After 15 years of working in the food industry, Hub Restaurant and Ice Creamery General Manager Alex Zepeda knows just how hard the job can be. And she said that while restaurants across the state have had to adjust to the recent increases in Arizona’s minimum wage, the change was long overdue.
“It is something that I think needed to happen,” Zepeda said. “And I’m glad that we’re paying people what they should be paid—a livable wage.”
Zepeda, 29, said that while Tucson’s cost of living is comparatively affordable, local folks may be supporting a family on a 40-hour weekly salary, so they need to make a living, she said.
“To have a livable wage is the right thing to do, so I’m happy with the minimum wage increase,” Zepeda said. “And our staff, they definitely deserve it.”
In November 2016, Arizona voters approved Proposition 206, which increases the statewide minimum wage during a four-year period. In January, Arizona’s minimum wage rose to $11 per hour; and in 2020 the statewide hourly rate of pay will reach $12 per hour.
The ballot initiative also guarantees that workers accrue paid sick time off. Arizona businesses with 15 or more employees must now offer 40 hours of paid sick time annually, while businesses with less than 15 workers must allow for 24 hours of paid sick leave.
Under Prop. 206, employees earn one hour of paid sick time for every 30 hours they work. If an employee doesn’t use their sick pay, those hours will roll over from year-to-year.
When voters OK’d the ballot measure, Arizona’s minimum wage was set at $8.05. The current federal minimum wage is $7.25, which hasn’t budged in a decade.
The only caveat is for employees who work for tips. Guided by the state constitution, Arizona businesses can pay up to $3 less than the minimum wage.
Zepeda worked as a server when Hub first opened in 2011, and returned to the local eatery as general manager in November.
She said of Hub’s 93 hourly employees, roughly 85 percent of their workers are impacted by the minimum wage increase.
Since the statewide change took effect on Jan. 1, 2017, Hub has had to make some minor adjustments and price increases to their fare and cocktail menu, she said.
“It’s been a struggle, because a lot of people see the value and the food and ask, ‘Why is everything going up in price?’” Zepeda said. “It has been tough.”
But when they explain to their customers that Arizona’s minimum wage is increasing, most patrons understand, she said.
She said bumping prices was a line-by-line collaborative exercise shared among the head chef and restaurant management.
“And you want to make sure you don’t scare people away from items, plus we kept in mind what our competition charges,” she said.
Knowing that Arizona’s minimum wage will climb to $12 per hour next year, Hub has planned ahead in order to mitigate any additional increases or adjustments.
“We shouldn’t have to increase again is what we’re hoping, and we’ll see how it plays out,” Zepeda said.
Due to the volume of customers, Hub has not had to cut their workforce, she said. It’s just a matter of scheduling smarter.
They’re also encouraging cross-training job duties, which helps with the general workflow within the restaurant. For instance, if a host is comfortable simultaneously answering the phones, seating guests and running orders, a task gets completed when necessary, which improves the guest experience, she said.
“For all of our new hires, we’ve cross-trained on everything so it’s more efficient,” she said.
When appropriate, a dishwasher will assist with preparing ingredients or eventually working on the line, she explained. Plus, having employees that handle multiple duties can cut back on costs.
Considering the size of their staff, offering paid sick time was a concern for management, especially since a lot of their employees work 40 hours per week, she said. But Hub is happy to offer that option, Zepeda said, because “this industry is hard and people need time to recover and have a life outside of their job.”
Although the ballot initiative may be championed by people earning minimum wage, the new law hasn’t gone unchallenged.
In December 2016, the Arizona Chamber of Commerce and Industry headed a group that sued to have the law overturned. They argued that the new law would cost the state money without naming a funding source, which violates the state constitution. The uncovered burden to Arizona’s general fund would come from an increase in payments to state contractors.
The group further argued the voter approved proposition violated Arizona’s single-subject rule, which requires a new initiative contain only one issue.
However, the Arizona Supreme Court unanimously ruled in favor of Prop. 206 in March 2017, balking at the industry-lead legal battle.
