s not the only reason to consider putting pickling front and center. For many, these preparations indicate a healthy F&B choice. Think kombucha, as an example.

As we know, healthy choices continue to be top of mind for many guests.

One more note: Technomic suggests being transparent and identifying the pickling and fermenting processes your team leverages to produce each menu item.

Economics

For those looking for a bit of optimism in these trying times, Technomic may have what you’re looking for. This year’s report, What We Foresee for 2023, says the following about the possibility of a recession:

“There is reason for optimism in the coming year, however, as any recession is expected to be relatively mild.”

Yes, that’s just one source’s opinion. However, Technomic is known for their voraciousness when it comes to data. So, if this firm is optimistic it could be a solid sign that things are looking up in 2023.

“Pent-up consumer demand” and variations thereof have been making the rounds since 2o21. However, it’s still a relevant phrase.

As it pertains to 2023, Technomic believes on-premise dining may “bounce back” this year. In fact, the firm suggests that people want to socialize and dine in person now more than ever.

Also, delivery and pickup times appear to be growing. So, plenty of people will see in-person dining as the more appealing option in 2023.

Operations

In part due to legislation addressing minimum wage and workplace conditions, employees may have the upper hand this year.

Add the fact that many people seeking work know many operators are dealing with a labor shortage and their negotiating position looks even stronger.

So, we could finally be in for a significant change when it comes to how the industry looks at compensation. More and more workers—and the guests they serve—are taking issue with tipping. Instead, many people outside and inside of the industry want to see operators pay staff a competitive, living wage.

Of course, there are also the hospitality professionals who prefer tips to minimum wage. In 2023, the industry could experience the start of a sea change. Time will tell.

For more predictions and this Technomic report in its entirety, please click here.

Image: Alex Gruber on Unsplash

October 21, 2022by David Klemt David Klemt No Comments

Cali Chains Move Quickly to Kill FAST

California Chains Move Quickly to Kill FAST

by David Klemt

If recent reporting is accurate, fast food chains with locations in California are fighting the Fast Food Accountability and Standards Recovery Act.

Several well-known restaurant chains have reportedly already dumped well over $10 million into a ballot drive effort. Among the chains lobbying to kill the bill are In N Out, McDonald’s, Wendy’s, and Chipotle.

In other words, the group of chains aiming to defeat AB-257 in California have very deep pockets. These heavy hitters are reaching deep to contribute millions of dollars to Save Local Restaurants, the coalition responsible for starting the ballot initiative.

And who are the Save Local Restaurants coalition members? The National Restaurant Association (NRA), US Chamber of Commerce (USCC), and International Franchise Association (IFA).

What is AB-257?

The Fast Food Accountability and Standards Recovery Act, also known as the FAST Act, is a California bill. Enacted on September 5 of this year, FAST amends a section of the state’s labor code that relates to food facilities and employment.

Click here to review the bill’s text in its entirety.

To summarize, FAST does the following:

Establishes the Fast Food Council, ten members appointed by the Governor, the Speaker of the Assembly, and the Senate Rules Committee. The council will operate until January 1, 2029.
Defines “the characteristics of a fast food restaurant.”
Gives the Fast Food Council the authority to set “minimum fast food restaurant employment standards, including standards on wages, working conditions, and training.”
Provides the council the power to “issue, amend, and repeal any other rules and regulations, as necessary.”
Allows the formation of a Local Fast Food Council by a county, or a city that has a population of more than 200,000.

It’s that third bullet point that likely stands out the most to chain operators. On January 1, 2023, California’s minimum wage increases to $15.50 an hour. If the Save Local Restaurants ballot initiative fails, the Fast Food Council could boost the minimum wage to $22 per hour right after we all yell, “Happy New Year!”

Proponents say the bill protects the health, safety, and welfare of fast-food workers. Opponents call it radical.

Fighting FAST

According to Save Local Restaurants, it’s not just chains that want to kill FAST:

“The FAST Act is opposed by small and family-owned businesses, minority-rights groups, workers, consumers, your favorite restaurants, taxpayers and community-based organizations,” reads their website.

Among their reasons for attempting to kill the bill are:

a resulting increase in the price of food;
the elimination of thousands of jobs in California;
an increase in the cost of living in the state; and
the millions of dollars the coalition claims the bill will cost California taxpayers annually.

