[Archived] Uptown Retail & Restaurant News 2012-17

[David Greene]

We won't go to Parasole restaurants since they skim the tips of the wait staff.

It is fairly common for restaurants to take 3% out of servers credit card tips, because the restaurants don't get that money either, it is the banks that are skimming it off the top in terms of processing fees.

That excuse is just bull. A restaurant can afford that 3% a lot more than a server can.

The minimum wage hike will probably have no net effect on restaurant profitability, but the lack of a tip credit for minimum wage has a profoundly anti-progressive effect on the distribution of wages within individual restaurants. Because Minnesota is one of the few states to not have a tip credit, front of the house labor costs run higher here which means that back of the house labor gets squeezed harder than it otherwise would. When people who are making $40k to $60k a year in tips get a raise because minimum wage goes up, that money doesn't come out of the profits of the restaurant, it comes out of the pockets of the lower paid dishwashers and cooks in the form of lost raises. A line cook who is making $11 an hour and working two jobs will probably benefit a lot less from the increase in minimum wage than a part time bartender who is bringing in $400 a night on their weekend shifts downtown. That doesn't seem fair to me.

This is entirely the wrong way to approach this. Restaurant management is counting on a divided staff. The right way to approach this is to demand fair wages from management for everyone. As soon as workers fight each other for scraps, they've lost.

The right way to approach this would be to contact your SEIU local.

[Chef]

You don't know what you are talking about. You are looking at this as an abstract intellectual exercise, rather than from the perspective of having done all of these things.

I have worked for restaurant owners who made less than any of their employees. It is a ruthless business, with tight margins. A lot of independent restaurant owners live hand to mouth. Obviously that is not the case with Parasole, but still, unless you have access to their P and L, you have no way of knowing what their margin is or if it exists at all. It is perpetually mystifying to me that on one hand people know that restaurants go out of business very easily, but on the other, think that restaurants are ripping people off right and left and are just rolling in money. The reality of the business is that you make money slowly when times are good, and you lose it fast when times are bad. Most restaurants lost a half a decade of profits in the first three months of the financial crisis and are only now returning to normal (if they survived).

As far as unions go, the don't really work well for restaurant kitchens. When I was a line cook (with Parasole) we (the kitchen staff) looked into forming a union because we had a lot of issues with the company. We eventually came to the conclusion that we would be better off quitting, which we all did. Kitchens tend to be face paced environments. That isn't driven by management, it is driven by the fact that labor is the biggest cost in restaurants and people don't want to pay $20 for a sandwich. In that world, good cooks don't want to work with bad or mediocre cooks, because they are constantly screwing up the flow of the kitchen and making other people's jobs harder. Because of the way union contracts are structured, unions in kitchens tend to protect mediocre cooks with seniority at the expense of the good cooks who are newer to the restaurant. That would be less of an issue if unions could guarantee a consistently higher wage for cooks, but in reality they can't. Unions generally get higher wages for their members by squeezing some of the profits out of ownership and having it redirected to the workers. That works in large institutional cooking environments like hotels and corporate cafeterias, but in most independent and small chain restaurants there aren't enough extra profits around to increase wages enough to offset union dues. This is why we chose not to go to SEIU when we were looking into it.

This is entirely the wrong way to approach this. Restaurant management is counting on a divided staff. The right way to approach this is to demand fair wages from management for everyone. As soon as workers fight each other for scraps, they've lost.

Servers often make more than the restaurant management in annual terms and always make more in hourly terms. That changes the dynamic.

[David Greene]

You don't know what you are talking about. You are looking at this as an abstract intellectual exercise, rather than from the perspective of having done all of these things.

Thanks for your perspective. I was indeed thinking in the context of large outfits like Parasole, not small independent restaurants where unions would be overkill.

I still maintain that workers fighting each other for wages is destructive. Yes, restaurants go out of business all the time but if management has to take a 3% credit charge out of server tips (tips!) because profits aren't high enough, then the restaurant is doomed anyway. It's just utterly ridiculous. I give those tips because I expect it (all of it!) to go directly to the workers. I always, always "overtip" because I've worked in the front end of a restaurant before and it is probably one of the worst jobs one can have in terms of stress, adverse health effects and degraded dignity. I remember the days I prayed for the dishwasher to be sick so I could go do that job instead.

FWIW, I also don't patronize businesses that don't take a credit cards due to fees. Sorry, I don't carry cash. While I patronize businesses that have the $5 minimum rule, I've never understood it other than as a way to boost sales (and that's fine, but let's be honest about it). We're talking about percentages, not values. That 3% on $5 costs the same as 3% on $2.

[David Greene]

Servers often make more than the restaurant management in annual terms and always make more in hourly terms. That changes the dynamic.

