Ivar’s, a seafood chain based in Seattle, deals a little differently with the usual problems facing restaurants. For example, most companies, faced with the challenge of generating PR, just whip up more creative ads. A few years ago, Ivar’s did that … and then put them at the bottom of the ocean. The organization put out the rumor that their late founder, Ivar Haglund, had placed billboards under Puget Sound. The signs, which were supposedly placed in 1954, bore slogans like: “Ivar’s Chowder. Worth surfacing for. 75? a cup.” Ivar’s latest trick is no hoax: while some business owners have protested Seattle’s minimum wage hike to $15 an hour minimum wage, the restaurant is rolling out a new, higher wage structure to staff before the phased deadlines.
(Photo Credit: Bob Donegan via Ivar’s)
Ivar’s President Bob Donegan spoke with PayScale via email to explain why the company decided to move to a higher minimum wage at Ivar’s Salmon House and Ivar’s Acre of Clams (when it reopens in the summer of 2015).
PayScale: What inspired you to change the pay structure ahead of the required raise to $15 an hour?
Donegan: On April 1, the $11 an hour minimum wage increase went into effect, but that was just the first in a series of increases. The schedule of increases to the minimum wage for a company our size would be $11.00 in 2015, $13.00 in 2016, and finally $15.00 by 2017. At Ivar’s Salmon House, we decided to move to $15 an hour immediately to streamline the process and avoid a series of operating and pricing disruptions had we elected for a slow phase in. In the end, we believe this structure will be best for our staff, operations and, ultimately, our customers.
PayScale: How will the new system work?
Donegan: We raised the baseline wage for all Salmon House employees to $15 an hour and have moved to a revenue sharing model for all hourly staff. The menu price increase will be about 21 percent and it’s important to explain how we got to that number. We crunched the numbers from 2013 and 2014 and found that customers were tipping about 17 percent. This 17 percent tip is reflected in the new system, along with an extra 4 percent to cover the labor costs associated with the minimum wage increase. In the end, customers should only find their bills to be about 4 percent higher.
The key is how we now share revenue with the full hourly team in the restaurant. It’s divided between servers and bartenders along with bussers, hosts, cooks, dishwashers and others – on top of their base $15 per hour wages. It’s important to us that all staff, from front of house and to back of house, share in the success of the restaurant every day.
There won’t be a tip line included on checks anymore to eliminate confusion, but if customers would like to leave more than the built-in 17 percent, they’re welcome to leave an additional cash tip on the table or write one in on the credit card slip and that will go directly to their server.
PayScale: What’s your take on lower “tip wages,” in general? Can that work as a pay model, or do servers wind up making less?
Donegan: Most of our servers and bartenders were making $18 to $19 an hour already with tips, but those can’t be counted as part of compensation under the new law. We found a way that keeps their wages consistent, if not greater, than what they made in 2013 or 2014, while also redistributing the revenue more evenly among all workers.
PayScale: What if hourly pay works out to be less than what servers were getting under the old system?
Donegan: We have always compensated our employees fairly by providing a complete benefits package well above industry standards. By instituting the $15 higher base wage before 2018 and including revenue sharing, no Ivar’s employees should see lower compensation or benefits because of this change. We’ll continue to evaluate and monitor employee compensation to ensure it’s fair and equitable to all.
It’s also important to note that this new system will ultimately benefit the employee by providing a more consistent wage across slow and busy times so they can manage their own funds more reliably. It also provides a more fair compensation system between tipped and non-tipped employees. Ivar’s will benefit by retaining key talent and through better recruiting because we can provide a more reliable and fair compensation package for everyone. When we’re able to retain and attract key talent, it helps us provide our guests an unparalleled dining experience.
PayScale: What’s the response been so far, from servers and customers?
Donegan: So far, the most important part has been explaining the breakdown of numbers, how we arrived at the figures, and how we’re sharing revenue. Once people understand that the change in funds isn’t adding to our bottom line, but going to directly to employees, everyone has been very positive about it. With 77 years of experience, Ivar’s is known as a leader in the Seattle restaurant industry and people appreciate that we’re taking a lead. Even amid some uncertainty within this new environment, we’re taking the necessary steps to find the best solution for our staff and loyal diners.
PayScale: What advice would you give businesses who are worried about the impact of a $15 per hour minimum wage?
Donegan: Restaurants have three to seven years to get to $15 an hour, based on size, so each has to consider what is best for its staff and customers. We hope other restaurants can learn from what we’re doing, but it’s not going to be one-size-fits-all approach. The industry is faced with gradual wage increases, how to manage tipping (which wasn’t covered in the new legislation) and how to fairly compensate both tipped and non-tipped employees. That’s the challenge.
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