Reportedly, full-service restaurant operators also oppose FAST. The reason is simple: If the Fast Food Council hikes fast-food worker minimum hourly wages significantly, FSRs will struggle to compete. FSR operators will have to hike menu item prices further, a situation that’s growing untenable as consumers balk at paying more at restaurants.

Then, there’s the fact that bills similar to FAST could pass in other states. So, chains are contributing millions to see that the Save Local Restaurants ballot initiative succeeds.

Should the effort be successful, FAST will be included on California’s 2024 ballot. That means it will be suspended until 2024 and be in the hands of the voters.

Image: Tima Miroshnichenko via Pexels

June 9, 2021by David Klemt David Klemt No Comments

Tip Elimination is Back on the Table

Tip Elimination is Back on the Table

by David Klemt

Several operators across the country feel that as we emerge from pandemic life, now is the time to once again try eliminating tips.

Back in 2015, Danny Meyer made a decision about tips in his restaurants that sent shockwaves through the industry. Over the course of five years, Union Square Hospitality Group (Meyer’s group) implemented a hospitality included policy to eliminate tipping.

To be sure, it wasn’t only Meyer’s restaurants that examined and put no-tipping policies in place. However, Union Square was certainly among the highest-profile operators to try it out.

Good Intentions

Per the CEO of Union Square and founder of Shake Shack, attempting to do away with tipping was about promoting equity in the hospitality.

Tipping has been linked to the propagation of sexism, racism, harassment, and exploitation.

Meyer has also said that he believes it leads to wage instability, and studies have shown it contributes to outright wage theft. And, as anyone who has worked in a restaurant knows, tipping can create a gap—and therefore tension, among other issues—between the front of house and back.

However, it has proven difficult to for no-tipping policies to take hold. This is in part because tipping is so ingrained in American society. And, of course, there’s also the issue of increasing menu prices; some people are fine with tipping but not with paying more for menu items.

Guests aren’t the only individuals who have pushed back against eliminating tips. Unsurprisingly, the very people Meyers and other operators are trying to help have rejected no-tipping policies.

Many servers and other FoH staff have made it clear that they’re not interested in working for an operator who eliminates tips.

Reinstatement of Tipping

Around eleven months ago, Meyer announced he would reverse course on his hospitality included policy. According to reporting, Meyer had done so not because of pushback against increased menu prices (about 15 to 20 percent to cover increased labor costs).

Rather, the five-year experiment never worked exactly as Meyer and Union Square had hoped. As he told Pulitzer Prize-winning journalist Jonathan Capehart during a Washington Post Live conversation back in March of this year, the policy wasn’t sustainable.

“It worked to a degree, but it was not sustainable, and the biggest reason it wasn’t sustainable was we could never quite do all the things we wanted to do for our team members like make sure that a formerly tipped employee could make as much as she made when she was tipped, make sure that we had a 401(k) plan, make sure we had a really, really generous family leave policy,” Meyer told Capehart.

And then there was the impact of the pandemic. Meyer finally pulled the plug on his no-tipping policy after New York allowed restaurants to reopen for outdoor dining a year ago. Reportedly, Meyer didn’t see how he could stand in the way of his staff making additional money.

2021 Experiment

Interestingly, several news outlets are reporting that operators around the country are at least considering doing away with tips this summer.

Again, this is at least in part due to the pandemic. Restaurateurs who have wanted to implement policies similar to Meyers’ Hospitality Included see this year as the time to try.

We still don’t know exactly what post-pandemic life will be. However, a hospitality industry reset is certainly coming—and it’s absolutely overdue.

So, it does make sense that as operators can change guest and staff perception of tipping and living wages as we all emerge from pandemic life and face a new world.

For example, the Chicago Tribune has reported that Big Jones, owned and operated by Paul Fehribach, has implemented service fees so he can cover offer servers between $18 and $25 per hour. A 20-percent fee for in-person dining or placing an order with a live person, and a 10-percent fee attached to online orders go to Big Jones payroll.

While there has been some pushback, the Chicago Tribune reports that Fehriback says Big Jones reactions are trending toward the positive.

It’s possible that tip elimination simply doesn’t work for some restaurant categories. As an example, those policies may work out in the casual dining space but not fine dining. Time will tell if it works at all.

Image: Sharon McCutcheon on Unsplash