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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: 386     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
Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.

Mani Singh, Business Broker, Southern California

I have successfully represented clients sell & acquire multitude of businesses ranging from Gas Stations, Liquor Stores, Markets, Super Markets, Smoke Shops, Postal Stores, Restaurants, General Retail, Auto and Construction related. Phone me for assistance with selling or buying at 951-296-7646 Cell

Timothy Cunha, J.D., Business Broker, Northern California

Having managed and sold several businesses of his own, Tim offers business sellers extensive personal experience and professional expertise in building business value, planning a successful exit strategy, "packaging" and promoting the sale, and coordinating a successful sale. 844-237-6487 Toll Free.

Jeff Back, Broker: Restaurant Specialist - SF Bay Area

J. Back & Associates Restaurant Real Estate was founded in 1988 as the first bay area real estate company to specialize exclusively in restaurant real estate. I am the past President of Charley Browns restaurants and have been involved in the restaurant business for over 35 years. 925-736-8200.

Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance

For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.

Abdul Jobah, Business Broker, Central Valley, Kern County

As A Real Estate Agent, I offer my clients assistance with the sale or purchase of commercial properties and/or businesses. Please contact me if you are looking to sell or buy a Central Valley business. If at any time you have any questions please do not hesitate to call me at 661-703-3916.

Harry Sidhu, CBB, Broker - SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.

Cheryl Maloney: Restaurant Broker Specialist - San Francisco

Cheryl is a business owner herself, Over 20 years bar/restaurant experience, and a law degree she's well-versed in real estate rules, regulations and best practices. She works tirelessly to create successful strategies and effective negotiations for those wishing to sell or purchase their business.


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