Minimum wage hike taking bite out of Plattsburgh restaurant biz

PLATTSBURGH — The increase in the state's minimum wage has left local restaurants with a bad taste in their mouths. The hike, which went into effect on Jan. 1, has rattled Plattsburgh's restaurant industry, who say the increase has resulted in slashed hours, higher costs and internal turmoil. The minimum wage increase consists of three separate policies. The overall wage of $8.75 was increased to $9 per hour; upstate fast food workers were bumped to $9.75, while tipped service employees saw their base pay increase by as much as 53 percent. Local business owners say the policy will lead to a domino effect of increased prices and higher costs. "For small business owners, it's going to be terrible," said Joe Kovacs, owner of Smooth Moves, a cafe in downtown Plattsburgh. "Everybody has to compensate and it will end up hurting." Wages are the biggest cost in any small business, he said. Kovacs pays his employees minimum wage and above. Larger businesses can control costs better, he said, including bulk purchasing through warehouses. But smaller operations have to absorb the costs somewhere. At least one item on his menu has already gone up, he said. Minimum wage is not the issue, said Kovacs, but rather housing. Kovacs said there needs to be a cost of living adjustment per county: a base wage that can be adjusted. The cafe owner also criticized Gov. Andrew Cuomo for sidestepping the legislature — who originally balked at the proposal — by using executive authority to unilaterally convene a wage board. Last July, the three-member panel recommended a phased-in increase of the minimum wage to $15 per hour at fast food restaurants by 2018 in New York City, and by 2021 for the rest of the state. The state labor commissioner signed off in September, setting into motion a push for a $15 wage for all workers, a policy Cuomo is trying to get through the state legislature. According to the state department of labor, the tri-county area boasted 4,602 jobs in the food services and drinking places sector in 2014, with 55 percent of those in Clinton County. In the entire North Country, 14,160 residents currently make the minimum wage, according to a report released on Wednesday by the governor's office. The bump to $15 would ultimately cover 43,423 workers. DRAMATIC EFFECTS As the clock ticked down to Jan. 1, Cindy Snow, co-owner of the Blue Collar Bistro in Plattsburgh, wrote letters to the governor's office on behalf of upstate restaurants. Tipped workers — including bartenders and wait staff — saw an increase from $4.90 and $5 per hour to $5.65 to $7.50 per hour, respectively. For those at the bottom, the policy marked an overnight raise of 53 percent. Hidden running costs pushed the number closer to $8, said the boss, who now has to pay $1.30 in unemployment and Social Security on every $10 a staffer receives in tips. "This could have a dramatic effect on the restaurant business," Snow said. To compensate, burger prices have been increased by $1. While the Blue Collar Bistro is better positioned to absorb the costs — Snow runs the downtown hangout as a second career — she questioned the survival of other operations. Owners work certain assumptions into their business model, said Snow. But when that abruptly changes, the model is no longer sound. Take it from a Glens Falls brewpub. Last month, the Davidson Brothers Brewery introduced sweeping reforms on how they compensated their workers. After studying the increase, the business opted to eliminate tipping entirely in favor of an 18 percent surcharge, a measure that galvanized the industry, led to waves of criticism and placed the locally-owned brewery at the center of a statewide debate on the philosophy of tipping. Larger chains have an "incredible" advantage against independently-run small businesses, Davidson Brothers co-owner Rick Davidson told the Sun. Davidson flatly said the proposed $15 hike will result in automation. It's already happening, he said, citing the replacement of skilled servers with tablets at places like Panera Bread, for instance. "You can walk in, get food to go, and never talk to a human," Davidson said. "Many thousands of jobs are going to be eliminated as this change takes place." A Siena College survey released last week found 87 percent of upstate businesses oppose bumping the wage to $15. SLOWING THE TIDE The North Country Chamber of Commerce said the measure would lead to a 67 percent increase in labor costs. The policy would make no differentiation between downstate, where the cost of living is higher, and upstate, which has a median income of $16.25, explained President Garry Douglas. The hike, Douglas said, would "disrupt and undermine the whole employment system." "We must take note that the true minimum wage is and will always be zero," Douglas told the Sun. "Our focus must be on how to reduce unemployment and preserving the first-step jobs that will be reduced by such a move will actually undermine this." Davidson said he believed it wasn't the governor's goal to hurt small businesses. But in the short term, that's the effect it's going to have, he said, noting his operation has no plans to reduce staffing levels or lay anyone off. According to the National Employment Law Project (NELP), an upstate worker needs at least $15 to afford basic living expenses, a sentiment echoed by the governor at a Manhattan rally last month. "You can't make it on a minimum wage job," Cuomo said. "You need two, three, four minimum wage jobs to actually make it, and that's not what the minimum wage was all about." Using statistics crunched by the Economic Policy Institute, NELP pegged $17.24 as the basic wage needed for a single adult in the Glens Falls-area to afford housing, clothing and transportation (the average across upstate, as Douglas mentioned, clocks in slightly lower, at $16.25). At present, the minimum wage is about $18,000 a year. The New York State Restaurant Association hopes to slow the tide. While they conceded that the hike to $9 was due, the group sent the governor and the state legislature a letter, co-signed by 100 restaurant owners, asking for a five-year wage freeze for tipped workers to allow small businesses to adapt. CEO Melissa Fleischut said the increase has already forced restaurants to close, business owners to cut hours and lay people off and made owners look to incorporate more tablets at tables. Any further