Seattle’s New Minimum Wage Increase

Last week, after months of debate and speculation, the Seattle City Council voted unanimously to gradually increase the minimum wage to $15/hour, the highest minimum wage in the country. This new plan gives businesses with more than 500 employees nationally at least three years to phase in the increase — four if they provide health insurance. Smaller employers get seven years, which is the category into which we fall.

This certainly presents many challenges for numerous Seattle businesses. If these changes were to be implemented today, it would be a $700k increase in wages for our two Seattle restaurants. Certainly the phased-in approach helps, but now that a path has been clearly laid out for us, it’s time to get to work and integrate many of the new mandates. We’ve already solicited feedback from Guest Advisory Boards at our Seattle-based properties, and will also have conversations with our employee teams about what is important to them, and how we can best work together.

The El Gaucho Way

Because of the core values of our company, we will not compromise on these elements as we work to navigate through the challenges ahead:

  1. Succeeding is our only option. We will continue to come up with smart and creative ways to grow the business and manage costs where it makes sense for us. We will also be a sustainable business – our employees are counting on us.
  2. We revel in celebrating lives. We will not sacrifice what we do for our guests. We will not compromise on the quality of our products, nor the services we provide.
  3. We will not sacrifice what we do for our employees. We will continue to be a great place to work, and offer great income and potential for our employees, as we have since the beginning.

We will continue to place an extremely high value on providing the best in everything we do: the best experience and level of service for our guests, and the best working environment for our team.  My dad founded this company on seven core values, one of which is that hospitality is a profession, and we’ve created over 350 jobs and well-compensated team members. Our employees are offered full health care benefits at 25 hours a week for individuals and families, a generous 401(k) match, and excellent employee development and training. We are proud that our team members can afford to buy homes, have families, and live the American dream.

Why This Matters To Us

Our concerns are that the increase in minimum wage doesn’t solve the pay inequality issues in the restaurant industry, and it doesn’t take the importance of tip income into account. The IRS, banks, mortgage companies, unemployment insurance, disability insurance, and most importantly, our team, all recognize and value tips as income.  In addition, in order to comply with the new minimum wage laws, the vast majority of raises will go to the service teams, which will widen the income gap between them and our culinary teams.

We will all be affected by this change, whether as a guest, employee, or business owner. We would love to hear from you with any ideas or recommendations you have as we face the challenges presented to us. It is the feedback from our invested community of guests and our valued employees that will help us continue to be the world-class establishment that we strive to be.

This is only the beginning of the conversation. We look forward to gathering input from you and our employees, and we will keep you posted on our decisions and progress.

Sincerely,

Chad Mackay
President and COO

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7 Responses to “Seattle’s New Minimum Wage Increase”

  1. Tracy Michaels Says:

    Since you are asking for input, I would be curious to know what percentage of the 700K is your overall net? In other words, is this something the staff and customers have to “eat,” or could it be handled within the owners and management? I think part of the movement of raising the minimum raise is to lessen the gap between the haves and the have nots. We our loosing our middle class. I don’t know if I agree with the new law or not, I would simply like all the facts.

    • Dear Tracy- The $700k represents over 60% of our taxable income. While we could cut our profits, it would also put us in default on debt covenants and would reduce the amount of capital we would have to invest in the restaurant such as replacing air conditioning units that are over $100k. We would survive in short term but would have difficulty staying open in the long run. Sustainability of our business is incredibly important to our staff as well. We were able to keep most of our people through the great recession and had the cash reserves to ride it out. In the future, that would be much harder to do. I hope this helps to answer some of your questions.

  2. Al and Anne Says:

    The $15 minimum wage leaves us in a bit of a quandary as to how much to tip. In Australia and U.K., for example, a 10% tip is considered generous, and no tip is acceptable. This is because serving staff are compensated at a higher level and are not reliant on tips to the extent they are here in the U.S. And as long as this is just a Seattle thing (not Bellevue, Tacoma, Portland), how does El Gaucho intend to approach its pricing structure? Higher prices in Seattle – and customers then being less generous with tips? That’s got to be a quandary, as well.

    • You and our restaurants are in a bit of quandary as well. Our servers make about $30-35hr on average in gratuities plus the $9.35 in minimum wage. They are middle class jobs earning between $55k and $70k for working about 28 hours a week. Our service teams are definitely professional and take pride in what they do and who they work for. We would like to keep pricing level between Bellevue, Tacoma and Seattle and may add surchage or service charge instead of raising prices. We will be engaging with our teams over the next few months to work on solutions. In addition to meeting with long time guests and getting feedback directly like this. Bottomline is that we are going to take great care of our guests, our people, and make sure we have a sustainable bottom line for our business as well.

      Thanks for your input.

      • Al and Anne Says:

        Chad, we guess another way to approach it so that you don’t get customers “boycotting” the Seattle location would be to have a short note of explanation somewhere with the Seattle menu that would “suggest” a 15% tip in Seattle, as opposed to what I assume many El Gaucho customers probably give now at all locations, closer to 20%. That way you don’t have to worry about surcharges at the Seattle location, menu prices stay the same among your Puget Sound El Gauchos, and customers don’t feel dining in Seattle creates disparate treatment on their bill. Just a thought. We love El Gaucho and think this whole minimum wage thing for wait staff and restaurant owners is a big negative for the reasons we’re discussing here. Thanks again for soliciting input!!

  3. Matthew Mitchell Says:

    I complete understand and appreciate your message.

    I live in Snohomish County and plan to avoid spending ANY money in Seattle. This includes visiting restaurants or other service related establishments. If I am forced to visit any establishment where tipping is customary, I will tip zero.

    I understand my position will hurt the very persons the increase in hourly rate is intended to help. Socialists can watch the population vote with their wallets.

    I suggest you close the Seattle restaurant.

  4. Thanks Matt for your input. Closing our restaurant really isn’t an option nor is it something we’ve even thought of. When my dad opened the restaurant 17 years ago, it help to revitalize Belltown and made it a destination neighborhood in Seattle. It’s the heart of our organization and we would never part with it without a fight! Luckily, you don’t have to come to Seattle but you can visit us in Bellevue and spend your hard earned dollars!

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