How do I combat the raising of minimum wage??

Question

I am an owner of a pizza biz in Illinois on the border of Kentucky. Minimum wage is $6.50/hr and right across state lines minimum wage is $5.50. Next year it will be raised to over $7.00\hr. If I raise pizza prices, they won't order. I am running high labor and my sales are down. I could run specials to raise sales then my food cost with skyrocket. What the heck do I do?

Answer 1

This is a significant part of the argument against the minimum wage increases. It doesn't, in the long run, help the people who it tries to help, and it hurts small business. Yes, the low wage worker needs help - but we must find a better way to do it.

Though the workers, no doubt, need the wage increase, it increases the costs of the business -- and the result is that some minimum wage jobs will be eliminated: others will be cut to only a few hours per week - thereby the low wage worker is not helped, and the small business is hurt.

It seems your only options are to absorb the cost increases, increase the cost of your product, reduce the cost of your labor - by eliminating some jobs - or giving fewer hours per week to your employees.
OF, if you're lucky - maybe there's some other way to reduce costs. Maybe you could run a dine-in/carry out business (no delivery), or run a carry-out only (no dining room) business, use fewer napkins, etc.
BUT none of these are good options for small business - and ultimately - the results, all across America, will be the loss of low wage jobs, or the closing of small businesses.
I'm sorry. This is why there are no such jobs as elevator operator, and service station attendant any more. Convenience store clerks and pizza makers may soon be at risk.
Again, I'm sorry - this is not good.

Answer 2

Well, if you have 10 employees this will be a $200 /week difference. I'd bet for $1.50 an hour more those workers right across the state line will work for you. I'm betting you can get more productivity with less workers if you pay them enough, then minimum wage isn't an issue.
But... the important thing is we live in America, the land of opportunity. I wouldn't try to save money like the other answers try and convince you to do, I'd try and make more. If you're doing something no one else in town does you can easily charge a few dollars more per pizza and no one will complain.

Answer 3

This is just the kind of situation that people ignore when it comes time to discuss the minimum wage. Not all employers are Fortune 500 companies with billions in profit. The vast majority of employers in the U.S. have fewer than 100 employees.

Too often the result of your conundrum is the business shuts down and everyone is out of work.

I know you'll look for ways to keep costs down such as using cheaper non-food supplies or using more advanced ovens and prep. tools. Ultimately, I think you'll have to tell your employees, "okay, you're making more money, I have to ask more of some of you and terminate some of you." Those that remain will have to accomplish more during each hour. Those that you have to let go will be casualties of the minimum wage.

Answer 4

The best workers in both states will migrate to the higher paying jobs. The worst workers will migrate to the lower paying jobs (your competitors) Their quality will fall, along with productivity.

To compensate, they will attempt to gain better workers by raising their wages, thus making the playing field level again.

Answer 5

Everyone else is in the same situation so you will be OK.

Also if one person makes 20 pizzas in an hour, than that is two cents per pizza.

I doub it will kill you all that much

Answer 6

Read through the answers from the others and most are good and true. But most are forgetting you are a small pizza shop that uses high school kids as employees during busy times.

I use to manage Little Caesars, Pizza Hut, Donatos, Papa Johns and was a head trainer for a few of them. Recently I have been looking back at food and thinking of getting a franchise from a new local company that is expanding well. But similar questions I have raised myself as you have.

Little Greasers (snicker) was all about cheap. But we did do well in large party orders. Use to supply large orders to local businesses, schools, YMCA parties, etc. These large pie orders were great to help off set labor. One person comes in early and makes all the pies, otherwise one other person to drop them off.

When I put a low store up high in profits one of the tricks I used was to ditch all the vendors for produce and pre-shredded cheese. I got a hold of an old Berkel with slicing blades and would hit up a farmers market each morning for fresh green peppers, onions, mushrooms, etc. Slice them each morning when I would make my dough. Cheese was bought in large blocks, cut up into chucks and then shredded as well in the Berkel. This alone greatly increased the taste of the pies and the customers realized it but it also cut over 30% off the cost of those items. Not to mention the bags of spoiled pre-diced produce I would throw out as a loss.

If you have a salad line and sub line, relook at that closely. Most salad items make no profit and you lose cash due to product being thrown away often. If you do subs relook at maybe buying like JTM hogies and meatballs at say Sams club over a vendor service.

Shop around for cheese as well as you know this is the most expensive item on your make table. Few pennies a pound here and there can really add up. If you don't use a weigh method or cups to distribute toppings for weight/amount, start doing so. Handfulls will always make your food cost go up.

If you buy pre-made sauce look into buying just cans of tomato paste, bags of spices and a large stainless steel crock. Mixing your own 9 batch container can save you up to $50 a batch over pre-made stuff. Only takes 10 minutes to make enough sauce for few days sales.

Follow some of the big boys....do a carry out special on tuesdays, do a pepperoni special on wednesdays, etc. Something to drive in more traffic.

Offer free small breadsticks each friday with any order over say $12.00. Pick like a large pizza with a few toppings then make the price just over that. In turn making the customer purchase the pie and a 2 liter or something to be able to get the free bread sticks. And a small dough ball is pennies to give away for an upsale. Specially on pop items.

If you have a Coke or Pepsi guy stop buy for deliveries, talk to them about better prices or you will be forced to drop their product line. Normally you will see them re-write your prices very quickly.

Back with the schools....a good selling point for them if they don't want to do it. Have them sell the pies by the slice for the kids at lunch. They make profit as well that can fund an after school activity. My one Caesars store we had 2 school orders every week, 52 pies and 70 pies. I would come in few hrs early and get it all together and my asst mgr would deliver them. Was a great way to make my labor drop 4-5% each week.

Plus train your employees more, cross train them. A kid that can answer a phone, cut a pie, make a pie, and roll a doughball can be more productive for his wage than just a kid who stands around just to answer a phone.

If you are near hotels of any type, talk to the mgr/owner about leaving flyers in the rooms. Small hotels you can offer a small kick back for each order that goes to the hotel or just free meals for them as a great way to get in the door.

Offer cross promotions with other small shops near you. Video stores are great. Paste their flyer on your boxes and leave a stack in their store as well. Most want a pizza if watching a video, they just don't realize it.

Offer up some new pies. One I was working on that I've never seen released by anyone but was ohh so good. A BLT pizza. Just a normal cheese and bacon pizza ran through oven. Once done spread shredded lettuce, tomato slices and a mix of mayo and ranch dressing, then cut it. Ohh its just past good. Other pies could be low fat, what ever new diet fad there is, etc.

Just relooking at all you do, altering a few things you can make it through this minimum wage increase and even make more profit than you do now. Just stay positive, most are going to have to deal with this and only the smart and strong will survive.

Answer 7

Stop cutting cost, find ways to increase your revenue instead.

Think outside the box, find new, creative ideas to advertise and market your food.

Downsizing is a bad idea.

Answer 8

You'll probably have to raise your prices, but don't do it so significantly that peple won't want your product. Your only other option is have less employees.

Answer 9

Open another store on the other side of the border.

Answer 10

find another line of service to offer.