Minimum wage hike drives menu prices up, restaurant owners say

The cost of goods and services inevitably goes up over time but small business owners say a recent increase in prices at restaurants and pubs in Edmonton is not random — it's due to the rise in the province's minimum wage.
Restaurant and pub owners are paying 47 per cent more in labour than in 2013 with a yearly increase in the minimum wage. (Underground Pub and Grill)

The cost of goods and services inevitably goes up over time but small business owners say a recent increase in prices at restaurants and pubs in Edmonton is not random — it's due to the rise in the province's minimum wage.

Alberta's minimum wage went up from $12.20 to $13.60 on Oct. 1, the fourth increase in as many years for the hospitality industry. 

"It has been an absolute onerous burden on us to try to get ourselves through these staged increases to the minimum wage," Gary Tomchuk, a managing partner of the Sherlock Holmes Hospitality Group, told CBC News.

The rate is $4.40 an hour more — a 47 per cent increase — than the $9.20 servers and bartenders were paid when Tomchuk became a partner in 2013.

And it's going up to $15 an hour in 2018.

"We work on very small margins," Tomchuk said. "Once you've paid your staff, your lease, your cost of goods ... when you have outside influences really driving and really pulling at that small margin, it really makes it a challenge." 

With labour costs taking up 30 to 40 per cent of their budget, Tomchuk said he and his partners have tried to compensate by raising food and liquor prices by about six per cent over the past few years. 
Gary Tomchuk, a managing partner of the Sherlock Holmes Hospitality Group, says menu prices are up slightly due to the latest minimum wage increase. (Gary Tomchuk)

"We can't charge $25 for a cheeseburger — well we could, but we'd have an empty pub."

Patrick Saurette, the restaurant representative on Edmonton's Downtown Business Association and co-owner of The Marc in downtown Edmonton, said he is not opposed to an incremental minimum wage increase.

"The rate and the scale of this increase that's on this policy is far too aggressive," he said. "It's too much, too fast. We don't have the appropriate time to adjust."

Facing an extra $35,000 to $40,000 in labour costs with the latest wage increase this year, Saurette said he raised prices six to seven per cent at his French bistro.

"Many businesses that are operating in the hospitality industry are very close to the edge and going at this great rate puts that at risk."

Independent, small businesses are not the only ones adjusting prices in response to higher wages.

Chopped Leaf, a national chain owned by Innovative Food Brands, increased their prices by about two per cent this year.

"We are sensitive to the minimum wage increases," Anna Datri, the company's vice president of marketing and communications, told CBC News.

"When you run a business, you have to look at all of the costs running that business."

Chili's Restaurants are closing nine locations in Alberta at the end of the month but the company did not attribute the closures directly to the increase in minimum wage.

All about the tips

Servers and bartenders have been wary of the potential reaction from customers.

"A lot of servers have been worried about the pay increase coming up and how it's going to affect their tips," said Chelsea French, a server at the Underground Bar and Grill.

"Just because people are thinking 'well, now that servers are making more money, I don't need to tip as much.' "

Levi Christensen, a bartender at Denizen Hall, says he hardly notices the minimum wage increase because he relies mainly on tips, which have remained steady. (CBC)

However, French, who's been a server for ten years, said a week after the increase, patrons were still tipping 15 to 20 per cent based.

"The paychecks were adding up, it did really help," she said of the wage increase. "But I make most of my money based on my tips."

The Underground is not raising its prices this fall after increasing them slightly in the spring.

"We decided to hold our levels," said Tom Goodman, assistant manager at The Underground. 

He said more places opening up in the area is prompting them to "try and please the customers as much as possible."

"Everyone's jostling for 'who has the best deals,' " Goodman said.

Levi Christensen, a bartender at Denizen Hall, hasn't noticed a change in his tips and isn't worried that patrons will adjust their gratuity.

"If anything, most people are oblivious," he suggested.

Christensen said he doesn't really notice the extra $40 a week on his paycheck.

"It always comes down to tips."

Denizen Hall also put up their prices slightly the week of Oct. 1, he said. 

Looking for compromise

Based on servers' reliance on tips, Tomchuk and Saurette want the province to return to the two-tiered system where liquor servers were paid a lower minimum wage. 

"There should be some sort of a compromise," Tomchuk said, suggesting something between the $9.20 wage in 2013 and today's $13.60 rate.

"[Servers] average anywhere from $13 to $22 to $23 an hour in tips, depending on what day of the week and what time of day they're working."

Allberta Labour Minister Christina Gray is firm that the government will not return to the differential wage she calls "inherently unfair." 
Alberta Labour Minister Christina Gray said the government will not return to a two-tier minimum wage where liquor servers, who rely on tips, get a lower rate. (CBC)

She said people who draw employment insurance because of an injury or parental leave used to have their benefits calculated on a wage that excluded tips.

"By having a low wage, that essentially meant that women going on maternity leave were not getting enough money to survive," Gray said.

Tomchuk and Saurette say independently-owned restaurants and pubs are struggling to make a profit.

In response, Gray said based on research, the government believes the increase will contribute to Alberta's economic recovery "because the families that see their wage increase will spend more money locally."     

Tomchuk is disenchanted with that approach.

"The government claims to be, you know, very pro-small business," he said. "This doesn't feel like it, at all."

So whether it's a salad at a take-out counter, wings and beer at a pub or steak tartare at a locally-owned French bistro, restaurant-goers in Edmonton can expect to pay a little more this year and perhaps more, in 2018.