Local Indie Biz #2: Neighborhood Bar/Restaurant

This excerpt is reprinted from The Stranger with permission from author Andrew Friedman.

282943_669542093088140_1727694119_nIn publicly discussing the $15 minimum wage issue, I’ve been cautioned by allies not to use logic, reason, and data to make my point, but instead to mirror the 15Now platform and stick to emotion-based polemics, apples-to-oranges “facts,” and simple slogans, as it is suggested that such manipulation works much, much better.

Well, I just can’t do that. But here is the reality to this situation:

That favorite coffee shop that you go to? That great neighborhood restaurant? That store where you buy your books, pet food, art supplies, or clothes? Each of those businesses survives on around a 5 percent net profit margin. That means that at the end of the year, after all the expenses—the payroll, the supplies, the inventory, insurance, rent, etc.—we all will end up with only about 5 percent income in our pockets if we’re doing a half-decent job. Maybe a bit more, maybe a bit less—but you get the idea. This does not leave a small local business with much room to absorb even a small incr
ease in costs, much less the 60 percent increase demanded by the well-meaning but ill-researched and biased reporters and neighbors involved in this discussion.

Here are some more boring facts:

Payroll is approximately 30 percent of my entire costs at Liberty, the bar I own (the average in this business seems to be 30 to 35 percent). If the minimum wage goes up to $12.50 an hour (a reasonable middle ground some have proposed), that would be an increase of 34 percent, which means just to stay even I’d have to raise prices 10 percent across the board—the labor’s percentage increase in total cost to operate Liberty.

If the minimum wage goes to $15 an hour, I’d have to raise my contribution to payroll by 18 percent. So my costs would have to rise by no less than 18 percent, just for payroll—and that’s before my vendors’ increases in costs have to be considered, which I believe will be around another 5 percent, and that’s before Liberty adds any profit.

So it’s not impossible to imagine that costs for business like mine in Seattle will go up by no less than 20 percent.

Those increases are way more than my income. Again, my profit is around 5 percent. And it’s not just me, that’s across the board—for restaurants, for bars, for clothing stores, for pet stores, for art supply stores—many of whom have set costs and are competing with online retail. This makes it very difficult for them to adjust their purchasing.

Here’s the deal though—small businesses like mine want to work with the mayor and city council to raise the minimum wage and find a reasonable middle ground. Because we know our numbers, and because we have worked so hard to get where we are, many of us are very serious about trying to communicate with our elected politicians and the Seattle citizenry to relate to you our REAL numbers.