What the Recent Seattle Minimum Wage Debate Means for Your Restaurant

Dave SchnittAccounting Outsourcing, Restaurants0 Comments

Minimum Wage

If you’re a restaurant owner or operator, chances are you’ve been following the divisive minimum wage news coming out of Seattle last month. This debate is the proverbial canary in the coal mine for the restaurant industry. The Seattle minimum wage law, which was signed last year, has begun to take effect, with the minimum wage moving to $11 an hour for small and medium-sized businesses and $15 an hour by 2017 for larger businesses with at least 500 employees.

While the politics of raising the minimum wage are debated in other circles, restaurateurs nationwide need to take note of the costs they can control on a day-to-day basis. Seattle’s minimum wage debate underscores many of the challenges restaurant owners and operators face in a landscape where competition is fierce and costs are rising.

I speak with dozens of restaurant CFOs and franchisees across the country each year. As a restaurant owner, there are several things you can do to control costs and better handle some of the hurdles ahead. According to the National Restaurant Association’s 2015 Restaurant Industry Forecast, restaurant operators are managing rising costs through tracking food waste, raising menu prices and shopping around for other supplies.

Here are my additional suggestions for companies to control their costs – all using solutions that lie in the back office:

  • Benchmark your finance & accounting operation: Understand key metrics such as: What is your cost for finance and accounting as a percentage of revenue? (It should be under 1% of revenue). What is the volume for each type of accounting transaction (accounts payable, accounts receivable, payroll, etc.) processed per month? How many people are doing this work? What is the cost to process each type of accounting transaction such as accounts payable, accounts receivable and payroll? How long does it take to process an invoice? What percentage of duplicate invoices do you process?
  • See how you stack up: Judge the results of your key metrics by comparing with established benchmarks for your industry or sector. If you’re spending a considerable amount of time and money on back office processes, chances are there are several concrete ways you can boost efficiency.
  • Reengineer: If your back office isn’t meeting the benchmarks, a thorough reengineering might be necessary to increase the efficiency of your business processes. This might entail establishing written business rules, implementing cloud-based systems, scanning or faxing invoices daily for processing or designing a comprehensive disbursement solution that accommodates multiple forms of payment. Note that only the largest companies (well over $1 Billion in revenue) can get a positive ROI on reengineering so if you’re not large, consider outsourcing these processes.

Implementing back office improvements – in addition to tracking food costs and shopping for suppliers – may take some time, but the payoffs can be significant. And with Seattle’s minimum wage increase perhaps inspiring similar moves in other cities, now is the time for restaurateurs to get the costs they can account for under control.

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Seattle Minimum Wage Debate's Impact on Restaurants
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While the politics of raising the minimum wage are debated, restaurateurs nationwide need to take note of the costs they can control on a day-to-day basis.
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