In February, Republican lawmakers passed a House bill that would allow employers to circumvent the statewide minimum wage increase. HB 2523 will create a statewide “youth employment” category that includes workers younger than 22, who are full-time students working less than 20 hours per week, according to local reports. If an employee falls into this category, Arizona businesses would only be required to pay the federal hourly minimum wage of $7.25. But the bill was held ahead of a scheduled hearing in the Senate Commerce Committee earlier this month and had not been rescheduled for a hearing as of last week.
Dan Bogert, chief operating officer at the Arizona Restaurant Association, said many restaurant owners across the state are adjusting to the boost in wages as anticipated by increasing prices, adjusting hours of operation and implementing better efficiencies.
Bogert said one of the greatest concerns restaurateurs have with Prop. 206 is the ambiguous language relating to paid sick time.
For example, the new law allows employers to pay out an employee’s sick time at the end of the year. And some business owners are taking this route, in order to keep their operations fully staffed during popular holidays such as New Year’s Day, he explained.
But the drawback is many managers aren’t sure how many hours in paid sick time they need to front-load their employees come Jan. 1. Then, a business owner, who always needs to plan for the worst-case scenario, Bogert explained, runs the risk of an employee using those front-loaded hours before they’ve earned them.
“There’s still a lot of open-ended questions, which creates a lot of uncertainty for restaurateurs,” Bogert said.
“Anytime you have a complicated, regulatory system set-up that an individual has to comply with—that’s administrative hours, where a chef is not in the kitchen.”
Regardless of the increase in overhead, Arizona’s restaurant industry is booming.
In 2018, there were 9,709 restaurants throughout the state that provided jobs to more than 228,000 people, according to an industry newsletter written by ARA President and CEO Steve Chucri. The Grand Canyon State’s restaurateurs brought in $12.5 billion in sales last year alone.
Industry analysts estimate the number of restaurants in Arizona will reach 10,000 this year and will earn approximately $13.3 billion in sales.
But with another increase to minimum wage looming, Bogert said he’s apprehensive about 2020.
“My fear is that dollar jump is going to take place and we’re going to have an economic downturn,” Bogert said. “When you have contraction of consumer spending and you have an increase in the minimum wage—that can really wreak havoc on the industry.”
One of the biggest problems with Arizona’s minimum wage hike for restaurateurs is the new law exacerbates the disparity between servers and kitchen staff, said Daniel Scordato, owner of Vivace Restaurant.
Before the minimum wage began to swell, Vivace’s servers and bussers were some of the highest paid hourly employees on staff, Scordato said.
The statewide change in wages further contributed to this issue, even though the portion of his staff vying for tips have no problem surpassing the hourly minimum wage, he said.
“That just cut right into our bottom line; that didn’t do anything for us,” Scordato said. “I don’t understand why they keep adding to the guys who are making sometimes $30 to $40 per hour on really busy nights.”
He further said implementing a tip pool—where restaurant workers evenly split customer gratuity—isn’t the answer, because servers are more motivated when their performance dictates how much they earn.
“And the base [rate of pay] problem is…people who aren’t good workers can come in and there’s no incentive for them to work harder,” he added.
On a busy night, an astute server can earn between $100-$300 in tips during a six-hour shift, he said. What would have made more sense is to set a threshold that states if an hourly employee makes a certain amount in tips, their based-rate of pay stays put, he said.
Scordato said he has always paid more than the statewide minimum wage in order to attract exceptional workers to his Catalina Foothills eatery. While Vivace offers an attractive hourly rate, they also expect the best from their crew, he said.
Offering paid sick time off has also increased Vivace’s overhead, Scordato said, adding the restaurant has 65 employees, most of whom are now guaranteed 40 hours of paid sick time annually.
At first, Vivace avoided raising its prices. But within the last six months, they bumped up most of the menu items by about 5 percent, excluding their most expensive plates, Scordato explained.
By and large, Scordato said his customers haven’t noticed the increase and often say that Vivace’s prices are far too low. Either way, he’s sticking to his profit margin philosophy.
“We always aim for a lower percentage, because I want to be busy and have happy customers that have good food,” Scordato said.