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Inside

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Features

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WLA’s upcoming convention zeros in on technology the art and craft of hospitality

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Washington’s hospitality industry faces winds of change

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Seven buzzes for full-service restaurants

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Seven buzzes for quick service restaurants

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Seven buzzes for hotels

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Old restaurant model broken

Other stories 14

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WRA President and CEO: Birth of a new business model

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News Briefs

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Hospitality Tech: Are you ready for EMV?

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Hospitality industry taking new liquor rules to court

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Meet your future workforce

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New Members/Calendar

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Marketplace

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Ask the Expert: Defeat wage inflation in four easy steps

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Washington Restaurant Association 510 Plum Street SE, Suite 200 Olympia, WA 98501-1587

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On the cover Things are changing fast in the world of hospitality. Old business models are dying and new ones are being born as labor costs increase, a new generation emerges and the hospitality industry responds. Get all the latest buzzes from Washington Restaurant & Lodging Magazine.

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October 2015 | 5

EDITORIAL STAFF Publisher, Anthony Anton Executive Editor, Lex Nepomuceno Managing Editor, Paul Schlienz Contributing Editor, Andy Cook Contributing Editor, David Faro Contributing Editor, Stephanie Davenport Contributing Editor, Marianne Scholl Research Editor, Sheryl Jackson Art Director, Lisa Ellefson JOINT EXECUTIVE COMMITTEE WRA Chair, Phil Costello Stop n’ Go Family Drive In WLA Chair, Matt Van Der Peet Westin Bellevue Hotel WRA EXECUTIVE TEAM President and CEO, Anthony Anton Vice President, Teran Petrina Director of Business Development, Ken Wells Director of Communications & Technology, Lex Nepomuceno Director of Education, Lyle Hildahl Director of Government Affairs, Bruce Beckett Director of Internal Operations, Bekah Cardwell

WRA President and CEO

Birth of a new business model

By Anthony Anton, president and CEO On your wedding day, do you celebrate the start of a new life with the love of your life or do you mourn the death of carefree single times? When your firstborn is placed in your arms, are you filled with love, emotions and the potential for the life in front of you or do you swear at the reality that you have now had your last eight hours of sleep for the next few years?

Of course, you chose the positive. Well, you are about to start a brand new adventure, and while I am sure it is not something you looked forward to like a wedding day or the birth of a child, the symbolism is the same. Something you have known is going away, and something new and unknown is taking its place.

2016 will mark the beginning of a new business model for hospitality.

That is just a reality. While the challenges of mandated health care, a big increase in the state minimum wage, paid sick leave and an even tighter labor workforce, adding nine or more points to your current labor costs, are not what you planned for, they are coming next year.

So approach this change as birth, not a death; get excited about creating a new way – inventing a new path.

510 Plum St. SE, Ste. 200 Olympia, WA 98501-1587 T 360.956.7279 | F 360.357.9232 www.warestaurant.org │walodging.com Letters are welcomed, but must be signed to be considered for publication. Please include contact information for verification.

Reproduction of articles appearing in Washington Restaurant & Lodging Magazine are authorized for personal use only, with credit given to Washington Restaurant & Lodging Magazine and/or the Washington Restaurant Association.

Articles written by outside authors do not necessarily reflect the views or positions of the Washington Restaurant Association, Washington Lodging Association, their Boards of Directors, staff or members.

Products and services advertised in Washington Restaurant & Lodging Magazine are not necessarily endorsed by the WRA, or WLA, and do not necessarily reflect the opinions of the WRA, WLA, their Board of Directors, staff or members.

ADVERTISING INQUIRIES MAY BE DIRECTED TO: Michelle Holmes Allied Relations Manager 206.423.3902 michelleh@warestaurant.org Washington Restaurant & Lodging Magazine is published monthly for Association members. We welcome your comments and suggestions. email: news@warestaurant. org, phone: 800.225.7166. Circulation: 6,310.

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For the pessimist sitting on your shoulder screaming at you that the world is going to end, and you might as well give up now, let me provide you with a few counterpoints.

There will be restaurants in 2020 – in fact, there will be more restaurants than there are today. This is a positive certainty based on several points:

Washington’s population is going to continue to grow; The outlook is strong in the Northwest for the non-service industries that really drive our customers’ wealth like the aerospace, high-tech and medical fields; and The generations coming into the workforce view our industry much different than those retiring from the workforce. They see no difference between eating out or eating at home; in fact, they view eating out as more practical, a better use of their time and a reality of their modern life. In contrast, the generation that is retiring has viewed eating out as a luxury that was an easily disposable part of their life

So view this magazine as an encouragement to start thinking of your new business model; many of these “buzzes” may not be right for you or your businesses, but they may spark the idea that is. And maybe your idea will be the industry buzz of 2017! 

Primary Source of Information | News Briefs L&I proposes 2 percent average increase in workers’ comp rates for 2016 Every fall, the Washington State Department of Labor & Industries (L&I) sets workers’ compensation rates for the following year. As wages and healthcare costs rise, the cost of providing workers’ compensation insurance goes up. This year, the department is proposing an average two percent rate increase for 2016. The proposed increase comes out to a little more than one cent per hour worked.

Workers’ compensation premiums help cover the cost of providing wage and disability benefits, as well as medical costs for treatment of injuries and illnesses. L&I uses wage inflation as a benchmark to help determine rates for the coming year because as wages climb, the cost of providing workers’ compensation coverage rises. Washington’s most recent wage inflation number is 4.2 percent. Significant cost savings by the agency are allowing for a proposed increase well under the wage inflation rate.  NLRB shift puts restaurants and hotels everywhere at risk The National Labor Relations Board’s abrupt change in direction on its “jointemployer” standard is a serious threat to the growth potential for restaurants and other businesses across the country. Decisions by the board in two recent cases—one involving a major restaurant brand—mean that restaurants and hotels could be held responsible for labor practices of the companies they do business with, such as vendors, contractors and staffing firms. And franchisors can be held responsible by the NLRB for labor practices of their franchisees, even though franchisees make the labor-related decisions. For more information, go to http:// wra.cc/mag1015a.  Get the recognition you deserve!

Apply now to National Restaurant Association’s Faces of Diversity, Restaurant Neighbor and Ambassador of Hospitality awards Restaurants do great things and are full of great people. Don’t miss this opportunity to receive the recognition you deserve. Apply now, for the National Restaurant Associations industry awards. The Faces of Diversity American Dream Award honors those who have achieved success through perseverance and determination. Each year the NRAEF, in partnership with PepsiCo Foodservice, recognizes three individuals who embody the American Dream. Founded in partnership with American Express, the Restaurant Neighbor Award celebrates and highlights the outstanding charitable service performed by restaurant operators. The Ambassador of Hospitality Award is the premiere award bestowed by the National Restaurant Association Educational Foundation to an individual who has exemplified extraordinary achievement and leadership in the restaurant and

hospitality industry. You can either nominate yourself or someone else for these awards. Deadline is October 30. For more information or to apply, contact the WRA’s Paul Schlienz at pauls@warestaurant.org. 

