Dear Terra Guest,
For more than 15 years, Terra has strived to provide the best quality service and product at a reasonable price. New government mandates are creating significant cost to do business as a restaurant. Labor is about 40% of the cost to run a restaurant. In support of the new minimum wage and other mandated increases for our TEAM a 3% surcharge will be added to every bill. The surcharge is directly related exclusively to the cost of increased daily operations which are beyond our control. It is not a gratuity and will be reviewed quarterly.
Please take a moment to read our thoughts and how we arrived at this difficult decision. We hope you’ll understand that our motives are sincere and our course of action is necessary for a sustainable and fair working environment for all. We appreciate your trust and understanding and will continue to put our heart and soul into providing you delicious food, exceptional service and genuine hospitality.
It might surprise you to know that restaurants only average 4-7 cents on the dollar after all expenses are paid— and that was before minimum wage started to climb, the implementation of the affordable care act and other State and local ordinances. In as much as paying our employees a higher wage would be the simplest thing to do it’s simply not possible to do so without making some changes.
Why then not just raise your prices?
In a sense we are, but we’re going about it in the most transparent way possible. It’s important to us that people understand we’re not doing this to improve our bottom line but to preserve the modest margin that exists today. But there’s more to it. Since we cannot predict how or what people will order, raising prices by $1 doesn’t necessarily mean an additional $1 to pay for these increased expenses. In fact, what the last several years have demonstrated is that every $1 increase you need necessitates far more than a $1 increase in pricing. By implementing a surcharge, we’re confident we’ll have the resources we need to continue raising wages for ALL of our employees, not only those earning minimum wage.
Why do you need to raise wages for all?
Due to a peculiar California Labor Code that excludes tips as income (even-though we pay payroll taxes on those tips) and a (we think) horrendous court ruling in the 9th Circuit Court of Appeals that excludes kitchen employees from sharing in those tips, there is a very large and growing income gap between tipped and non-tipped employees as large as 300%. And since tipped employees are the only minimum wage employees restaurants typically have, they have been the primary beneficiaries of those increases. This is an unfortunate and unintended consequence but one we cannot continue to ignore. With a surcharge, we” be able to not only comply with minimum wage ordinances but ALSO raise the pay for those wonderful people in the kitchen whom are already above the minimum.
I'm just a diner, why should I care?
Without getting into the politics of minimum wage, we support the idea that anyone working full time, should be able to afford some basic standard of living. As extreme as $15 an hour might sound relative to where minimum wage has been, it’s only $30,600 a year on a pre-tax basis. If anything, we don’t think it goes far enough and we’d like to do better. Unfortunately, as we outlined above, as it relates to the restaurant industry in California, it’s not going to the right people and restaurants have limited resources to do what is required by law AND what we all feel is the right thing to do. It hurts to acknowledge this but the sad truth is the front of the house are earning 2 – 3 times that of what the cooks are making after adding in their tips. Considering a great guest experience is a total team effort it’s just not right
Is there an alternative to this?
Yes there is. Unless there’s a change in labor code or a reversal in the court ruling, restaurants will likely have to move away from the traditional tip model sometime between now and $15 an hour so that there is a greater income equality. This can be done by implementing a flat service charge like 18% – 20% or raising prices by that amount and having the prices include service much as they do in Europe an other parts of the world. By doing so, restaurants will be able to ensure that those tips are distributed in a fair and equitable manner so that all employees benefit without necessitating drastic price increases year over year. We’ve been very outspoken in favor of this solution but in the end, we concluded that taking baby steps would be best for our business and our employees. Tipping is very much engrained in our culture and change will have to come slowly. The good news is that in the short term, we are able to raise the quality of pay for our kitchen crew and that we have some amazing servers who despite not being compelled to do so, still voluntarily share a portion of their tips with their kitchen counterparts.
We want to thank you for taking the time to better understand the challenges we’re facing. We know not everyone will like or agree with our solution but we do hope that we’ll be given the benefit of the doubt. Ultimately, we’re doing this to preserve the quality of experience you’ve come to expect from our restaurant, to take care of our hardworking and dedicated employees and in the simplest of terms, to keep the lights on.
We appreciate you,
Mike, Jeff and Bobbi Rossman
Questions, please email Jeff at firstname.lastname@example.org