January kicked off minimum wage hikes in 21 states, and experts say rising labor costs are making it tough for some restaurants to keep their doors open.
Some 65 cities across the country rolled out wage increases at the start of the month. Cities in Colorado, Washington and California have some of the highest minimum wages in the U.S.
According to the Economic Policy Institute, Tukwila, Washington, has the highest minimum wage for non-tipped workers as of January at $21.10. Some of the other cities with the highest minimum wage this year include Seattle at $20.76; West Hollywood, California, at $19.65; Denver at $18.81; and San Francisco at $18.67.
Jot Condie, CEO of the California Restaurant Association, said for many restaurants, significant cost increases are not sustainable.
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“It’s no coincidence that restaurants in those cities where you see these super-high minimum wages have struggled to survive and the closure rate in those cities for restaurants far exceeds, you know, the closure rates in other parts of the state,” he said.
Condie said restaurants also have low pre-tax profit margins, some between 3% and 5%, leaving little room for error.
Food and labor costs are the biggest expenses for restaurants, each taking up roughly 33 cents of every dollar in sales, according to the National Restaurant Association.
Some restaurant owners in Denver are still figuring out how to balance their budgets so they can keep customers coming in and staff happy.
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Joshua Miller is an employee at Sarpino’s Pizzeria in Westminster, a northwest suburb of Denver. Miller said he started out doing pizza delivery and has enjoyed his time learning skills in the kitchen. He added that making above minimum wage helps him earn a living amid the rising costs of living.
“Minimum wage helps with my rent. Gas prices.” Miller said.
Samar Sawaged is the owner of the Sarpino’s franchise, and said she pays all her employees above minimum wage. Sawaged said many businesses like hers are offering higher salaries than minimum wage.
“Our big challenge here is other pizza places,” she said. “People are fighting over hourly wages to get more and more.”
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Sawaged said she finds additional ways to help her employees financially with opportunities for bonuses.
Chi Lee owns Chi’s Express, a chinese restaurant in Denver. Lee said the restaurant has less than 10 employees, and that helps him balance its budget.
“Because we have a small operation, a small menu, as you can see,” Lee said, “so that’s why our costs, our food costs will be a little bit down.”
Lee said they have adjusted to inflation by raising their combo meal prices.
It takes around 12 employees to generate $1 million in sales in a restaurant, but it only takes about four employees in a clothing store to generate the same amount, according to the National Restaurant Industry.
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