FDA issues more guidance on menulabeling law The Food and Drug Administration released additional draft guidance to help restaurant operators comply with the menu-labeling law, requiring certain chain restaurants to add calorie data to menus and make other nutrition information available upon request. The law goes into effect Dec. 1, 2016. The 53-page draft guidance, mostly in Q&A form, comes in addition to final regulations released last December. Last year’s regulations left key questions unanswered and, in some cases, were confusing. The FDA is currently accepting public comments on its draft guidance. There is no stated deadline. The National Restaurant Association is analyzing the new material. Additional information will be available at Restaurant. org/MenuLabeling. The National Restaurant Association will be drafting comments based on member input.

Members are also encouraged to send their comments and questions directly to the FDA. 

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Hospitality Tech

Are you ready for EMV?

By Paul Schlienz, managing editor Crunch time is here.

October 1 has come and gone. Are you prepared for EMV? If not, it’s time to get prepared. Pronto.

October 1 was a key date.

Why? Because on this date, liability for credit card fraud shifted.

Big changes are under way in the U.S. payment industry. Those swipe and sign credit and debit cards are on the fast track to extinction.

Replacing these familiar, but insecure payment cards will be chip-based cards under the EMV (Europay, MasterCard and Visa) global interoperability standard. The final architecture of the new cards is still under debate, but, in addition to a chip, they will either require signatures or personal identification numbers (PIN) at the point of sale.

This won’t come as any surprise to anyone who has been to Europe, in the last few years, where the chip and PIN standard is firmly in place, but the U.S. has been slow to shed the old card technology.

The U.S., indeed, is the world’s last major market that still uses the old-fashioned swipe-and-sign magnetic strip cards, and consumers and merchants are paying a serious price.

The antiquated card technology is a major reason why the U.S. has nearly half of the world’s credit card fraud, as revealed in a 2014 U.S. Senate Judiciary Committee hearing, despite it being home to only approximately a quarter of all credit card transactions.

Since October 1, your customers are still be able to swipe their old magnetic strip credit cards, and whichever party is using the old technology will bear the liability for any fraud.

Thus, if a guest comes to your restaurant or hotel with a chip card, but you only have a magnetic strip terminal, you will be liable for fraud. If, however, you have a chip-enabled reader, but your customer only has a magnetic strip card, the bank that issued the card is liable for any fraud.

“EMV isn’t a mandate,” said Janette McGrath, vice president with MasterCard’s U.S. Product Strategy Division in a National Restaurant Association webinar on the new credit

card standards. “There isn’t a penalty if you [didn’t} meet the October 1 date.

We really are trying to create an incentive to get everyone to move to this more secure payment system.”

Security is, indeed, the major consideration for the shift to chip-based cards. The new cards validate the card and cardholder through either a PIN or a signature.

“The principle thing that EMV chip cards do is address counterfeit fraud, which is the majority of the fraud that happens in the United States today, and certainly over the past few years,” Carolyn Balfany, a MasterCard product expert, told Tech Times. “The new process makes it almost impossible for fraudsters to create fraudulent or counterfeit transactions.”

According to a MasterCard, by the end of 2015, 50 percent of U.S. issued cards and at least 45 percent of U.S. terminals will be chip-enabled.

Should you switch over to the EMV standard now? There is no hard and fast answer to that question.

“Some of the metrics on whether a restaurant should switch to an EMV-compliant system sooner or later are related to the current chargebacks you get now for counterfeit cards and lost or stolen cards,” said Jim Higgins, the National Restaurant Association’s vice president of payments and financial services, who was also present at the EMV webinar.

“If you’re suffering large losses, that’s a good reason to go with a chip card reader sooner rather than later.”

According to Higgins, among the considerations in switching to EMV-compliant equipment is what your competitors are doing with the new standard.

Switching to EMV is, however, a major undertaking not to be taken lightly.

“The training of staff is going to be imperative because these cards are going to be relatively new to the consumers as well,” said Michael English, executive director of product development at Heartland Payment Systems, also at the EMV webinar. “It’s going to take a lot of patience on both sides to make the transition.”  October 2015 | 9

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WLA’s upcoming convention zeros in on technology the art and craft of hospitality

By Marianne Scholl, contributing editor

reviews in a workshop by Garvey Schubert Barer attorney John Crosetto.

How do you maintain quality service in our increasingly high-tech world? That’s one of the questions Carla Murray, a senior vice president of operations for Starwood Hotels and Resorts Worldwide, Inc., will answer when hotel owners, general managers and lodging professionals gather next month at WLA’s Annual Convention & Trade Show.

The popular industry event takes place November 15-17 at the Hyatt Regency Bellevue, and it is on track to be WLA’s largest convention to date.

Other convention topics include HR management in an increasingly challenging world; tax updates to help your hospitality company save money and avoid audits; customer service to win hearts and capture minds and what hotelier can do in response to local employment mandates.

Carla Murray, senior vice president Operations West at Starwood Hotels and Resorts, will be one of the featured speakers at WLA’s Annual Convention & Trade Show November 15-17 at the Hyatt Regency Bellevue.

In her presentation, Murray will draw on her expertise overseeing 60 properties in the Western United States and her experience as general manager of key Starwood properties including the Sheraton Seattle Hotel. She’ll offer insight into how technology is changing the hospitality marketplace and creating new opportunities and challenges in engaging guests and delivering service fundamentals.

Keynote speaker Jason Thielbahr, CRME, will also zero in on technology as he shares the expertise he’s honed at the intersection of technology, distribution and online marketing. A savvy practitioner of integrated revenue strategies, Thiellbar is Red Lion Hotels Corporation’s senior vice president of revenue optimization and distribution services. Attendees will also have the opportunity to learn best practices for responding to online

Cindy Fanning, director of operations for Silver Cloud Inns & Hotels, attends the convention each year because it always delivers important industry training and information. She also appreciates the networking.

“Being able to connect with our peers at the convention is truly beneficial,” Fanning said. “The program and the networking opportunities give us a chance to exchange ideas and get good information on best practices.”

Convention highlights also include a Kick-off Tailgate Party featuring the SeaHawk-Cardinals game on the big screen and the Trade Show, which offers one-stop shopping for the latest in lodging-related goods and services. Platinum sponsor ERNwest and other generous sponsors make all of this possible.

To register for the convention, or to see the schedule of events, please visit www.walodging.org/convention. 

October 2015 | 11

WRA Government Affairs: working for you

By Stephanie Davenport, contributing editor

Last month you should have received the 2015 edition of the WRA Legislative Review. In that issue, you can read about how we just ended the longest session in the history of our state. You can also read about the many pieces of state legislation that were set to impact our industry this year.

