VIDEO: Howard Bulka, owner of Howie’s Artisan Pizza, in conversation with journalists Jocelyn Dong and Elena Kadvany, expands on the complexities of running restaurants along the Midpeninsula in an episode of Behind the Headlines.
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Last year, Omar Piña’s Menlo Park restaurant, Mama Coco, was so short staffed, he had to return to the kitchen for several months. His wife often came in to help serve food.
Finally, he hired two people to fill the gap — people who had no prior restaurant experience but had worked at Mexican markets. He spent about a month teaching them how to cook and was eventually able to return to his primary responsibilities as a business owner.
But the economic pressures impacting his and many other Midpeninsula restaurant owners’ ability to hire and hold onto quality staff a regional labor shortage, the increasingly prohibitive cost of living in the area and higher minimum wages, among other factors — persist.
Restaurants up and down the Midpeninsula are understaffed, with consequences for both owners and consumers. At some restaurants, service has been affected: Some days, Pizzeria Delfina in downtown Palo Alto doesn’t have enough staff to open its outdoor patio, owner Craig Stoll said. Owners are raising menu prices more frequently to be able to pay their staff competitively, afford hours of overtime and achieve already razor-thin profit margins.
Longtime owners who have run restaurants here for decades say they’ve never seen labor costs become so acute, and they fear a breaking point is on the horizon.
“We’re competing as much for staff as we are for customers,” Stoll said in an interview with the Weekly. “The cost of living goes up, and we continue to have to pay more, and our margins shrink, (and) our prices increase. It’s kind of a vicious cycle.”
An ‘evaporating’ labor pool
For Michael Ekwall, who with his wife co-owns La Bodeguita del Medio, a longtime Cuban restaurant on California Avenue in Palo Alto, affordability is not only the No. 1 issue driving the local labor shortage but also “No. 2 and 2.5.”
“The labor pool here — because it’s so expensive, the cost of living is so high — is much shallower than say San Francisco or even San Jose because the cost of entry here is so much higher,” he said. “When you’re talking about a one bedroom apartment for $2,000, not a lot people can afford that.”
Owners say the problem has become more acute in the last two years or so. At one local restaurant, line cooks make about $2,600 per month; bussers, about $3,000; and servers, about $4,500. (Line cooks, however, work the most hours.) Employees can get additional compensation from overtime pay, and servers also earn more from tips. However, the median rental price for a one-bedroom in Palo Alto currently sits at $2,700, up 8.7 percent from last year, according to a report compiled by rental website Apartment List. The median cost to rent a one-bedroom in Mountain View is just below Palo Alto’s at $2,680, according to Apartment List.
Owners said they see many staff living with multiple people in apartments — three people in a one bedroom, for example — to afford rent.
Most restaurant staff still live in the area, in relatively more affordable cities like Redwood City, East Palo Alto or San Jose, owners said. Workers don’t tend to come from areas that are cheaper but farther away, like the East Bay or Gilroy, given the added expense it would take to commute.
Yet even Midpeninsula cities with relatively less-expensive housing, like Redwood City, are becoming unaffordable for restaurant workers.
“If you’re a restaurant assistant manager or a restaurant sous chef and you wanted to start a family or have a life or buy a house, how could you possibly do that in the Bay Area?” asked Howard Bulka, owner of Howie’s Artisan Pizza at Town & Country Village.
“They find an apartment; they find a back house; they live with three people in a two-bedroom apartment or whatever it is. But ultimately, they leave. Ultimately, they look for greener pastures,” he said.
“The labor pool is just evaporating,” Bulka added.
The cost of living is pricing out not only restaurant employees but owners themselves. Ekwall rents a home in Menlo Park and said he can’t afford to buy a house in the city where he’s run a restaurant for 20 years. Bulka and Dan Gordon, owner of the eponymous restaurant in downtown Palo Alto, both live in Redwood City and said that they, just like their employees, cannot afford to live in Palo Alto.
Peter Katz, the original Northern California franchisee of burger chain The Counter, said he sees similar issues across his eight locations, but labor costs are highest at his Palo Alto, Mountain View, Cupertino, San Mateo and San Jose restaurants. Labor accounts for from 33 percent to more than 40 percent of total sales revenue at The Counter, depending on the location. It is the restaurants’ largest expense category, he said, and itself has risen about 30 percent to 40 percent over the last five years.
Bulka said he has been raising wages in his restaurant consistently for the last three years.
In the first five years Howie’s Artisan Pizza was open, he raised menu prices once. Now, he raises them every year to compensate for the increases in labor and other costs, he said. This is not a simple fix, given raising prices means running the risk of customers ordering less, choosing to eat elsewhere or cooking at home.
Ekwall described the current labor environment as a “staffing nightmare.” On a weekly basis, La Bodeguita is down three people out of about 45, he said. Like Piña, there are days when he and his wife have stepped in to fill in as host, food prep or even dishwasher. On a recent week, La Bodeguita racked up 120 hours in overtime — the equivalent of two-and-a-half employees, he said.
“We’re trying to balance this concept, from our perspective, of being able to pay people enough money so they can live around here but also that we can stay in business,” Ekwall said. “That’s the challenge.”
And in an over-saturated restaurant scene, potential hires have a healthy choice of prospective employers. Today, rather than people being desperate for a good job, owners are desperate for good staff.
“Sometimes they get a different offer from a different restaurant — maybe one more dollar, $2 more — and then they leave,” Piña said.
“I’m always scared. Every time I come in, I cross my fingers and I say, ‘Hopefully everyone comes to work,'” he said.
