Increased Minimum Wage’s Effect on Business

The campaign to raise the minimum wage isn’t just affecting employees, it’s affecting their employers as well; especially restaurateurs. Currently, they spend about 30% on food costs, 36% for labor costs, and 30% on administrative and other costs; which only leaves them with a 4% profit margin. When this new wage increase goes into effect, not only are they hit with higher labor costs, but there’s also plenty of collateral damage as well.

To compensate for this loss, some restaurateurs are making drastic changes (i.e. cutting food costs by selling smaller portions for higher prices) that will impact the guest experience in a huge way. For example, Seattle culinary icon Tom Douglas instituted a two percent “Wage Equity Surcharge” at his restaurants on April 1.

He explained his actions on his blog: “With the new regulations, companies with over 501 employees have to increase to $15 minimum wage over the next three years unless you offer a ‘silver-level’ health plan or above in which case you can spread it out over four years,” Douglas said. “Companies under 500 employees have up to seven years to pay the $15 minimum using a mix of wages, tips, and healthcare benefits. This is a multi-million dollar discrepancy between large and small employers and completely tilts the playing field in a very competitive industry.”

Douglas, who’d been a strong supporter of higher wages for restaurant workers for years, raised his menu prices by 4% instead.

Another iconic Seattle restaurant, Ivar’s Salmon House, also increased their menu prices to adjust to the rise in minimum wage. The message that appears on their menu now states: “Tipping is no longer necessary. The City of Seattle’s new minimum wage law went into effect on April 1, and we have changed the way we pay our employees.”

Abraham Lincoln once said that, in order to take care of employees, we must protect their employers. So, if these large scale operators, like Douglas and Ivar’s, are challenged by the new law, how are the little guys faring?

To get to the bottom of this question, let’s take the case of pizza franchise owner Ritu Shah Burnhamm. Based on the way that the new Seattle law is written, her restaurant is categorized as having over 500 employees, although her individual store only has 12. This hiccup puts her on par with the big restauranteurs who have to pay $15 per hour for minimum wage. As a result, she has decided to shut down her operation.

“If you have to pay $15 an hour in 20 months, and that is the largest part of your expenses, it’s a little difficult to do a business plan that makes that work,” Burnhamm said. “I tried. Before I made my decision I tried, and I didn’t see it happening.”

Watch my interview on Fox News with Varney & Co regarding the minimum wage hike

How to Run a Business

When a company does a good job, they make people happy. They laugh, they smile, they have a good time — that’s what we do for a living. Any business doing that is making a noble effort.

Use these best practices for running your business:

  1. Selling begins once customers “enter” your store
    Every business process of communication must create a positive customer reaction every time. That reaction is the product. Any business, no matter what it is, lives or dies by the customer reaction it creates.
    Don’t just create great products, but also present them well to beat competitors who sell identical products
  2. Consider the lifetime value of your business
    Don’t just create a once-in-a-lifetime experience, create brand loyalty. When first time customers visit a new restaurant, fewer than 50% return because it’s still outside their habit cycle. Yet, if they do come back, there is a 50% chance they’ll return after a second visit and a 70% chance after a third. Therefore, don’t focus on just giving a great first impression, but also a great THIRD impression.
  3. Find what stimulates profits
    Since everyone is in the business of reactions, learn to manipulate those reactions for your benefit. Most people fall into one of four personality or motivational buckets: money, pride, ego, and fear. Craft your marketing language to play off of one of these motivators. For example, if your product is a type of insurance policy, outline how your safety net pacifies a fear. If you’re selling a new type of personal indulgence, be sure to highlight how good it makes people feel.
  4. Treat difficult clients like family
    Every entrepreneur has to deal with those needy, hard-to-please customers, but try to cultivate a new patience by acting as you would with a difficult relative. Just as you wouldn’t lash out at your grandmother during dinnertime, hold your tongue around tough clients to deal with them more effectively.
  5. Hire for attitude, not experience
    A candidate with the right attitude will boost your company higher than an experienced misfit. The key to recruiting is identifying the ideal personality for the job and then creating a descriptive job posting that captures it.
  6. Don’t coddle your weakest employees
    A common denominator in bad business is that managers view their employees as family, coddling the weakest ones and hoping they do better. Businesses should be run more like sports teams, where winning players are encouraged and weaker players find themselves facing pressure to improve.
  7. Teach your employees
    Training is behavior modification. TEACHING is showing someone how to do specific tasks and then encouraging them to add their personalities to make their role come alive. This will result in a happier workforce – and you might even learn something from your employees when you let them be themselves and contribute ideas.
  8. Simplify your menu
    Trim down your “menu” to ease choice and avoid overwhelming your customers with too many options. Simplify the selection process by presenting variations of the same product rather than listening them separately (for example, have one entry for chicken wings and show they’re available in three flavors rather than three different menu listings), bundle offerings into packages, and rotate in new products.Simplifying your menu and offering a rotating selection of new products and offerings gives your customers an incentive to return for promotions or simply to see what’s new.
  9. Keep your target demographic in mind
    Always conduct research on their target audience before opening a business and continue those considerations as your business grows. More upscale bar customers will not react well to a card or a coupon, but they will react positively to a mailing that looks like a more formal and exclusive invitation — it’s simply a matter of design and delivery.
  10. Innovate realistically to serve your audience
    With new technology and trends constantly emerging in the marketplace, it is important to be mindful of your audience before trying something new. Protect and maximize your investments by innovating WHILE listening to customers. An innovation that steps far outside of most people’s envelope of expectation can reduce or narrow your market when your aim should be to constantly expand your market.

