by Gordon Mccombs

Created on: February 26, 2009

Service industry employees who earn tips can lead troubling financial lives. Through the roller coaster of season changes and economic recessions, it seems as though servers and bartenders should receive a minimum hourly wage to protect their time investments. These initial feelings towards the subject are sympathetic; however, they leave some major concerns that are far too often overlooked. While we all feel warm and fuzzy about our favorite cocktail server feeding her family, we also need to responsibly investigate the consequences of our decisions.

The restaurant industry is one-of-a-kind. Dreams are broken, life savings are lost, fortunes are made and glory is had. But what truly separates the foodservice business from the pack is a public perception of business owners making obscene amounts of money. Many people say "I'd love to retire and own a restaurant." This blissful Eden of food and cash simply does not exist. Though the average gross profit margin looks extremely enticing to a potential investor, anyone who can pinch themselves will awaken to the true killer of net profit in restaurants: Labor costs.

While servers and bartenders get an opportunity to perform for their dollar, any other position in the restaurant is locked in at an hourly rate. This is usually a pittance, particularly for any salaried employee. One of the key reasons the wages are so low for the other staff positions is simply that the servers bring home a paycheck as well as tips from their customers. These small paychecks don't really mean much for many servers; in fact many times they are often cashed months after they were dated or forgotten completely.

Now take twenty-five of these paychecks, then factor in increased federal income tax liabilities and other miscellaneous chips at the bank account created by increased payroll, and multiply by fifty-two. The result of this equation is a large dent in the labor budget for the business.

In order to maintain decent profitability, or to just cope with losses due to equipment failure or spoilage, an establishment must control whatever it possibly can. Assuming a restaurant is running fairly efficiently, the only two areas considerable cutbacks can really be made are in its labor and food costs. There are only a few ways to cut labor: hire a cheap staff, run a skeleton crew, or work salaried employees harder than ever. The latter is generally the first step taken.

A salaried chef is already expected to take on quite a few responsibilities.

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