I think it probably very much depends on what "management" we're talking about. Front-line managers indeed are paid pretty poorly. I'd imagine the higher-ups at Parasole make a pretty good living.

If a server makes more than the manager, more power to 'em! They worked hard for that money and should be able to keep it. Maybe the manager should start a union.

When that story about wages & tips at Eagle St. Grill flared up during the governor's race, I called up to ask management about available $100k server jobs. Turns out they didn't have any so I was stuck in my boring computer desk job.

[sad panda]

Except it's not a straight %. There are also costs per transaction, more fees for rewards and/or corporate cards and so on. Where I work, AmEx is the simplest computation: 2.89% + .15 and then .18 to our merchant processor. So your $2.00 transaction for us would cost .39 (ie 20%) if paid by a credit card. This isn't to say that cash and checks don't have an inherent cost to them, they do. Checks cost us .18 each to deposit and cash is .20 per $100.

[Chef]

Yes, restaurants go out of business all the time but if management has to take a 3% credit charge out of server tips (tips!) because profits aren't high enough, then the restaurant is doomed anyway. It's just utterly ridiculous. I give those tips because I expect it (all of it!) to go directly to the workers. I always, always "overtip" because I've worked in the front end of a restaurant before and it is probably one of the worst jobs one can have in terms of stress, adverse health effects and degraded dignity. I remember the days I prayed for the dishwasher to be sick so I could go do that job instead.

Think of it like this: if you own a mom and pop restaurant that does $800k a year in sales at a 5% profit margin you are making $40k a year. That is probably about as much as your servers are making, since you work twice as many hours as them you are making half their hourly wage. Bank processing fees on tips for an $800k a year restaurant are around $4k a year, so if you let the servers keep that 3% you aren't making $40k, instead you are making $36k a year. The servers haven't invested the time or risked their nest egg in opening the restaurant, you have. Do you let them keep the money or not?

The real answer is don't open a restaurant.

[Nathan]

David, no offense, but I think your reasoning is really flawed.

I think chefs perspectives are right on after working for restaurants quite a bit, he's pretty accurate. don't forget that the servers also choose where to work if we're talking about that level of restaurant. they knew about the 3% credit card tip fee when they started, it's not a surprise every week. the server is just as capable of moving to another high end restaurant if they feel shorted, and they're a professional server.

[FISHMANPET]

FWIW, I also don't patronize businesses that don't take a credit cards due to fees. Sorry, I don't carry cash. While I patronize businesses that have the $5 minimum rule, I've never understood it other than as a way to boost sales (and that's fine, but let's be honest about it). We're talking about percentages, not values. That 3% on $5 costs the same as 3% on $2.

Aren't processing fees for smaller customers a fixed amount per transaction plus a percentage? That's why smaller businesses have a minimum. So 3% plus 30 cents does cost more on $2 than it does on $5.

[David Greene]

FWIW, I also don't patronize businesses that don't take a credit cards due to fees. Sorry, I don't carry cash. While I patronize businesses that have the $5 minimum rule, I've never understood it other than as a way to boost sales (and that's fine, but let's be honest about it). We're talking about percentages, not values. That 3% on $5 costs the same as 3% on $2.

Aren't processing fees for smaller customers a fixed amount per transaction plus a percentage? That's why smaller businesses have a minimum. So 3% plus 30 cents does cost more on $2 than it does on $5.

Thanks, I didn't realize that.

Chef's explanations are very helpful and while it's true that servers can move, we know the job market is tight.

I will say that while the 3% hit may reduce the owner's take from $40k to $36k, it's an even bigger hit for the wait staff. If they are really making the same $40k as the owner, by taking that 3% the owner is reducing each member of the wait staff's salary from $40k to $36k, which is a $4k * N reduction, where N is the number of wait staff. In that case, N > 1 means the owner is profiting from the practice. I don't know if this is how Parasole works or if their skim percentage is lower than the bank's percentage. I don't really care because at the end of the day, it's taking hard-earned money from workers.

A 5% margin seems really low. I don't doubt that that's what restaurants get at all. It just shows how risky a venture it is.

But again, I would be very surprised if Parasole's overall margin was 5%. I can believe it for independent operations but a big local chain like Parasole has economies of scale and should be able to do quite a bit better.

[LakeCharles]

I will say that while the 3% hit may reduce the owner's take from $40k to $36k, it's an even bigger hit for the wait staff. If they are really making the same $40k as the owner, by taking that 3% the owner is reducing each member of the wait staff's salary from $40k to $36k, which is a $4k * N reduction, where N is the number of wait staff. In that case, N > 1 means the owner is profiting from the practice. I don't know if this is how Parasole works or if their skim percentage is lower than the bank's percentage. I don't really care because at the end of the day, it's taking hard-earned money from workers.