If you did not receive a copy of the latest Legislative Review, you can see it online here: wra.cc/ wamag16.

During the session the WRA achieved key outcomes on a number of priorities:

No new capital gains, street utility or carbon taxes.

No increases in B&O taxes or surcharges on B&O taxes (with the exception of elimination of the preferential rate on royalties for franchisors).

No new utility taxes.

Defeated proposals to impose new health care mandates on employers.

Passed new enforcement and licensing resources to assist the Liquor and Cannabis Board (LCB).

Educated lawmakers on the importance of promoting tourism, setting the stage for further legislative action in 2016.

However, the hospitality industry faces all kinds of challenges that continue to progress even when the legislature is not in session. Our Government Affairs team works all year-round to protect and represent the needs of our members. As we speak, local businesses are facing:

Minimum wage increases: By the time you are reading this the WRA will have held a series of webinars to inform members of how the WRA plans to tackle this

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acting on an order from President Obama, proposed critical issue in the upcoming year. This is likely the increasing the minimum salary for employees to biggest issue for many of our members. Minimum wage be considered exempt from overtime to $50,440 a increases are being introduced on a city-by-city basis year, or $970 a week—a substantial increase over the in Washington: SeaTac, Seattle and Tacoma have all current levels $23,660, or $455 a week. But that’s moved forward with proposals. Discussion is happening not all. The proposal also left open the possibility within the Spokane and Bellingham city councils. that the DOL could institute a “duties test,” rigid Public perception and support from lawmakers, as guidelines that define the types of employees who shown by polling data, signals that there will be an must be paid overtime. More than 1,500 restaurant increased minimum wage for most of Washington. operators and the National Restaurant Association And it is highly likely that a proposed increase will submitted comments outlining their concerns about make the ballot. The WRA Government Affairs team is the proposed revisions. The national arm of the working to change the conversation so neighborhood restaurant association is working hard to ensure that restaurants are involved in the crafting of a statewide the voice of hospitality is considered when these laws solution to increasing the minimum wage. At both are drafted. On a federal level, the hospitality industry the local and state level, the WRA GA team is working also faces impacts from new health care mandates and for the best outcome on this issue for the hospitality scheduling restrictions. industry.

Liquor regulations: On September 16, the WRA held its first Alcohol Summit in order to get direction on the To keep current on all of these issues you can subscribe future of alcohol beverage regulation in Washington. to both, the Washington Restaurant Weekly and/or Hot For two years, the WRA has been in vocal opposition Off the Grill, which you can read about below. During the to rules proposed by the LCB that appear to violate month of October, the GA team is traveling around the Initiative 1183. The most recent decree from the LCB state connecting with members, letting you know what we will set up a system of uniform quantity discounts for faced this year and getting key feedback from you about spirits, and strict rules around when and how those what is critical to success in your business. volume discounts can be calculated. Businesses will be prohibited from taking advantage of product At this date, three of our regional meetings are still promotion and pricing specials, specifically “family upcoming. We will be in Bellevue, October 19; Seattle, plans” or establishing a customer relationship beyond October 20; and Vancouver, October 26. If you would like a single, one time order. The WRA will be challenging more information about these meetings, please contact the latest rules in court. This is the second time WRA Shannon Garland, GA administration, at ShannonG@ has asked the court to overturn rules that violate the warestaurant.org or 360.956.7279, ext. 139. law and impede restaurants and bars from legally acquiring product to run their business.

What we have learned from past meetings has shaped our legislative agenda, and we would love your participation.

Paid leave mandates: Paid leave ordinances have also In November, after all of the meetings have concluded, we been passing in Washington, on a city-by-city basis. will be sending out a special Hot Off the Grill (HOTG).

SeaTac, Seattle and Tacoma have all implemented new The HOTG is our e-newsletter that goes out weekly during laws. Spokane is currently in the process of adopting the legislative session and gives members insight into all new rules. Each set of ordinances is very different with that is happening on the Hill. During the interim, we some requiring as little as three send out the HOTG on an as-needed basis to keep Paid Leave: Tacoma days off and others requiring a you up-to-speed. If you would like to subscribe to lot more. Current paid leave laws the HOTG, you can contact Stephanie Davenport, in Tacoma are changing the way communications manager, at StephanieD@ businesses can operate within warestaurant.org.  the city. For full details about what you need to do as a Tacoma citizen visit: http://wra.cc/ tacoma16.

New federal overtime laws: The U.S. Department of Labor, http://wra.cc/tacoma16 October 2015 | 13

Washington's hospitality industry faces winds of change

By Paul Schlienz, managing editor

The largest employer, in Washington, is not Boeing. It’s not Microsoft. It still won’t be Amazon, despite all its growth.

Our state’s largest employer is restaurants, which employ close to 230,000 people in Washington. Add to that the 31,364 people who work in the state’s lodging industry, and you see just how important the hospitality industry is to Washington’s economy. Additionally, restaurants are the employer of the first step that gets people started in the world of work.

Our state’s restaurant model, however, is changing. Since 2002, Washington’s restaurant model has been 36 percent for labor, 30 percent for food and 36 percent for everything else. This, however, will soon change in 2016.

A minimum wage increase of some kind is coming. Even if you live somewhere other than Seattle or Tacoma, you can you be sure that this is going to affect your operation.

Minimum wage increases, however, are not the only things coming down the pike that will affect your labor costs.

Unemployment is going to drop nationally, in the coming year, to about 5.2 percent. There will not be a lot of extra workers. The generation that’s coming into the workforce is much smaller than the generation that’s leaving. Finding excellent workers to keep our industry great is going to become much more difficult. And there’s more.

Federal overtime laws being proposed right now will greatly change the way salaried workers do their jobs. The healthcare mandate will be pretty much fully implemented by the end of next year. Leave mandates are continuing to build momentum. And new scheduling restrictions are being proposed.

Of course, this is a union agenda. Union membership is dropping, and younger workers are not interested in joining.

Unions know it’s difficult to organize employees who only work 15 hours per week. Thus, unions are trying to force restaurants to employ more full-time workers since they are more like to vote to join a union.

The handwriting is on the wall: Our current restaurant model 14 | warestaurant.org

will die in 2016. Like it or not, labor costs are going up.

The secret of surviving in the new environment is to face reality. You will need fierce resolve and belief that you will get through these changes.

Build a network with your fellow operators. Talk and think about how the business model will be different.

Stop ignoring politics. While you may hate the political process, you ignore it at your own peril, especially in local communities, where much of the action on workplace issues is happening. Use the WRA as your filter. Get to know your mayor and city councilmembers on a first name basis. Tell them about your business problems and concerns.

Emphasize your local community ties, especially if you own a franchise.

Consider outsourcing non-core functions. If it’s not great customer service or great food, get someone who is excellent at performing in areas like HR, bookkeeping, accounting or tech.