For more tips, download Jon Taffer’s free business app, BarHQ available on Google Play and iTunes

5 Tips to Help You Make Your Bar The Hottest Joint in Town

Interested in making your bar the hottest joint in town? Follow my tips to find out what makes a bar great:

  1. Hot bars are high energy

The key to having a high energy bar comes down to the music. Hire a DJ to play songs that have a lot of beats-per-minute to keep your customers moving and grooving.

  1. Build your bar to suit the tastes of your target demographic

If you want your patrons to spend money in your bar, you must give them what they want. It is important that everything (i.e. the finishes, walls, textures, beverages, foods, etc.) will be pleasing to the customers in your demographic.

  1. Never drink in your own bar

It is important that you keep things professional at all times. If there’s a big crowd and your staff is working hard to take care of your customers needs, your place is beside them, helping to keep up with the demand. Even on a slow night, there is no excuse. Your bar is your place of business- drink on your own time.

  1. Use visuals to up your hotness factor

Make sure that your bar, food, drinks, design, artwork, entertainment, uniforms, etc. are visually appealing to your customers. If your bar is missing any of these elements, it won’t matter if you serve the best burger and/or cocktail in town. No one wants to go to a bar that they think is uncool.

  1. Innovative Beverages

An easy way to increase the cool factor of your bar is with the addition of fresh, new cocktails. Trendy drinks are always a crowd pleaser, so be sure to set aside time with your bartender to learn and keep up with the new recipes. Beer cocktails and flavored spirits are also really popular. Make sure to switch up your selection to get an accurate idea of what your customer’s preferences are.

You may also want to invite your employees to get creative and to come up with some innovative recipes of their own; just make sure they look appealing. Garnish them appropriately and serve them in unique glassware for an extra touch.

Taffer’s Take: Jon Taffer on How to Keep Your Bar Hot and Contemporary

tafferhead2promoWe are pleased to welcome renowned nightlife expert Jon Taffer on board as a contributor. This is the first entry in his regular column, Taffer’s Take.

Let’s talk about drinks. Innovative beverages. Cool, new, fresh cocktails.

Drinks and cocktails have trends just like anything else, so spend time with your bartenders learning and keeping up with new recipes, and invite your employees to get creative and try coming up with their own. Don’t forget to make sure your cocktails always look appealing — no matter how good they taste, no one’s going to keep ordering them if they look weird! Garnish them appropriately and serve them in different and unique glassware.

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How to Make Your Bar the Hottest Joint in Town

The host and executive producer of the TV series Bar Rescue gives his tips on what makes a rockin’ bar. Take notes, people.

Jon Taffer is a longtime food and beverage industry consultant specializing in nightclubs, lounges, and pubs, who’s had a hand in 800 establishments over the course of his three-decade career. He’s also the host and executive producer of the Spike TV show Bar Rescue, which sees Taffer and his team “rescue” failing bars from the brink of closure. New episodes of the series begin June 21.

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A New Era of Vegas: Resorts World

In the wake of the closing of the Riviera, a new casino emerges from the East… the far East. Resorts World Las Vegas (operated by Malaysia-based Genting Group) held its groundbreaking ceremony on May 5, 2015 on the site of the former Stardust casino with traditional Chinese thunder drummers and costumed lion dancers kicking off the historical event.

This is the first mega-resort to be constructed on the Strip in nearly a decade and the first property to be developed entirely by an international company. The $4 billion Chinese-themed resort and casino (designed by Las Vegas architect Paul Steelman) will include four towers filled with 6,500 rooms, a 175,000 square-foot casino, a 4,000-seat theater, an aquarium, a panda exhibit, an indoor water park, and a replica of the Great Wall of China.

Genting Group’s reputation as a leader in the global travel and leisure industry will be a huge draw for domestic and international tourists. The development of Resorts World Las Vegas will stimulate the Nevada tourism industry by attracting new foreign investments, creating thousands of jobs, and bringing in greater numbers of visitors, conventions, and shows to our state. The next few years will usher in the next renaissance for casino marketing and player development in Las Vegas with this new exciting international destination.