The credit card company is making 3% of all tips. So if all the tips combine to $133,000 the whole year, then 3% is $4000. Either the owner eats that $4000, or all the servers split the loss of that $4000. So say there are 20 wait staff, each one loses $200. Not saying you are wrong overall on the subject of tip skimming, but your line I quoted is definitely false.

[David Greene]

I will say that while the 3% hit may reduce the owner's take from $40k to $36k, it's an even bigger hit for the wait staff. If they are really making the same $40k as the owner, by taking that 3% the owner is reducing each member of the wait staff's salary from $40k to $36k, which is a $4k * N reduction, where N is the number of wait staff. In that case, N > 1 means the owner is profiting from the practice. I don't know if this is how Parasole works or if their skim percentage is lower than the bank's percentage. I don't really care because at the end of the day, it's taking hard-earned money from workers.

The credit card company is making 3% of all tips. So if all the tips combine to $133,000 the whole year, then 3% is $4000. Either the owner eats that $4000, or all the servers split the loss of that $4000. So say there are 20 wait staff, each one loses $200. Not saying you are wrong overall on the subject of tip skimming, but your line I quoted is definitely false.

It's not false, it just entirely depends on what management's policy is. Your scenario assumes that management skims something less than 3% from each wait staff. My guess (and I have nothing to back it up) is that Parasole is likely somewhere in the middle, skimming a bit more than necessary to increase the bottom line but not the full 3%.

[LakeCharles]

If we imagine there are only $133000 in total tips, then the credit card company is getting $4000 one way or the other. Each server in this scenario makes $6650 in tips. So if 3% is taken, they lose $200. Otherwise they keep their $200 and the owner loses 20*$200=$4000. Those numbers seem low to me, so you can mulitply by whatever number you need to make it accurate, but the point is the servers do not necessarily take an "even bigger hit" than the owner. If the owner is only making $40,000 a year than they are taking a bigger percentage wise hit. If they are making $400,000 a year they are taking a smaller hit. But it depends. In your scenario you imagined each server would lose $4000, which would mean they would need to each make $133,000 a year in tips. Which I think we can assume not many do.

[robotlollipop]

Tacos delivered by bikes! http://www.vita.mn/crawl/254596381.html

[Nathan]

Tacos delivered by bikes! http://www.vita.mn/crawl/254596381.html

I Saw this yesterday amazing! but again the tip of the wedge is shafted just like with fiber coverage :/ lol

[Minneapolisite]

What is their food like? Their website still says 'coming soon' (which is sort of what their space looks like). I love Eastern European food but am wary of Eastern European-inspired food.

I just had the borscht and it was good, but nothing I'd go rushing back for. It seems like people are all about the pierogis. The space feels like it isn't done though, but I'm still somehow surprised at how many new bars here in Mpls are sterile, bland, and yet people here love them in droves, especially in Uptown and Downtown. Instead of a photocopied sheet of a Russian newspaper with Lenin on it tucked on the side with the basket of bread why isn't a whole wall a collage of Soviet-era front pages in Russian? Instead it's just painted grey and red.

[FISHMANPET]

I think the food is more Eastern European inspired than it is Eastern European. I think Moscow on the Hill in St Paul has better food.

[Wedgeguy]

Dunn Bros. Coffee is finally doing some interior work on their new Hennepin Ave location.

[twincitizen]

Here's the sushi/hibachi joint that will open in the former Tiger Sushi space in Murals: http://kyotomn.com/

I'm glad that space won't sit vacant too long. Same goes for Lago Tacos opening in the Heidi's space (though I wish the city had purchased the strip of land for 29th Street before they start valet parking cars there again).

With the tap room opening in the theater space, and Lime's future restaurant tenant, LynLake is gonna be rockin' this summer.

[TommyT]

Here's the sushi/hibachi joint that will open in the former Tiger Sushi space in Murals: http://kyotomn.com/

I'm glad that space won't sit vacant too long. Same goes for Lago Tacos opening in the Heidi's space (though I wish the city had purchased the strip of land for 29th Street before they start valet parking cars there again).

With the tap room opening in the theater space, and Lime's future restaurant tenant, LynLake is gonna be rockin' this summer.

Oopsie! They have their Rainbow Roll listed as 99.99

[twincitizen]

Uptown pro-tip: The happy hour at Chiang Mai Thai (Calhoun Square) is easily one of the cheapest around. All tap beers are $3, and they have Bell's Two Hearted (among other good beers). A variety of appetizers are $3 or $4, normally $5-6.
Observation: for such a nice clean restaurant, their bathrooms weren't pretty. Graffiti on the back of the men's room door looked like it had been there a while and it was unreasonably smelly for a Sunday afternoon.