Find ways to relate to Millennials. They are your future both as employees and consumers.

Be transparent, open, honest and clear. You’re going to have to make changes in the coming year. Not being honest with employees and customers about why you’re making changes will not help you. If you’re truthful, you can show your customers how public policies have impact on your operation.

We, at the WRA, have been hearing talk or, as we like to call it, “buzzes” about how operators are responding to these new challenges. In the following pages, you’ll get these latest seven buzzes on what’s happening in the FSR and QSR segments of the restaurant industry in addition to seven buzzes from the lodging world.

Rest assured that there will still be restaurants and hotels in 2020, and there will be lots of them, but they’re going to be different. Start preparing now for the new world of hospitality. 

Seven buzzes for full-service restaurants

By Andy Cook and David Faro, contributing editors

As you’re aware, Washington has the highest statewide minimum wage in America; it’s outpaced the national average for years—with no tip credit.

The Affordable Care Act mandates rolled out for large employers this calendar year; those of you identified as smaller employers are now likely adjusting your model in much the same way as your larger counterparts were a year ago.

Now consider the growing patchwork of local municipalities enacting employment legislation such as paid sick leave and higher-than-state minimum wage.

Those of you operating outside the influence of these local ordinances are likely wringing your hands over its looming threat.

We’re a resilient breed of business people. Traditionally, as outside forces impose costly regulations, you’ve acclimated.

A big part of that practice has been a slow, but sure shifting of your operational norms.

Things are different today; with costly regulations and a shortage of qualified labor, many of you are looking at fundamentally altering your operational strategies.

The industry is a-buzz with talks of a ”new model” and the death of the “traditional model.“ For full service restaurants, the first buzz is centered on labor.

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Bye bye, bussers

The model of ”full service” is going to have to be redefined, and that starts with staffing structure. Support staff – AKA bussers, hosts and expos – are the first casualties.

That’s not buzz; it’s reality. Remember when lunch shifts employed a full support staff of hosts, expos and bussers.

The server sections were likely smaller, too. Look at the early shifts across Washington’s full service eateries today; what do we see? Perhaps one host, maybe a single latescheduled busser, a bartender who is technically a floor server that pours a few drinks, and a person in charge who’s pulled on the latex gloves to act as the expediter.

This is today’s early-shift norm.

So get your box of latex gloves out. It’s inevitable; a variation of this staff structure will soon be the all-shift default state.

Sales/server staff are going to have to up their game.

If you’re worried about overloaded sections, the recommendation is to hire more sales staff, not support staff. As the general model for running a restaurant changes, the career server, used to the old model, is going to have some ”labor pains” to work through. This is when you have to make hard choices about who can entertain your guests while, at the same time, performing at a high level of customer service.

Full-service managers have a number of anecdotes regarding the Grade A server who is not dependent on support staff to provide a great customer experience. Keep them at the front of your mind, because in the emerging operational model, you will have to hire more servers of that ilk. Unfortunately, most of those professionals learned their craft by rising through the entry-level positions. As you adjust your model, emphasis will have to be placed on career and/or goal development partnerships. The onus will be on you, the employer, to help provide the skills and efficient workflow they need to succeed.

2

Tipping (as we know it)

Much to the chagrin of front-of-house staff, tipping is on the way out. Tips are hard to track, tipped employees can be lax about their declarations and, more importantly, tips do not concretely represent the tipped employee’s total compensation in the way that they should – at least not on a policy level. So, as the wage model October 2015 | 15

changes, ”tipping” becomes ”total compensation,“ and you must accommodate the new responsibilities inherent in providing this compensation. If it hasn’t already, this will likely include a no-tipping strategy.

3

Tip pooling is another buzz kill for the traditional model. This is hard one to sell, but some restaurateurs are doing it, and it is working. What about the career servers? They got where they are because they are awesome at what they do; they get it.

These employees correspondingly, after years of developing hospitality gravitas, correlate their tips with their skills.

Grade A servers make more money because they are better at what they do than the subpar server standing at the neighboring POS habitually bemoaning one small detail after another. The Grade A server having to dilute a 2025 percent plus gratuity average with the flat 15 percent earnings of their subpar colleague (all the while suffering through their amateurish bemoaning) is given a hard pill to swallow. The Grade A servers have adapted because that’s what they do. And that is, in part, why they are good at what they do. At least there’s the social comfort that comes with the knowledge that the hard working back-ofhouse employees are getting some relief.

Three pricing realities The next buzz deals directly with how restaurants are compensating employees while removing the revenue stream of cash tips. Whether it is a service 4 charge, increased prices or some other financial structure, some restaurants that are experimenting with no tipping polices seem to be meeting with success. Understanding the 5 different experimental models being used right now will go a long way towards preparing your new model for success.

There’s a time, in your operational model, where you take a strategic look at prices. You have a scheduled menu costing assessment, but at some point, along with your prices, you have to look at reality. Simply put,

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you have to bring in more than you are putting out.

Determining the best pricing structure for your business is always a hard set of calculations, and now, more than ever, you must pay attention to the hard reality that increased labor costs are driving prices upward.

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Technology

The last buzz is important, and probably the most ignored.

Embrace modern technology. The old model does not showcase the opportunities that modern technological integration can bring to a business.

You don’t have to buy a fleet of robots, but it behooves you to be aware of software and technological advances that can improve your loss prevention strategies on many levels.

Back in the day, the restaurants that were the first to move to electronic POS systems also had to invest a considerable amount of resources up front. They were also the first to reap the savings that such systems contributed to their bottom line. Today’s tech is online, and so, even if you do nothing else, develop your digital storefront to the same degree as your physical space. If you are unsure of how to do that, call the WRA; we’re dedicated to helping you achieve the operational level you need in digital management or otherwise. Today’s technological advances offer a variety of vendors, and come at a far more flexible price point that the originators of yesterday’s POS systems.

Programmed HR management and payroll? An online ordering system build combined with automated marketing and analytic reports (right down to your neighborhood)?

How about dynamic POS tablet integration? A giant fleet of robots? (Actually, we’ll get back to you on that one.)

In our industry’s frantic pace, time is your most important asset. If you can have a third-party service automate the daily minutia of mundane tasks, you can get back to capitalizing on the things at which you excel.

And of course, that’s why you got in to this business in the first place. 

Seven buzzes for quick-service restaurants

By Paul Schlienz, managing editor

Things are changing rapidly in the world of quick-service restaurants.

QSRs are embracing new electronic ordering technologies, rethinking ideas of what constitutes a perfect employee, finding new ways of connecting with local communities, responding to pricing realities and developing an entirely new approach to employee advancement.

It’s a brave new world for quick service, but change doesn’t have to be scary for QSR employers or employees - not if it’s well thought out.

