Trumping the restaurant industry
By Willie Degel, founder and owner of the six-restaurant Uncle Jack's brand
The last eight years have been tough on the restaurant business. On a federal level, policies like the Affordable Care Act and new environmental regulations have taken a substantial bite out of the industry's already slim margins. In New York City, where I own five restaurants employing 200 people, issues ranging from minimum wage increases to a near-impossible burden of proof on the employer even in the most extreme unemployment cases have added to the toll.
In my case, this year's minimum wage increase in New York City from $5 to $7.50 an hour for tipped employees would have added $350,000 to the payroll at my three Uncle Jack's Steakhouse restaurants. This forced me to cut a bus boy position I used to have for every five tables, even then offset only 30 percent of the cost, and also raised other fees like workers compensation insurance and FICA taxes. By 2019, front-house staff everywhere in the city will be earning $10 an hour while other personnel from dishwashers to hostesses will be collecting $15 an hour, obliging me to take even more drastic measures simply to survive.
Obamacare compelled me to hire a full-time administrator to handle the paperwork and has seen employee premiums triple from $185 to $450 in three years despite group coverage that should yield a substantial discount. Unfair pro-employee unemployment claim decisions are costing my business a fortune in both legal fees and unemployment payments.
And a new restaurant I'm building in Astoria, Queens, is 14 months behind schedule and $295,000 over budget because of new energy codes and the need to hire a team of 12 people to oversee construction and regulatory compliance. Ten years ago, a team of three could have done the job, and the 60 people I'm going to employ there would already be collecting paychecks.
To be sure, many of the industry's current challenges are the result of state and local policies rather than federal regulations, but the administration sets the tone for public policy across the country, and putting Donald Trump in the White House promises to usher in an era of regulation relief that will lighten the load for restaurant owners in every sector — from quick service and fast casual to fine dining.
Our president-elect's pledges to roll back provisions of the Affordable Care Act and loosen environmental laws will go a long way toward providing that relief. He has also advocated for state control over the minimum wage to accommodate differences in labor markets across the country, suggesting that he will not pursue a federal minimum wage hike. The corporate tax reductions on his agenda could put more money in restaurateurs' pockets, and income tax reductions could give consumers more disposable income that they can spend eating out.
Trump's plan to deport millions of undocumented immigrants is more problematic, given the fact that 10 percent of the industry's workforce are immigrants, but I believe the economic impact will be substantially offset by the administration's pro-business policies.
The bottom line is that our soon-to-be 45th president understands business. He knows what it takes to build a strong and profitable operation. He recognizes that too many regulations are as toxic to the marketplace as contaminated food is to consumers. He has loudly and repeatedly declared his commitment to growing the economy. All of this is good news for restaurant operators and a reason to hope that the next four years will be better than the last eight.
Willie Degel is founder and owner of the six-restaurant Uncle Jack's brand, now including Uncle Jack's Steakhouse, Uncle Jack's Steak Sandwich Shoppe and Jack's Shack Organic Eatery in New York as well as Uncle Jack's Meat House in suburban Atlanta. A second Uncle Jack's Meat House will open in April in Astoria, Queens. Degel is alsoformerhost of the Food Network's Restaurant Stakeout.
Topics: Operations Management