increase, Fleischut said, will just exacerbate these problems. "Some very very difficult decisions are going to have to be made," said NYSRA Spokesman Kevin Dugan. "That's a huge increase in labor costs." Margins are often under 8 percent for small restaurants, Dugan told the Sun. "They're going to have to make it up in other ways," Dugan said. WORKING FASTER While automaton is not in the cards for the Butcher Block in Plattsburgh — "We'll never do that," said General Manager Kevin Kilkeary. "That's a drive-thru" — the fine dining restaurant has reduced staff hours since the beginning of the year. "Everyone's working a little faster," Kilkeary said. Payroll for the 30 servers, mostly part-timers, has increased 10 percent. "We don't plan on raising prices this year," said Kilkeary. "But somebody's going to have to pay for this sooner or later." Servers are also anxious that patrons will tip less once they learn of the new policies, he said. "If it goes to $15, a lot of jobs will be lost," said Kilkeary. Subway on Route 3 confirmed they have reduced employee hours and laid people off. Manager Amber Cook said the franchise had to let people go in early-January until business picks back up in the summer. "It's the worst part," Cook said. Several salaried employees were moved to an hourly wage. Staffers can only work a certain amount of hours, up to 40, Cook said. Corporate management determined labor and food costs can't exceed 50 percent of the restaurant's operation, Cook explained. To combat the increase, the franchise may have to raise prices. Doing so would require a meeting with other operators in the region. Five Guys' Plattsburgh location has already raised menu prices by 5 percent, according to General Manager Jessica Porter. Locations elsewhere saw a bump as much as 10 percent. Restaurant operators are also concerned about a wage drift. Several large chains in the Plattsburgh market said they had already been paying their workers at or above the wage before the increase. But the hike, said restaurant brass, means they will have to boost everyone else to remain competitive in the marketplace. All Five Guys employees were brought up to $9 per hour, said Porter (Five Guys is considered "fast food casual") while those who were already making that were given bumps after mandatory performance reviews. Porter said the chain's leadership encouraged a more rigorous review process to ensure all employees were going "above and beyond" the performance criteria. Maria D'Amelia, a spokesman for Stewart's Shops, said the chain will have to be competitive in their recruitment efforts. The Saratoga-based heavyweight pulls from the same labor market as fast food chains. But D'Amelia said the company's business model — employees own just over one-third of the company — may act as an incentive for workers to stay put. The chain is following the changes in state law closely. "We're always concerned about the long-term impact," D'Amelia said. "We are about making smart decisions from the start." Several other foodservice powerhouses in the Plattsburgh area, including Buffalo Wild Wings, Dunkin' Donuts and Texas Roadhouse, declined to comment through their corporate offices. The governor's office sidestepped a reporter's specific questions on how the policy is affecting small business owners in the North Country, instead opting to send a report detailing the demographics of the population that stand to benefit from the increase. HARD FEELINGS While servers and bartenders saw their wages elevated, the boost for service employees does not include workers in the back of the house, including cooks and dishwashers. This has caused discomfort for both owners and recipients of the boost. Susan Upton pored over her books during a weekday lunch rush. The increase came as a surprise to the owner of the Campus Corner, who'd found out the week before. "All these small businesses owners are just trying to stay alive — this is crazy," said Upton. Upton said she was irked that the back of the house didn't get bumped. "There's a lot of hard feelings everywhere," Upton said. Waitress Angela Paduano said she would have been fine with a .25 cent raise. "Theirs should have gone up $2," she said, motioning to kitchen staff. "The back should have gotten more." The Campus Corner, an old-fashioned diner in downtown Plattsburgh, does not pool tips, Upton explained. "It's theirs," Upton said. "They worked hard for it." Upton's back-of-the-house staff are well-compensated, she said. But she, like other business owners, is concerned about future recruitment efforts, especially if the final figure does make it to $15. Paduano said she would have welcomed the situation at restaurants that pooled, like at her previous employer, a local steakhouse, where $200 in tips would often be whittled down by half at the end of the night once distributed amongst staff. Would possible price increases dissuade patrons from dining out? Anthony Finnegan tucked into a homemade ice cream sandwich, one of the cafe's specialities. "I love this place with a passion," he said. THE WORKERS For the average full-time worker, the bump amounts to about $10 per week. "We're pretty happy about it," said Jessie Atkinson, who works at the Koffee Kat, a cafe in downtown Plattsburgh. "We just got 9 bucks — it's a good way to start the year." The part-time barista attends SUNY Plattsburgh, where he studies criminal justice. The increase will help put a dent in basic living expenses, he said. Employers have an obligation to provide for their workers, said Atkins. "If you can't afford to pay your workers, you shouldn't be in business." Atkins noted his boss was a member of the Clinton County Board of Legislators. "We have a pretty good boss here," he said. "She takes care of us." Nick Kaiser works part-time at Five Guys. The increase, he said, will help with student loans. "I was glad." Five Guys is a good place to work, he said. Kaiser paused for a moment and cited the sluggish economy. "Anywhere is a good place to work." This is the second article in a series on how the minimum wage increase is affecting the North Country. Coming tomorrow: How one local business ignited a statewide debate on tipping. Correction: A previous version of this article incorrectly referred to Atkinson's surname as "Atkins."

Signup for our newsletter

Minimum wage hike taking bite out of Plattsburgh restaurant biz

COMPANY

CUSTOMER SUPPORT

SUBMISSION FORMS

BEYOND THE NEWS