Bill Chait, who co-owns such restaurants as Republique and Bestia, implemented a 3% healthcare surcharge at Republique back in early 2014, to both criticism and acclaim. Bestia, meanwhile, has been providing 100% health insurance for their employees since 2013. In light of the city of LA's recent $15 minimum wage increase (which will occur over the course of a few years), Chait talks about the current tip-based compensation system and why he thinks change is imperative for the sake of restaurant workers.
I have been asked to speak to issues related to working in the restaurant industry quite a bit recently. I think it is important for all of us to pause for a minute and discuss what all of us in the restaurant industry agree upon. I think I speak for a number of my colleagues in Los Angeles today when I say that I feel strongly that everyone in our industry should be able to earn a living wage.
I also think it is important to avoid going down the rabbit hole of the emotionally charged minimum wage discussions and everything that seems to sprout from that discussion. Health insurance and paid sick time are certainly part of that equation, as is a five-day work week, training and development, and a positive collaborate work environment.
When I implemented the health care surcharge, we received quite a bit of notoriety. Most people — the overwhelming majority of those that dine in our restaurants — were for it and applauded the system. A minority were critical for a number of reasons. What was lost in the discussion was that it has resulted in health care for almost the entire staff, front and back of the house. One hundred percent of the cost was paid by the restaurant and subsidized by the surcharge, with no government subsidies required. We negotiate directly with Kaiser or Anthem for rates. The ownership of the restaurants get the same insurance as the staff.
This is a victory for a small business approach to something we all recognize needs to be done in every industry, not just the restaurant industry. We are operating in a world where over-regulation and conflicting regulation, are in danger of crushing the very engine that provides the business opportunities for millions of entrepreneur's and the people that work for them. The new paradigm of compensation in restaurants in Los Angeles is being written as you read this editorial.
The tipping model...as form of supplemental compensation has run its course.
In the past, our industry in Los Angeles and California in general, specifically the casual dining sector, has had a two tiered compensation system. Whether we like it or not, the tipping model wherein one class of our team [the front of house] has experienced the benefits of 18-22% of total revenue as a form of supplemental compensation has run its course.
Service has long been a product that we provide that is no different than a dish on a menu. This explains the concept of corkage with wine. You can bring the bottle but we still need to open it, serve it, clear and wash the glasses and provide all the insurance and licenses necessary for you to drink it. Service charges and tips have been taxed on multiple levels and regulated as to how they are dispersed. The whole model is broken. It has been for a long time.
I hope people understand that the evolution in food and food service in Los Angeles is amazing and wonderful. It is just beginning and should gain momentum and establish Los Angeles as one of the great restaurant and food service cities in the world. Everyone involved in our businesses should share in that success. We need to come together to help the evolution in a proactive way. We are working to do just that with many restaurateurs. I hope we all succeed.
Bill Chait is the Managing Partner of Sprout LA which is a restaurant collaboration with Chefs including restaurants such as Bestia with chefs Ori Menashe and Genevieve Gergis, Petty Cash and Republique with chefs Walter Manzke and Margarita Manzke, Barrel and Ashes with chefs Rory Herrmann and Tim Hollingworth, and Redbird with chef Neal Fraser and managing partner Amy Knoll. He is currently working on the new Otium Restaurant with chef Tim Hollingsworth and and their partner, Eli Broad, adjacent to the new Broad Contemporary Art museum on Grand Avenue.