- A California restaurant owner says he plans to raise his wages after the minimum for fast-food workers shot up to $20.
- Other businesses in the state will likely have to pay workers more to compete for labor.
- The owner said the new minimum wage compounds years of difficulties for restaurants in California.
The owner of a restaurant in California says he'll "absolutely" have to raise his wages to compete with local fast-food chains now that they're paying workers $20 an hour.
Sal Vitalie, who owns the Italian-style Garden Club restaurant in South San Francisco, San Mateo County, said he was worried about the impacts that AB 1228, the new legislation that put California's minimum wage for fast-food workers up to $20, will have on his full-service restaurant.
"I haven't seen the effects yet of the $20 an hour fast food minimum wage, but I'm talking to friends in the industry and even talking to my staff, we see it coming," he told Business Insider on Friday. "We see people are going to want to leave to go make $20 an hour."
Vitalie said he has around 24 employees. He said he "can't really afford" any worker benefits other than those required by the state, including paid sick leave.
Though the legislation only affects limited-service restaurant chains with at least 60 locations nationwide, it's expected to push up wages in other industries as they fight to hire and retain workers.
Vitalie said he didn't expect his tipped employees to move to fast-food restaurants because their tips mean they make significantly more than $20 per hour on average. However, he is thinking of offering $20 to dishwashers, which is "the hardest position to keep and fill," he said.
"It's already hard to find dishwashers, which is a horrible job for minimum wage," Vitalie continued. "But why wash dishes for $15 or $17 if I can go get $20 flipping burgers at McDonald's?"
Restaurant margins 'are so small to begin with'
The new minimum wage compounds what Vitalie described as years of difficulties for independent restaurants in California.
"Our margins are so small to begin with," Vitalie said. "That's really tough, especially for independents to make a buck."
Vitalie said that he bought the Garden Club in 2018 after its previous owner died.
"Since I took over the restaurant in 2018, I have not paid myself because there's no profit there," he said. "And with the rise of inflation with food costs and labor costs, it's getting really, really bad."
Many independent restaurants struggled during the pandemic because of a combination of supply-chain chaos that pushed up the prices of ingredients and rising wages caused by both a massive labor shortage and higher minimum wages in some cities.
California's general minimum wage went up to $16 an hour in January, but many cities and counties have higher minimums to reflect their cost of living. South San Francisco has put up its minimum wage annually since 2020, and it reached $17.25 an hour in January.
Back in 2018 when Vitalie bought the restaurant, before South San Francisco set its own minimum wage, the state's minimum was $10.50 per hour for businesses with 25 or fewer employees and $11 for those with more.
"We've raised prices a little bit, but the consumer will only take so much in cost raises," Vitalie said. He added that many of the restaurant's diners were older customers who had been coming there for "a long time" — the restaurant opened in 1964 — and wouldn't accept higher prices.
So, as well as charging customers more, Vitalie has been cutting his costs over the past few years. He said he'd reduced the number of servers per shift from two or three to just one and used a combined busser and dishwasher rather than two separate workers.
"So the quality of service is not quite as well as it was, and it's very frustrating," he said.
One of the next steps could be reducing the restaurant's opening hours or potentially closing on Mondays and Tuesdays to cut operating costs, Vitalie said.
Vitalie has also cut portion sizes to save money, including stopping serving unlimited soup and salad. He said the previous owners had been serving 16- and 20-ounce steaks, which he cut to 10 and 12-ounce portions.
"But that's the way the restaurant was for many, many decades, so I've got a lot of pushback and complaints about cutting portion sizes and raising prices," he said. "I don't know if I can cut back portion sizes anymore."
Are you a fast-food worker excited about the new minimum wage? Or a franchisee or restaurant manager worried about how it will affect your business? Email this reporter at [email protected].