Following are seven buzzes or ideas that are circulating right now through the QSR sector. In varying degrees, you can expect to see all of these trends in the near future.

Simplification Look at your operations. Find out where the chaff is located. Focus like a laser on getting rid of inefficiencies. Make sure that everything fits together in a lean and mean sort of way.

In the new model for QSRs, you can’t afford to be carrying dead weight in your operation.

Electronic ordering - efficiency Look around and you will already see evidence of a growing trend in the QSR world. Already, major QSR chains, like McDonald’s, are moving in this direction.

Electronic ordering, as it spreads, will open untold opportunities for QSRs way beyond the obvious time saving advantages of saving time and labor by using electronic POS systems.

By using third party marketing systems, you can expand your marketing penetration. Services like Via 121, a WRA partner, are experts at online marketing beyond the POS at your counter.

Millennials, who love speed and convenience, want to be able to order on a smartphone, walk into your restaurant and pick up their order. A good smartphone app will help you connect with this vital segment of your potential market.

Some operators are taking the trend of electronic ordering to an extreme. At one new San Francisco restaurant, guests can order, pay and eat without the slightest bit of human contact. Due to its futuristic approach, this eatery is known as the “robot restaurant.” It is nearly fully automated with no waiters or order takers behind a counter. Although people work behind the scenes, helping prepare food, these human employees may only be a temporary holdover from a more labor intensive restaurant model. Indeed, plans are in the works to fully automate this restaurant’s food preparation process if turns out to be less expensive than using human workers.

With ever rising costs of running a restaurant, automation that helps cut back on expenses may gather steam as a model for the future. People, however, do crave interaction with employees when they go to restaurants, and this may limit the appeal of such a model. While we don’t expect most QSRs will go to this extreme, the emphasis on efficiency and cutting down costs will drive more operators toward varying degrees of electronic ordering.

Electronic ordering - banking Electronic ordering can also simplify your operation and save you precious time by hooking up your POS system to your bank.

Think about how much easier your life as a restaurant operator will be with your customers’ payments going October 2015 | 17

directly into your restaurant’s bank account. Simplify, simplify, simplify should be your mantra.

Re-thinking the perfect employee It’s time to completely overhaul your ideas about your perfect employee. Now that wages are going up, you’re expectations of your employees need to go up with those wages. The old model was entry-level, but if you’re paying $15 per hour, those expectations aren’t going to cut it anymore.

Ask yourself what you expect from a $15 per hour employee. If you’re paying that wage, you should expect problem solving abilities, critical thinking and other skills beyond what you’d pay a $9 per hour worker.

profit margins. Don’t engage in wishful thinking when it comes to pricing . Look out for your bottom line.

Be hard and logical. Even if you sell a lot of one particular item, if it costs a lot to produce, it might not be a great item to keep on selling. And make sure you have a good mix of high and low cost items.

Know the whys behind your pricing system rather than just the structure.

Outside/in employment ladders One of the most intriguing models to emerge from Seattle’s minimum wage increase is that of outside/in employment ladders.

More on this later.

Finding ways to be local One of restaurants’ great strengths - across all segments of the industry - is their ability to connect with their communities. People celebrate the great occasions of their lives at restaurants - how many times have you seen a youth soccer team celebrating the end of its season at a local QSR? Or how often have you seen a restaurant sponsor a community team or take the lead in donating to a local charity? It happens all the time, and it’s part of what makes our industry a great one.

Even local franchisees within large QSR chains can and are finding ways of connecting themselves with their communities rather than allowing themselves to be viewed as a tiny cog within a corporate behemoth.

Increasingly, franchises are putting “locally owned” up front on their brands. Formerly, if you saw “locally owned,” it was often in the back - more or less out of sight, out of mind.

This is a smart move, especially in view of the big uniondriven push for increased minimum wages. Often, the QSR corporate brands were used as targets to rally the union troops. If QSR franchisees are going to stop these kinds of attacks, they’re going to have to do everything they can to show their strong relationships with their local communities.

Facing pricing realities It is of utmost importance for QSRs to use realistic pricing. If your costs are increasing by 50 percent, you can’t charge 50 percent less. We all know that restaurants have extremely narrow 18 | warestaurant.org

What does this mean?

Simply put, in an outside/in employment model, cities like Seattle, with high minimum wages, are no longer training grounds for QSR. If operators are going to pay $15 per hour, they have a right to expect the very best performance from any employee that receives such a wage.

Expect to see chains with outlets in both Seattle and its lower wage suburbs to use those suburban outlets for training employees. In contrast, Seattle will be the place where operators move their strongest employees. It only makes sense to take your risks in lower wage areas. What you get that way is less turnover and lower training costs.

What if you are a single unit restaurant in a high minimum wage city, like Seattle, or a chain with no units in the lower wage suburbs? Don’t worry. You can still make the outside/in employment ladder work for you by forming partnerships with QSRs beyond your city’s limits, where they can provide especially strong, well-trained employees for your restaurant.

However you look at it, big changes are coming to the QSR world. Smart operators will embrace these innovations, experiment and find a sweet spot that works for them and their guests. Always remember, however, that you are not committed to any approach so long as you are transparent about it. Don’t be afraid to leave an approach if it doesn’t work.

With all of these buzzes, consumers will ultimately say “Yea” or “Nay.” As much as we want to be king of our kingdoms, the consumer still has the final say. 

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October 2015 | 19

Seven buzzes for hotels

By Marianne Scholl, contributing editor

You might call it the best and the worst of times to be a lodging owner or operator here in Washington.

Travelers, in 2015, have been treating our state very well, indeed. Both domestic and international arrivals at SeaTac International Airport are up 13 percent over last year, and key indicators for Washington’s lodging industry all show healthy growth. Year-to-date occupancy, average daily rate and revenue per available room, or RevPAR, have all risen, and statewide indicators exceed national averages on all fronts. Seattle’s enviable occupancy rate, this summer, averaged just shy of 90 percent.

Yet, despite a robust income line on many operators’ balance sheets, the expense side has everyone worried, especially in cities where extreme minimum wage laws have been upping the ante for employers. HR professionals, particularly in Seattle, see a perfect storm on the horizon.

Health insurance requirements are kicking in under the Affordable Care Act, ACA reporting requirements alone require more HR support, and local labor laws in Seattle, SeaTac and Tacoma are causing payroll costs to skyrocket.

What’s a hotel to do to remain competitive?

Cultivate your talent In real estate, it’s location, location, location. For hotels, right now, it’s all about finding and keeping talent. These are the employees to whom customer service doesn’t need to be taught; they come by it naturally. They also have the skills and capacity to deliver on their promise. And as HR costs rise, due to federal and local employer mandates, they are increasingly important to the bottom line.

Lodging is a labor-intensive service industry, and it’s difficult for properties to reduce staff to offset higher payroll costs.

