Zenzi (an hypothetical restaurant) is the oldest and finest high-end vegetarian restaurant in the U.S. It has a view of San Francisco bay from every one of the more than 200 seats. It has been a success since it opened more than 25 years ago. It was designed and started by a key member of a local Zen group.
Zenzi has been popular and crowded throughout its life. It is always listed in the top 100 San Francisco restaurants and the top dozen most important.
The restaurant and its location was my idea. I started the ball rolling to create a Zen restaurant in that location, so I have always had an attachment to it. Fifteen years ago, I was put on the Board to deal with some problems and have remained on the Board because it is fun and I like the people.
This blog is about the effect of the San Francisco minimum wage law on a successful operating business as seen from inside. The law was passed two years ago raising the minimum wage from $10.74 per hour to $12.25 on May 1st of this year. So we have had 6 months of the new minimum wage.
Next July the wage goes to $13.00, then to $14 the following year and finally to $15 in July 2018.
So what does this current 14% increase in the minimum wage do to wages?
I just saw the October financials which show the effect of 6 months of the new wages. The effect on a restaurant is significant because wait staff is paid minimum wage, but gets 3 times that income in tips. The dishwashing and related staff in the kitchen is also minimum wage and shares in the tips.
With the $10.74 wage, there was a gross revenue of $5 million with direct labor at $2 million and benefits of $.5 million. Net revenue last year came to roughly $.5 million. With new wages for 6 months at $12.25, the labor and benefits cost went up $.2 million for the half year and 2015 net revenue went down by that amount to $.3 million. (All these are approximate figures that a person in the restaurant business could estimate.)
I pointed this out to the other 10 members of the board. They are all Democrats and they promptly changed the subject. They believe in a political policy of raising the minimum wage. I pushed harder and the answer I got was: ‘How do you know what the future will be about?’ I said I relied solely on addition, subtraction and multiplication. The next effort to change the subject was, ‘Bring this up at the next budget meeting in April.’ Since this net revenue impact is large, my response was: ‘If you are going to lose your job, do you want to know it early or late?’ Still no acknowledgement of the impending problem.
So I made a motion that considered next July’s wage raise to $13 per hour, which will be on top of the 2015 increase and will increase wages and benefits by another $.2 million by year end, clearly wiping all of the net revenue. Nobody seconded my motion, but I got my calculations in the minutes.
From that point in the meeting a few people humorously referred to ‘Michael’s armageddon future’. But the Board went ahead and authorized a $160k remodel based on a $200k bank loan. And ignored the impending future problems.
I call this worship of the Democrat golden lamb of a minimum wage ‘idolatry’. Two things to keep in mind about this idolatry: (1) all three Democrat candidates for president endorse a high and rising minimum wage, and (2) many of these Zenzi Board members are Buddhist. Saying a lot about the extent to which Zen meditation opens one’s mind. Not.