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How Do I Prepare My Restaurant To Sell Amongst Mandatory Minimum Wage Hikes?

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Comments & Replies: 1     Views: 1753     Posted By: Joe Ranieri  Joe Ranieri, Business Broker: LA, Orange County Areas

A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Here is some advice in handling this new increase.

Topics: Buying A Business, Selling A Business     Tags: buying a business, for sale by owner, selling a business



This is a topic many small business owners are having with themselves these days. A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Here is some advice in handling this new increase.

This is a topic many business owners are having with themselves, and major franchises, such as McDonalds, are reported to already be preparing for $15 an hour minimum wage in California by installing ordering kiosks in their stores. A point of back ground, back in 2016, California Governor Jerry Brown signed into law an increase to the state minimum wage from $10 to $15 per hour. The increase is gradual and goes up about a dollar a year and maxes out at $15 an hour in 2022. Many business owners are concerned about dealing with a 50% increase in labor costs over such a short period of time, and not only will they be paying $15 minimum wage, but many workers, such as employees who have been with the company for a while and supervisors make a few dollars over minimum wage, and so they will be making $17, $18 or $19 dollars an hour. The minimum wage hikes coincide with record low unemployment, so business owners will be fighting amongst each other for good labor, increasing wages even more.

1. Audit Expenses - Focus on two things which you can control, food costs and labor. With regards to labor, look for sales peaks/declines during the day and staff accordingly, appropriate staffing will improve profitability - gone are the days when an owner can have employees standing around or having 2 employees doing the same job when one will do. As a past business owner, I've seen employees dealing in food, waste an unbelievable amount, and so an owner should be very focused on lowering food costs.

2. Research laws/regulations on tips regarding servers/staff - Make sure as a restaurant owner you are up to speed on the latest and upcoming laws regarding tip pooling/tip sharing and how it impacts minimum wage amongst servers. Some restaurant owners have been talking about including a service charge in lieu of tips, this is somethings one should investigate and see if it works in their personal market.

3. Hire smart - There's an old saying, "Slow to hire, fast to fire." An owner who pays more for labor should expect more from the employee. An owner should really analyze the qualifications of a recent hire, but if they find that they are not working out, be tough and send them on their way.

4. Upgrade technology - If it is affordable, consider automation or introducing kiosks. Computer tablets have never been more affordable and are great ways to lower costs by having customers order from them. According to a USA Today article published June 7, 2018 there are advantages to ordering kiosks vs ordering at the counter, "What we are finding is when people dwell more, they tend to select more," McDonald's CEO Steve Easterbrook told CNBC Monday. "So there is a little bit of an average check boost that comes with it." An owner should also invest in monitoring cameras in their store and have them be viewable remotely from either a laptop at home or their smartphone. Monitoring cameras goes back to controlling food costs because of internal theft.

5. Increase Prices - This is tricky, because an owner always wants to build their business, but if it's possible analyze where there is a possibility of increasing prices on food items. This can be accomplished smoothly with the role out of a new menu board or new menus.


  Helpful Resources To Assist In Selling And Buying California Businesses
Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Bob Hughes: Business Broker, Coachella Valley Area

Bob Hughes is a business broker & is President of Hughes Properties. Hughes has a wide variety of entrepreneurial experience with the personal ownership & sale of numerous businesses, and has sold over 200 small & mid-sized businesses in the Riverside County marketplace. Call Bob at 760-323-8311.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Lee Petsas, Business Broker - Southern California Area

UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440.

Ken Oppeltz, Business Broker, San Diego County

We have been San Diegos premier business broker and merger and acquisition specialist since 1989. Staffed with some of the best-qualified and most experienced business brokers in the industry, our professionals have all earned or are candidates for the Certified Business Intermediary (CBI).

Christina Lazuric, CBI, CBB Business Broker: Orange County

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Chris Seaman, Business Broker: Southern California

Founded in 1994, First Choice Business Brokers has accelerated to become one of the most successful Business Sales Organizations in the world. Our team of agents have gone through extensive training to become experts in the field of business brokerage. Call Chris at 858-578-4111 for more info.

AJ Rana - Business Broker, San Francisco Bay Area

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