The focus, instead, is on reducing expensive turnover. This is especially true in the Puget Sound region where a booming tech industry, an increase in hotel rooms, and Seattle and SeaTac’s higher minimum wages have thrown an already challenging labor market even more off kilter.

HR directors, in Seattle, are looking at better on-boarding of new employees and special perks, like deep discounts on rooms at related properties, to hold on to employees. And as an industry that has always offered a ladder to success, 20 | warestaurant.org

it’s time to celebrate that ladder and help more employees move up into increasingly rewarding and challenging positions.

The forward looking 360 Hotel Group, which owns and operates six hotels in Western Washington, is proactively investing in training to give employees who have demonstrated commitment and aptitude the skills and experience they need to move into managerial positions.

Be mobile Keyless room entry, digital check-in, messaging to request room service… You name it and it’s probably already possible on your smartphone. Over the next several years, apps are very likely to become brand standards for a range of services. Staying up-to-date on trends in mobile technology is imperative not just for service but for marketing and revenue management because phones are where the action is.

Travel Weekly reports that online travel purchases will reach $116 billion next year with hotel room spending up 55 percent since 2012. While consumers are still more likely to purchase through online travel agencies (OTAs) or hotel websites, using their desktops, shopping for hotels and planning trips are now more frequently done on mobile devices, according to a study by Phocuswright and Millward Brown Digital.

Stay engaged Digital check-in may eventually take some pressure off front desk staffing, but successful apps offer more immediate benefit. They, like good old-fashioned social media, will help your engage tech-savvy travelers and gather information on your guests that will help you deliver outstanding service.

There are plenty of examples at the brand level: In May, Marriott Hotels launched Mobile Request, enabling frequent travelers to chat with staff via mobile messaging before they even arrive at the hotel. Kimpton Hotel & Restaurant Group’s new loyalty program allows for tracking and rewarding things like participating in a property’s

nightly wine hour, traveling with pets or mentioning a hotel or restaurant on social media. Tweet about your Kimpton visit and you might find a free snack in your room the next time you stay.

Go local Millennials are all about the experience, and whether you represent an independent or branded property, a bed and breakfast or a selectservice hotel, helping guests experience the local culture is simply a smart business practice. Full-service properties have the opportunity to design F&B offerings that feature local products and produce, but even limited-service franchise properties can capitalize on local offerings.

Take Wirta Hospitality’s Holiday Inn Express & Suites in Sequim. Owner Bret Wirta has teamed up with a local whale watching company to tout one of the area’s unique travel experiences. His front desk staff has gone whale watching and been coached on how to talk to guests about the trips, serving as ambassadors to this and other Sequim adventures. The property’s website hiesequim.com offers travel tips, including the Olympic Peninsula’s 10 best family attractions and 10 best backpacking adventures.

Yet even more important than being local is being genuine, says Wirta. While older travelers like the comfort of having everything the same, younger travelers are looking for unique experiences, and they want these to be authentic, not pre-packaged offerings.

Friend your enemies Talk OTA and you will raise the hackles of many a hotelier, especially now that Expedia has further consolidated the market with its recent acquisition of Orbitz.

Many consultants, however, urge hoteliers to make the most of their inevitable relationship with OTAs. The “billboard” effect is one of the most frequently sited benefits for keeping rooms up on OTAs, especially for independent properties that aren’t backed up by a strong brand site or large brand marketing budget.

a competitive set within your local area. Because selling inventory is their business, OTAs have market intelligence that can help you understand what makes your more successful competitors stand out. HotelRez also touts the value of participating on package programs to build base and protect rates. As proof that this works, it cites a 2014 Expedia study, which found that hotels with a higher than average participation in packages also have a higher ADR during all booking window periods.

Integrate It used to be that only revenue managers and digital marketers talked about distribution. Now technology, distribution channels, revenue strategy and data science are hot topics for the industry as a whole. It’s a bit like the search for the Holy Grail: Everyone is looking for a formula that optimizes marketing, revenue management, technology and distribution, and integrated revenue strategies may be the answer. That’s because mastering your online and digital presence, increasing your conversion rates and maximizing your RevPAR is more important than ever given the consolidation of OTAs, emerging distribution challenges like Google and “alternative accommodation” sites like Airbnb.

Get involved As payroll and operating costs rise, the stakes for maintaining a profitable business keep getting higher.

That’s why it’s so important to have a strong, effective trade association representing your business in Olympia and throughout the state. You can help ensure that WLA and the WRA are even more effective in defending your interests by attending a regional Government Affairs Committee meeting this month, responding to a call to action, or taking advantage of opportunities to get to know your elected officials. Building a relationship with your state legislators, or getting to know your city council members will pay off when you ask them to consider how a bill you dislike would affect your business. For more information on your government affairs team, contact Marian Ericks, government affairs manager, at 206.920.8881 or MarianE@warestaurant.org. 

HotelRez Resorts and Hotels recommends asking your OTA manager for reports on how you measure against October 2015 | 21

Old restaurant model broken

By Sheryl Jackson, research editor

Starting in 2016, there will be many factors that will impact and increase a restaurant’s labor costs to potentially unsustainable levels. The model businesses currently use will be no more.

Two of these factors include minimum wage increases and upcoming labor shortages.

Minimum wage increase According to a recent statewide survey conducted by the WRA, an immediate increase in the minimum wage to $12 an hour will result in operators projecting an immediate 10 percent increase in labor costs, dropping their low 4 percent profit margin even lower.

Labor shortage According to Bruce Grindy, the National Restaurant Association’s chief economist, while both hiring and job openings trended upward over the last few years, the gap between monthly hires and job openings is much smaller than normal. In fact, during the last 12 months, the average gap between the two indicators is the smallest it has been since the JOLTS data series began in 2000. These recent developments indicate that the restaurant industry’s labor market is likely tightening. For the complete article, go to restaurant.org and search “labor shortage.”

Other factors affecting labor costs include new federal overtime laws, the national health care mandate, leave mandates and new scheduling restrictions. For information addressing ways to assist your costs, please see the article “Washington’s hospitality industry faces winds of change” on page 14.

22 | warestaurant.org

Hospitality industry taking new liquor rules to court

By Stephanie Davenport, contributing editor, and Paul Schlienz, managing editor

Last month, the Washington State Liquor and Cannabis Board (LCB) adopted new rules that regulate pricing practices for spirits and wine sales. For two years, the WRA has been in vocal opposition to these rules that appear to violate Initiative 1183 (I-1183), but restaurants’ concerns have fallen on deaf ears.

Most recently, the WRA asked for a delay in the effective date of the rules. The delay would have allowed the courts to legally evaluate if the LCB has authority to set pricing strategies – a concern raised by the majority of stakeholders. The LCB, however, declined to wait.

The WRA’s only remaining option was to challenge the board’s action in court.

