Minimum Wage Hike Forces Restauraunt Owners to Adapt

While the recession has affected various local industries, the Tulsa World's frequent list of out-of-business restaurants is evidence that the food service industry has been hit especially hard. On the whole, restaurant owners across the state and nation have experienced slower sales, higher food

and energy costs and more problems with employee recruitment and retention over the past few years. On July 24, many already-struggling restaurateurs saw yet another challenge when the federal minimum wage, along with the Oklahoma minimum wage, increased 70 cents for the third year in a row.

Because many of the nation's "unskilled" workers are employed in the food service industry, increased labor costs can significantly affect restaurants' bottom lines. After Congress passed the first minimum wage increase in a decade in 2007, many restaurant operators combated the hike by increasing their menu prices and reducing employee hours, according to the National Restaurant Association. Similarly, the most recent minimum wage increase is forcing many restaurants to adapt or die. Fortunately, restaurant owners and operators still have several options to ensure they remain profitable despite the harsh economic conditions. Here are some suggestions. First, identify potential operational adjustments that may help maintain your kitchen labor costs. Keeping labor numbers in line may require salaried employees who earn bonuses based on restaurant performance to cover work normally performed by hourly staff. Tipped employees do suffer when sales suffer, but reducing staff slightly through attrition can help offset that income decrease. Also consider that discounting your menu can be a slippery slope that eats away at profits in the long term. Instead of discounting items to go easy on customers' wallets, which also can devalue your restaurant's "experience," invent new ways to generate income such as hosting monthly events or expanding your retail product line. While it's tempting to pull back on marketing when times are tough, research shows that maintaining these efforts pays off. Companies that stuck to their aggressive sales and marketing efforts during the 1980s recession grew by 275 percent in the five years that followed, according to the Nielsen Economic Adviser. In contrast, companies that cut sales and marketing grew only 19 percent in the same five years. Increasing public relations and paid advertising takes a leap of faith, but time and money to keep your name in front of the public is often well-spent. If that scares you, consider taking some small steps to boost your visibility, such as increasing your in-kind donations to charities and attending more promotional events. As long as your brand doesn't have rules against social media participation, Web sites like Facebook and Twitter also are easy, free venues to increase your restaurant's front-of-mind awareness and create loyalty, especially among 20- and 30-something audiences. Finally, remember that customer service has never been more important than in today's economic climate. Most people have limited resources for eating out and must be frugal about how they spend that money. Stress this to your management and wait staff so they can help ensure that no one is disappointed after a visit to your restaurant. Increasing your restaurant's value by improving its quality of service will create happy customers who make plans to return. Becky Chapman and her husband, Mark, are the owners and operators of the Melting Pot restaurants in Tulsa and Oklahoma City.