A Lesson Learned about Trying to Pass on the Cost of a Living Wage to Customers

Restaurants Unlimited CEO Jim Eschweiler has learned something about the viability of a “living wage” for his employees, and about the generosity of his customers: Each has limits.

restaurantIn the process, Eschweiler has created a cautionary tale for other CEOs who are feeling pressured to jump on the bandwagon to pay their entry-level employees at the level that political discourse has dictated they should. It may work out—or it may not.

Eischweiler has discontinued a 1-percent “living wage” surcharge that his company had added to checks at restaurants in Portland, Oregon. Seattle-based Restaurants Unlimited – which has a total of 45 casual-dining restaurants in 10 states under such names as Henry’s Tavern, Kincaid’s, Palomino and Stanford’s—had added the 1-percent surcharge with the notation “LWageSC” on checks, according to Nation’s Restaurant News.

In politically progressive Portland, one might assume such an appeal would work out. Labor and other leftist interests have been pushing fast-food operators, mass-merchant discounters, janitorial services and many other types of companies to raise minimum wages to a “living” level where an hourly worker could support a family.

“CEOs must balance the utility of pay hikes in attracting and retaining employees against the upward pressure higher pay puts on prices—at a time when consumers are more price-conscious than ever.”

Several cities and states have begun raising minimum wages, and a number of major employers, ranging from Walmart to McDonalds to Starbucks to Ikea to Gap—have been boosting their pay lately, prompted by tightening labor markets and lured by the benefits of augmenting employee wellbeing.

But Restaurants Unlimited patrons apparently balked at being asked explicitly to foot the bill so that the company could pay its workers more.

“We truly appreciate all the feedback from our loyal guests regarding the one percent living wage surcharge policy,” Eschweiler said in a statement to The Oregonian. “After further consideration we have decided to discontinue this policy.”

Given the slump being experienced by much of the restaurant industry these days, and the continued financial pressures on many of its patrons, it doesn’t take much to chill eatery CEOs’ impulses toward boosting pay. But labor-market pressures might prompt more restaurant chiefs to take chances like Eischweiler did anyway.

In any event, a general lesson for all CEOs from Eischweiler’s stumble is that they must balance the utility of pay hikes in attracting and retaining employees against the upward pressure higher pay puts on prices—at a time when consumers are more price-conscious than ever.

 

 

 


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.