“During the past three years, the WRA has worked to provide numerous legal analyses raising our concern about the board’s authority to intrude on these business decisions, dozens of detailed comment letters from restaurants and hotels that will be harmed, hundreds of responses to the small business impact survey, and even provided a detailed economic study to help educate the board about why pricing decisions occur in a private marketplace,” said Julia Gorton, the WRA’s senior government affairs manager, and its lead on issues related to the LCB. “Every possible option has been thoroughly pursued over the past three years, but it appears that the only resolution now is to ask a court to weigh in. We will continue to work towards a cooperative relationship with the board, as their largest regulated stakeholder” Restaurants have good reasons to be unhappy with the LCB’s rules.

“The rules set up a bizarre and complex system for how price can be calculated for spirits, and a completely separate system for wine, without any market-based rationale,” said Bruce Beckett, the WRA’s director of government affairs. “We think it’s pretty simple – price should be determined by the willingness of a customer to pay the price, and the willingness of the buyer to sell at that price – the way it works for ‘goods of all kinds’ – as permitted under the law. It’s disappointing that it has

come to this; however, our job is to protect local restaurants and consumers.”

The rules prohibit businesses from negotiating price on spirits and wine. The LCB sets up a system of uniform quantity discounts for spirits, and strict rules around when and how those volume discounts can be calculated.

Businesses are prohibited from taking advantage of product promotion and pricing specials, specifically “family plans,” or establishing a customer relationship beyond a single, one time order.

Not only are the new rules likely illegal, they are harmful.

Nearly two hundred Washington businesses responded to a small business economic impact study, produced by the LCB itself, explaining how their businesses would be drastically affected. The majority of these respondents were small businesses. Restaurants are far from the only business that will be impacted; grocers, wineries and spirits manufacturers have all raised serious legal concerns about the board’s proposed rules.

“It was frustrating when the LCB violated the law during the implementation of privatization three years ago, but our objections were affirmed in court when the LCB rule to restrict purchasing options for restaurants was overturned,” Beckett said. “At that time dozens of rules were also invalidated for failure to follow required rulemaking procedures to examine the impact on small business. This will be the second time the board has ignored the impact on small business, and the second time we ask a court to overturn rules that violate the law and impede restaurants and bars from legally acquiring product to run their business.”

The LCB filed the rules with the Office of the Code Reviser.

The rules take effect on October 24. As of this writing, the WRA and WLA are in the process of filing suit in Thurston County Superior Court.

“I don’t think the LCB should be involved in anything to do with pricing,” said Pete Hanning, owner of Seattle’s Red Door. “The board’s core functions are safety, keeping alcohol away from minors, taxation, licensing and preventing overservice. Let the private sector work out issues like pricing.”  October 2015 | 23

Meet your future workforce

By Lyle Hildahl, director of the Washington Restaurant Association Education Foundation

There have been mega reports on the gap between positions needed to fill for the next decade and the qualified people to fill them.

One response is to automate as much as we can.

Good strategy.

Unfortunately, however, this doesn’t solve the problem.

I would agree that we need to automate as much as we can, but we are in the hospitality business, and robots won’t cut it when it comes to providing the feel, emotion or heart of a dining or lodging experience.

Our value of the experience comes from the quality of the people that cooked, cleaned, served and lead through that experience.

Hospitality is eye contact, visual art on the plate, a smile, a feeling that we matter to the employees and management.

So, there’s my rub on automating everything; it can’t and won’t happen. A sensible balance is the right approach.

So, what are we going to do about the gap in qualified employees to fill the jobs? Everything we can.

Like a successful restaurant or hotel, you bring teams in to accomplish your goals. The Washington Reataurant Association Education Foundation is working with as many teams as possible through partnerships to prepare the current and future workforce. We partner with high schools, colleges, workforce development councils, DSHS, FareStart, Goodwill and, most importantly, the hospitality industry.

We learn from our experiences right? Many times we learn more from the experiences where things didn’t go so good.

Unfortunately, in the hospitality business, we don’t have a lot of room for our employees to make a mistake when it impacts a guest’s experience. Quality of food, service and atmosphere all weigh in, and it’s the employee – guest interaction that makes a difference.

You all know that.

So where am I going with this?

We need a training (apprentice) wage, up to a year, that allows the employer to provide the experience and the employee to get the education so they will both succeed.

I always thought the minimum wage was a training wage, and with that minimum wage going up to $12–15 across the state, where is the training wage now?

The Education Foundation will continue to build partnerships and training programs to provide the knowledge side of the equation. Industry will continue providing internships and jobs to provide the experience side of the equation. We need the public and government to provide the necessary push and support for a system that includes a training wage.

We have 37 partner ProStart high schools that provide industry-certified knowledge and education. As we continue to deal with the challenges of increased labor costs, I hope you will continue to support this amazing program by hiring these teens. They are getting the knowledge and experience you desire and expect. Get involved if you can, so you can see for yourself how amazing these young adults are. Teach a class, invite these students to your restaurant or hotel for a tour, hire them for a special event and meet your future workforce.  October 2015 | 25

INDUSTRY CALENDAR Oct/Nov Training

NEW HOSPITALITY MEMBERS Atlantic Crossing, Seattle

Great State Burger, Seattle

Bar Noroeste Taqueria, Seattle

Holiday Inn Bellingham Airport, Bellingham

Bistro Turkuaz, Seattle

Hot Cakes Chocolate Molten Cakery, Seattle

Oct. 19

ServSafe® Manager, Everett

Buckley’s on Belltown, Seattle

Nov. 3

ServSafe® Manager, Seattle

Buckley’s on Queen Anne, Seattle

Nov. 9

First Aid/CPR/AED/BBP, Kent

Nov. 10

ServSafe Manager, Kent

Nov. 16

ServSafe® Manager, Kent

Nov. 19

ServSafe® Manager, Tacoma

®

Cafe Amasia, Tacoma Caliburger, Seattle Caruso’s Sandwiches & Artisan Pizza, Spokane

Hugo’s on the Hill, Spokane Main Street Grill, Centralia Nate’s Wings & Waffles, Seattle Orfeo, Seattle Paso Del Norte, Blaine

