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1. Tell us about The Alliance’s recently released compensation report?
Due to skyrocketing labor costs and the tight labor market restaurateurs kept asking us for data to guide them in offering competitive compensation packages to attract and retain employees. But the data didn’t exist. So we partnered with Harri.com, which is an innovative website that connects restaurant employers and job seekers to develop this much needed report. With assistance from Professor Michael Lynn at Cornell University’s School of Hotel Administration we collected data from nearly 600 restaurants around the city, analyzed it and published the first NYC Restaurant Industry Compensation & Benefits Report. The data provides information on casual, fast casual and fine dining restaurants.
As for the results, the report found that the median hourly wage for a server is $27.50 an hour, which was of major interest during a time when there is so much discussion about tipping. And, with the city’s shortage of line cooks, employers were also interested in the pay rates for that and other kitchen positions. The types of benefits being offered and the employer contributions was also a focus of interest.
The growing number of corporate office jobs that exist within the industry that range from human resources to marketing to finance intrigued me. The corporate support is needed due to the growth of the “restaurant group,” which operates multiple concepts under one umbrella. The competitive nature of the business and the challenging and heavily regulated operating environment are major factors for corporate positions too.
2. What’s your read on Manhattan’s commercial retail rents for 2016?
A restaurateur with a lease expiring in 2016 will likely be faced with a daunting renewal increase that costs multiples of their current rent. And in some cases, the restaurant’s business model may not allow for the cost cutting measures and sizable menu price increases needed to make the new lease affordable. This has been a major factor in why some beloved restaurants have shuttered over the past few years. The restaurants that extend their lease this year will have to review their operations to ensure they’re running as efficiently as possible, maximizing their revenue per seat and providing great experiences for guests. Restaurateurs signing a new lease need to have realistic revenue projections, a sound concept and be properly capitalized. Even then it’s difficult to have longevity and be profitable. But we have the most incredible entrepreneurs in NYC, so I have no doubt we’ll see some classic restaurants renew their leases and great new ones open, despite the high rents. It will be sad to see others close though. One reform being pushed by the business community to help with the high rents is the elimination of the commercial rent tax, which businesses below 96th street in Manhattan pay if their annual rent exceeds $250,000. That’s approximately $20,000 per month rent. So many small restaurants are forced to pay this tax, which makes it even more expensive to succeed. Perhaps there will be more to come on this topic in a future column.
3. Food Halls are popping up everywhere, Pennsy being the latest. How do these create opportunities for your members?
Today’s food halls are curated with great restaurant brands and offer a fast pace and exciting environment that attracts local and visiting foodies. These are definitely not your old school food courts found in shopping malls. When you look at all the trends happening in today’s restaurant market, especially the fast casual boom, the reasons for the popularity of food halls become evident. A good food hall has built-in foot traffic, already gets buzz on social media and is a nice way to grow a restaurant company’s portfolio. While not inexpensive, the start up cost is less than opening a full-scale brick and mortar restaurant. But they often lack storage and prep space, so restaurateurs need to know what they’re getting themselves into. Depending on the type of cuisine they’re selling they may need additional storage and prep space at their full restaurant or commissary to service the food hall location. Food Halls align a restaurant’s brand alongside others, which has its pros and cons. For example, it provides nice exposure for a multi-unit brand but it may be tough to stand out if it’s your first or second location. It does however help associate a new brand with other established and successful ones. On the flip side, if one of those other brands or the Food Hall itself provide a negative experience to a guest, it can impact you. It doesn’t appear the growth of food halls will slow soon, making this option a unique and good opportunity for our members as long as they are prepared and understand the business model.
Andrew Rigie is the Executive Director of the New York City Hospitality Alliance, a trade association formed in 2012 to foster the growth and vitality of the industry that has made New York City the Hospitality Capital of the World.