Mark Lowman (l) and Travis Shaw committed to paying employees $15 at Byte, now open on 1st Avenue.

Mark Lowman (l) and Travis Shaw committed to paying employees $15 at Byte, now open on 1st Avenue.

A look inside restaurants paying $15

Updated: April 12, 2017 - 1:48 pm

Gyst_3Ahead of the potential minimum wage hike to $15, a few Minneapolis restaurants have already tried paying $15 or more.

Two venues said they are making it work, although it’s not easy. A third abandoned the experiment and shifted to lower server wages with tips. Another stopped tips and raised pay to $15 this week.

At Byte on First Avenue, everyone makes $15, pools the tip money and trains to do everything from bartending and prepping food to waiting tables and washing dishes. The owners said they needed to adapt their entire business model to support the wage.

“I took inspiration from a taco stand,” said co-owner Travis Shaw.

At a taco cart, Shaw said, one person can easily make food for many people. The food is cheap, but flavorful. Setting $15 as the goal, they reverse-engineered the Byte menu to make the math work, using cost-effective pork shoulder in the bahn mi, chicken thighs in the taco salad and fried paneer curds in the vegetarian curry wrap. They’re trying to keep the menu affordable and aiming to sell a high volume of scratch fast food and beer.

But it’s still not easy, Shaw said.

“When payroll comes around, it’s hard. It’s a lot,” he said. “It makes me nervous half the time. We’re barely keeping our heads above water.”

Finding a balance

Although lower wages would give Byte more breathing room with the bills, Shaw said that’s not what they wanted to do. And three-and-a-half weeks in, he said they’re starting to hit the numbers they need.

Shaw said that including tips (tips are pooled and paid out by the week) staff wages are consistently over $19 an hour, approaching wages comparable to a unionized hotel. One staffer can even help care for her parents, he said.

“We’re an independent restaurant without corporate backing. I think it’s a big deal,” Shaw said.

Upton 43 in Linden Hills tried a no-tipping policy for three-and-a-half months. The restaurant started all staff and servers at $17 or more, aiming to eliminate a fight for prime shifts and create more of a family environment.

“Overall they would be making more money long-term and consistently,” said spokesman Josef Harris.

But Harris said the experiment didn’t work. Labor costs were too high, and dishes that were $20 crept closer to $30 to cover costs.

“Some people had sticker shock,” he said. “… Until diners start to value the food just as high as the experience and understand everything that goes into bringing them that food, I don’t think we’ll be able to get there.”

He said it was an interesting test of patron psychology. People didn’t seem to have a problem spending more with an additional tip, but they balked at higher menu prices, even if the total cost was a wash. People wanted some control over the total bill, Harris said.

“We kind of found ourselves pricing ourselves way out of the market,” he said. “It really affected our margin if we wanted to stay competitive.”

Harris said he thinks restaurants will have a hard time staffing at $15 an hour. It’s already challenging to find the perfect balance of food costs, labor and profit, he said.

“Anything that shakes that, once you find that balance, it’s really hard to find that balance again,” he said. “Once restaurants start losing money, they lose a lot of money really quickly. … With $15 an hour, we would see a lot of restaurants close trying to meet that mandate.”

A city-commissioned study found a higher minimum wage is likely to have the greatest impact on the operating costs of restaurants, with smaller restaurants more sensitive to the change. The restaurant industry is the group with the most minimum wage earners in the Minneapolis area.

Any wage hike may not be immediate. Last year’s campaign to place a minimum wage question on the ballot proposed a $15 wage phased in over several years and at different speeds for small and large employers.

Gyst Fermentation Bar. Photo by Michelle Bruch
Gyst Fermentation Bar. Photo by Michelle Bruch

Aiming for a livable wage

Common Roots Café has paid staff $11.40, above the minimum wage, since 2007. This week they announced a shift to $15 with no tipping. Common Roots increased prices 15 percent to make the change.

“We believe it is our responsibility as a business to guarantee fair wages, and that shouldn’t depend on the generosity of our customers,” the café said in a Facebook post. “… We believe it’s imperative that all staff, regardless of whether they serve our customers, prepare your food or wash your dishes, get equitable compensation for their work. Tipping makes this very challenging.”

GYST Fermentation Bar also pays its staffers $15 and stopped accepting tips last fall, acting on the principle that the culture of tipping is outdated and that all jobs deserve a livable wage. They increased menu prices about 15–20 percent. For patrons who insist on leaving a tip, they’re donating the money to Appetite For Change, a community organization based in North Minneapolis.

After the shift to no tipping, they felt the impact of increased payroll taxes and smaller check prices.

Nevertheless, the owners said it was the right thing to do. They’ve worked for $9–$12 at spots like Whole Foods and the Bi-Rite Market in San Francisco.

“It’s not livable at all,” Ky said.

Mel said she’s seen restaurants where servers make $300 a night while the kitchen staff makes $9-$11 an hour. And Ky has worked in traditional salaried positions as well.

“It gives us some interesting perspective,” Ky said. “I worked hard at my [salaried] job, but not nearly as hard as I worked in the food industry. I want this industry to be valued for what it is.”

Good food is costly, she said.

“You have to pay the farmers, who work hard and long hours to grow food,” she said.

Forced to change

A couple of doors down at Little Tijuana, Deborah Dickson was surprised to learn GYST was paying people $15. Dickson and business partner Steve Wagner are tired of city regulation, and the minimum wage under consideration is no exception. A sign in the window states: “Mpls City Council and their policies don’t support small business!”

Dickson said the statewide minimum wage hike that went into effect nine months ago prompted them to cut three people from the kitchen, and now the owners are working seven days a week, 80–100 hours apiece. If the minimum wage increases again, Dickson said they may have to cut hours and staff further.

“I’m working all day from open until close, until 2:00 (a.m.),” Wagner said. “I sleep back here. … In three years I haven’t had a day off.”

He ticked off the restaurant’s expenses, including the mortgage, payroll, property tax, insurance, food, liquor and electric bill.

“Everybody has the misconception that we get to keep all the money we take in,” he said.

Dickson said she doesn’t think patrons will come to Minneapolis to hunt for parking spaces and pay higher prices for meals. Customers have already commented on past price increases, she said.

Shaw at Byte said he has mixed feelings about the proposed minimum wage hike. The $15 wage is difficult for Byte, even though the entire business model was built around higher wages. And a crappy-paying job is better than no job, he said.

“We’ve been really on the fence on it,” Shaw said. “Some people would just have to rework the entire system. This will break people unless they completely change their system to something more fast-casual.”

He said his heart goes out to other restaurants, and anticipates that a change would likely be chaotic.

“We’re trying to build this model and show it can be done,” he said.

  • Buster

    “At Byte on First Avenue, everyone makes $15, pools the tip money”

    I would never eat at a socialist restaurant.

  • southmpls

    this article is super interesting — gives several perspectives on wages that support work. The idea of cross-training all employees at most/all positions is a great managerial strategy, I’m wondering if the mandate applies to 5 employees or 25 employees or 50 employees? all part-time employees? all full-time employees? when does the wage that supports work kick in — 5 hours – 15 hours – 30 hours? it would be really helpful if a small restaurant owner would be willing to share her annual balance sheet and tax return (anonymously, of course). it would educate those of us interested in starting a small restaurant. but mainly, a full-time employee at $15/hour earns just a little over $30,000. not a hefty sum given urban apartment rates, but it’s not poverty wages either, and it’s a solid place to start.

  • southmpls

    what’s socialist about paying wages to workers?