Chinese Garden Restaurant, Longview

Pastime Saloon, Castlerock

Crawfish King, Seattle

Pizza Dudes, Renton

Meetings

David’s Pizza, Spokane

Poulet Galore, Seattle

End Zone Bar & Grill, Lynnwood

Ridgecrest Public House, Shoreline

Oct. 6

Executive Committee Meeting

End Zone Bar & Grill, Yakima

Oct. 7

MSC Sub Committee Meeting

Fanfare Events, Nooksack

Saigon Rendez Vous Restaurant, Olympia

Oct. 7

Government Affairs Committee Regional Meeting, Tacoma

Flying Saucer Pizza, Redmond

Oct. 12

Government Affairs Committee Regional Meeting, Tri-Cities

Oct. 13

Government Affairs Committee Regional Meeting, Spokane

Oct. 19

Government Affairs Committee Regional Meeting, Bellevue

Oct. 20

Finance Committee

Oct. 20

Government Affairs Committee Regional Meeting, Seattle

Oct. 26

Government Affairs Committee Regional Meeting, Vancouver

Oct. 28

Government Affairs Committee Regional Meeting, Mount Vernon

Nov. 11

MSC Sub Committee Meeting

Nov. 16

WRA EF Board Meeting

Nov. 17

WRA Fall Board Meeting

Nov. 18

MSC Fall Board Meeting

Nov. 19

Retro Invest/Retro Trust Meeting

Events Nov. 1517

WLA’s Annual Convention & Trade Show

Frank’s Bar & Grill, Winlock

Tonala Mexican Restaurant, Spanaway

NEW ALLIED MEMBERS Agilysys Nancy Naretto sales@agilysys.com 3380 146th Pl SE Ste 110 Bellevue, WA 98007 6472 877.369.6208 www.agilysys.com Agilysys is a leading technology company that provides innovative point of sale, property management, inventory and procurement, workforce management, analytics, document management and mobile and wireless solutions and services to the hospitality industry. The company’s solutions and services allow property managers to better connect, interact and transact with their customers by streamlining operations, improving efficiency, increasing guest recruitment and wallet share, and enhancing the guest experience. Agilysys serves four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of the company’s consolidated revenue is derived from contract support, maintenance and subscription services. Agilysys operates throughout North America, Europe and Asia, with corporate services located in Alpharetta, GA, and offices in Singapore, Hong Kong and Malaysia.

Blasingame Insurance Nick Gilliland nick@blasingameins.com 200 N Argonne Rd Spokane Valley, WA 99212 2852 509.891.1000 http://www.spokaneinsurance.com/home.html Blasingame Insurance Agency. a division of W.R. Insurance Brokers Inc., has been serving the

26 | warestaurant.org

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Our products include fresh pastas, rolls, hamburger buns, bakery goods and flours. Taste, texture and nutrition far superior to rice based gluten free foods.

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HEALTHCARE SOLUTIONS Are you lying awake at night wondering if you are compliant with all of the healthcare laws? Let the

WRA help you sleep better!

The Washington Restaurant Association has added “HEALTHCARE SOLUTIONS” to our program offerings. To find out what works best for your business, visit: http://wra.cc/hcsolutions to walk through our healthcare options for your business.

Or, ask your broker. Don’t have a broker?

Call or email and I will set you up with an expert in our industry!

Contact Stephanie Conway for more information at 360.581.5788 or email her at stephaniec@warestaurant.org.

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According to ACRAnet, the WRA employee background check partner, one-third of job applicants lie on their applications and another five percent falsify their social security number. In today’s economically challenging times, employers are more likely to see a rise in embezzlement and other potentially harmful behaviors. In fact, a reported $4 billion is lost annually to embezzlement and a violent employee incident costs employers on average an incredible $250,000. These sobering statistics make any small business owner cringe. However, employers can protect themselves with a mere $19 investment in an employee background check. Visit warestaurant.org for more information.

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The Washington Restaurant Association designed a health care plan just for WRA members. The Hospitality Industry Health Insurance Trust (H.I.H.I.T.) enables business owners in the hospitality industry to provide affordable healthcare benefits statewide. Contact Joe Peoples at 877.892.9203 for a FREE quote.

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28 | warestaurant.org

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Ask the Expert | Restaurant Profit Coach

Defeat wage inflation in four easy steps

By Rick Braa, CHAE

Q:

We’re beginning to prepare for the upcoming year. In our plan, we need to specifically address the increase in wages and impact of minimum wage. What are some ideas to address wage inflation?

A:

Minimum wage increases annually in Washington state. Seattle jumped into the discussion as a major city highlighting its progressive politics.

After several months of discussions, the mayor’s office mandated a series of increases triggered at the beginning of each year, eventually phasing out after minimum wage hits over $18 per hour, in 2025, when the state minimum wage is expected to hit just above $12 per hour. 2016 marks the next major jump for large employers (more than 500 employees) to a minimum wage level of $12.50 and at least $13 per hour minimum compensation providing a medical benefits credit of $0.50 per hour. Small employers must meet $12 per hour minimum compensation and may include a credit of $1.50 per hour for tips and/or medical benefits, but must pay at least $10.50 per hour. While the increase is not insignificant, small employers are not going need to make major adjustment, this year, to cover higher wages to the same extent as large employers. Whether a company is large or small, the important practice is to be proactive with labor management. Consider the following to help ease the pain: Increase expectations of knowledge—Line ups need to be replaced with pre-preparation on behalf of the service and cooking staff; it starts the day before, not minutes before the shift. Be sure to plan ahead for menu and impart knowledge prior to the staff leaving the prior day to give the staff time to think about their shift the following day.

Use email as a tool to send highlights about the restaurant and what’s happening so it can be read by staff prior to arriving to the restaurant. Higher wages carry increased responsibility on behalf of the staff. Test staff individually on their way into the shift whether it’s bar knowledge, food knowledge or an area of service focus.

Increase the service level—Guests come the first time for the food, and come back for service. Guests are five times more likely to return to a restaurant if they had a memorable experience with an employee. In a time of wage inflation, driving frequency of guest visits must be the focus since it has the highest impact on sales. By increasing focus and providing outstanding service, guests will return more often. If a restaurant serves 50,000 guests per year,

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capturing 3,600 more visits (10 guests per day) will yield more than enough to offset increases in wages. Service is the avenue.

Reduce the number of employees—Fewer employees cost less money. Each member of the team carries taxes, perhaps benefits, a need for management and ultimately hours. In any organization, there are 20 percent of the employees that are non-engaged, working in the opposite direction of where the restaurant needs to go. That’s two out of 10 people that underperform and provide 50 percent of a day’s work for a full day’s pay. Evaluate the staff and use overtime as a tool for improvement; employees that work overtime and know the value of what they provide will produce at a higher level for their OT 50 percent increase in base wage than having a non-engaged employee. Fewer, more engaged and productive employees will save money and increase guest satisfaction.

Take timely price increases—Wholesale prices increase every year, and so does payroll cost. Be smart and increase item pricing on items of high volume that aren’t easily compared to other items in the market. Analyze the top sellers over one year. Increase prices on the top sellers and multiply the amount of the increase against the yearly totals. Reserve large price increases for future years when wages increase at a much higher rate. A five percent increase in pricing will pay the increase in inflation.

Pressure on wages is not going to subside without a major recession. The number of employees available is too small a pool to keep wages from inflating. Driving return visits with highly engaged employees that feel valued and appreciated with higher check average will take the sting out of wage inflation.

For a more information on improving profitability and driving performance, contact AMP Services at rbraa@ ampservices.com. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability. 

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