Resorts World Las Vegas is scheduled to open mid-2018.

For a preview of the resort, watch this video from Resorts World Las Vegas:

5 Mistakes Small Business Owners Make

Mistakes in managing and operating a business can threaten its long-term viability. The key to success is to quickly identify your mistakes and learn from them.

Here are the top 5 mistakes of small business owners:

  1. Getting into the business for the wrong reasons
    The bar business is a very social business, and many owners come into it for the wrong reasons. Running a bar is not as sexy or easy as most people think. Too often, owners get involved for the wrong reasons — whether for social gain or easy money — and do not have the self-discipline or determination to be successful.”

    Find your real motivation for starting a business and determine whether you have the entrepreneurial spirit. A great business owner is social by nature but will also possess the financial abilities to manage a business. Remember, it’s a business, not a hobby.

  2. Not taking responsibility for failures
    The common denominator of failure is an excuse. Business owners will blame the economy, the government, their competitors, and every external factor for their failures before they own up to their mistakes. This is wrong – we only fail because of ourselves. The minute you take responsibility, everything changes.
  3. Poor marketing
    A small business needs to develop a brand and marketing strategy in order to provide their customers a clear expectation of what their business can offer. There are three specific marketing initiatives for every business: new customer, frequency, and spending programs. A new customer program such as reaching out to local businesses and neighborhoods promoting your business will bring in new business. Frequency programs, such as email blasts and social media promotions, are designed to achieve the retention of existing customers. Spending programs such as up-selling and exclusive deals are aimed to increase the amount of money spent each time the customer does business with you.
  4. Financial neglect
    Cash is the lifeblood of any business, so it is imperative that there is a strict record-keeping procedure. Managing expenses is a science and must be done frequently. To be profitable, labor costs should be between 25-32% of all revenue, food costs should never exceed 30% of food sales, and beverage costs should be below 21% of beverage sales. Knowing exactly how much money is going in and out of the business will help guide every business decision.
  5. Not having the necessary experience or help
    Only 1 out of 12 first-time owners succeed in the restaurant industry. For second time owners, the success rate is 1 out of 3. Experience is important when it comes to running your own business. Get experience by working for someone else first or have a partner with experience.

How to Succeed in the Bar Business

Owning a bar sounds like the perfect life to many potential entrepreneurs, but it’s not always fun and games. It’s hard work. It takes time. It takes dedication. But if you have a clear vision, it can also translate into a rewarding and successful business.

Here are some tips for prospective bar owners to know before they get into the business:

1. Build a bar for your customers
You must build a bar for the marketplace and focus on your location. The bar shouldn’t be build to suit you.

Everyone remembers the downfall of Piratz Tavern from Bar Rescue. This failing pirate-themed bar was centrally located in Silver Spring, Maryland which had a sprawling business population during the daytime. The outlandish style of Piratz Tavern didn’t appeal to the local marketplace of corporate workers, so Bar Rescue renovated and rebranded the bar by changing the name to Corporate Bar and Grill, adding a lunch and happy hour service, and creating an environment that was inviting to the business community. However, soon after the renovation, the bar discarded the changes and reverted back to its pirate roots. In April 2015, Piratz Tavern closed its doors.

The takeaway from this rescue attempt?

Please your audience. Don’t open a bar for yourself, or that’s where you will fail.

2. Hire for attitude, not experience
Working as a bartender isn’t exactly rocket science and you should be hiring people who have great personalities. A candidate with the right attitude will boost your company higher than an experienced misfit. The key to recruiting is to identify the ideal personality for the job and then creating a descriptive job posting that captures it.

In this industry, we can only teach people, not train them. Training is behavior modification and can be a lengthy process. Skills can be learned, but personalities can not be changed. Teaching is showing someone how to carry out specific tasks and then encouraging them to add their own personalities to make their role come alive. We don’t train anyone; all we do is teach people so we should have the right personalities from the beginning or it’s all going to fall apart.

3. Profits come from the bar, not the kitchen
The cost of food is higher than drinks since there is more labor and equipment in making food. Food is a lot less profitable than beverages.

4. Keep an eye on the details
Control your liquor costs by frequently taking inventory. Inventory is a time-consuming task but it is the only way to control your cost of goods and ensure that you are making a profit margin. Profit margin in the bar business can disappear if you do not keep an eye on the details.

5. The first night is just the first night
New bar owners will open their bars and experience a “honeymoon” stage where they will be really busy for a period of time. A rookie bar owner in this stage will make the mistake of not managing their food and beverage costs properly and over scheduling their employees. These two mistakes of poor product and labor management will eventually force a bar to close.

3 Tips for Personal Success

Screenshot 2015-05-07 10.03.50Watch Jon Taffer’s interview with Forbes discussing his three tips for personal success. View Video