Coleman Main Street Wednesday — $15 Minimum Wage Forces Seattle Restaurant to Raise Prices 21%, but Eliminates Tipping

April 8, 2015

By Bob Coleman
Editor, Main Street Wednesday

Last month I calculated restaurants would have to raise prices 7% to compensate for the first incremental increase in the city’s minimum wage to $11 an hour on April 1. There would be periodic mandated scaled increases to get to $15.

The upscale Ivar’s Salmon House has gone all in and moved to the $15 level immediately.

It also raised menu prices 21 percent. The famous Fish ‘n Chips will run you $20.60 and the Wild Alaska Halibut is now $43.50. But, the restaurant eliminated tipping. Ivar’s estimates the cost to their patrons will increase by only 4%.

This is how Ivar’s changed their employee compensation model:

‘We took the average tip given by our customers over the past three years (17%) and included it in the price of our food. Seattle’s minimum wage law prevents Ivar’s from counting tips as part of compensation, so it forced all Seattle restaurants to re-evaluate the way we do business.

Ivar’s goals were:

  • To comply with the new law;
  • Keep wages and benefits for our employees the same or better than the past;
  • Maintain high quality food and service; and,
  • Not significantly change the cost for our customers

‘We looked at all other places around the country where the minimum wage has changed, and how restaurants, employees and customers responded. We think this system is the best way of meeting our goals.

‘Our employees who were paid minimum wage were our servers and bartenders, but they earned an average of $18 to $19 an hour in tips on top of the $9.47 minimum wage. On April 1, we raised all Ivar’s Salmon House employees to $15 an hour and removed tipping, which means we raised our average customer bill by about 21%. We’ll share that increase with all hourly employees. So, hosts and hostesses, bussers, cooks, dishwashers, servers and bartenders all share in the success of the restaurant every day. We are telling our customers they no longer need to tip their servers or bartenders as service is now included in the pricing of our menus.

‘In addition to the hourly minimum wage of $15 per hour, we will share the new revenue with the full hourly team in the restaurant. The 21% increase in menu pricing will be shared with the hourly staff of servers, bartenders, bussers, hosts, cooks, dishwashers and others to cover the increased hourly minimum wage as well as a commission structure for them. In the end, the ultimate average cost increase to our guests will be 4% higher.

‘Ivar’s has been a leader in the restaurant business for 77 years and we decided to get to $15 an hour as quickly as we could. By making the change now, it avoids a continuous series of operating and pricing disruptions that would have been necessary had we elected for a slow phase in.’

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