Owners have also had to lower their standards for hiring, particularly for back-of-house positions. Cooks with far less experience have become more attractive in the current labor market, owners said.
Another huge shift for restaurants operating in Silicon Valley: increasingly stiff competition from tech companies and restaurant chains that can offer better pay, benefits and hours. The impact from tech companies is dual: Not only are they drawing down on the local labor pool to staff on-campus eateries, but by providing employees with quality food at the office, fewer people going out to eat on their lunch breaks, local restaurant owners said.
In light of all of this, owners are doing what they can to make their restaurants more attractive places to work. La Bodeguita, for example, has long paid half of full-time employees’ health care plans, and offers 401Ks. Asian Box, which operates locations in Palo Alto and Mountain View, pays its staff weekly (which costs the restaurant “substantially more”), offers cell-phone plan reimbursement, helps staff with loans, writes apartment references for staff and has always paid more than minimum wage, owner Frank Klein said. Owners are more flexible with scheduling, particularly given many employees work more than one restaurant job.
Other owners say they are cultivating kinder, more positive kitchens with an emphasis on teaching — a stark contrast from the traditionally unforgiving, even abusive, environment of kitchens past. At Pizzeria Delfina, Stoll has implemented regular staff reviews to check in not only about performance, but to set and guide staff toward goals.
“Our focus is always on being a great restaurant for guests to eat at,” Stoll said. “Newsflash: We have to focus on being great employers now.”
Pressures of the new minimum wage
On Jan. 1, restaurant workers in both Palo Alto and Mountain View saw their minimum wage increase — in Palo Alto, to $12 per hour and in Mountain View, $13 an hour. Both cities are on a path toward phasing in an eventual minimum wage of $15 an hour. California’s minimum wage is currently $10.50 an hour, with yearly increases ahead through 2022.
Owners say they support a living wage for their staff, but local cities’ accelerated increases are having an intractable impact on their bottom line. They’re also frustrated by local elected officials who supported the increases without understanding the effects on restaurants in particular. The low-paid employees who need a higher wage the most, like back-of-house line cooks and dishwashers, are sharing the new increase with waiters who make ample additional income in tips.
This amounts to robbing Peter to pay Paul, Dan Gordon said.
“It’s very regressive in terms of the highest-paid restaurant employees are getting a raise and the people that need it the most at the back of the house are going to be left behind,” he said.
The new minimum wage also affects restaurants disproportionately, with full-service restaurants bearing more of a burden, Gordon said. The wage increase means less money to go around for the non-tipped employees. One solution owners have called for is an exemption that would apply to tipped employees, most of whom already make more than $20 per hour in tips alone. (The Palo Alto City Council agreed in January to advocate for a state law that would allow cities to do this, in part due to pressure from these and other local restaurant owners.)
Gordon and other local owners are also watching carefully as Bay Area restaurants experiment with different solutions, such as replacing tipping with a mandatory service charge.
While the full impact of the minimum-wage hike remains to be seen, Gordon is already worried about the jump to $13.50 coming next January. He predicts “dramatic” closures are ahead for full-service restaurants.
“There’s a lot of uncertainty and there’s a lot of panic in the air. Restaurateurs are all talking about it. The initial nail into the coffin was Jan. 1, and now we’re worried about next January and how to survive,” he said.
New trends in dining
As the full-service neighborhood restaurant struggles to survive, less labor-intensive concepts are taking hold. The rise of fast-casual dining, in which customers order at the counter, their meal prepared assembly-line style, is gaining in popularity.
This trend is apparent in Palo Alto’s and Mountain View’s dining rows. In 2016, Palo Alto saw the opening of numerous fast-casual eateries, including Sweetgreen, Lemonade, Tender Greens and three poké eateries. Sweetgreen is planning another location for Mountain View’s Castro Street, which is also home two fast-casual poké spots, family restaurant-turned-fast-casual Asian-fusion eatery Srasa Kitchen and Asian Box, among others. Service is less central to their concepts — and, thus, to their success.
And at some restaurants, such as Calafia Cafe and Yayoi in Palo Alto, tablet computers are helping to take orders, split checks and calculate tips.
While owners hope diners still value the touch of a human server and the full-service experience, the appeal of the cheaper, fast-casual model is undeniable.
“We think that our staff, hopefully, represent us in our vision and enthusiasm to the guests. You don’t get that from a tablet,” Ekwall said. “But at the same time, if you have overhead of labor of several hundred thousand dollars a year and you can buy an iPad for $500 — less than a week’s worth of wages — and you don’t have to pay that tablet workers’ compensation insurance and you don’t have to pay it health care … a lot of people are doing that.”
The one guaranteed protection against this perfect storm of economic challenges? An informed, spending customer. Restaurateurs hope to educate diners about why their hamburger might cost $12 instead of $10 now, about the nuanced impact of minimum wage increases and how the ever-rising cost of living in the Bay Area is affecting their bottom line.
Peter Katz of The Counter, for example, said he’s been working with a City of Cupertino small-business economic-development group that recently sent information out to residents about the impact of the city’s minimum-wage increase on restaurants. He said like to see this kind of an effort replicated in Palo Alto and other cities he operates in.
Now, more than ever, Katz said, it’s important for local diners to patronize their favorite restaurants.
“Eat out more,” he said. “If restaurants are successful, we can better afford to pay the wages that we need to pay, the guests are happy, the employees are more successful and happy and the owners can afford to stay in business.”
Despite the local labor shortage, restaurants of all kinds — mom and pops, fast-casual, high-end, local and national chains — continue to open on the Midpeninsula, though owners say it is easier for chains with deeper pockets to risk the high labor costs, high rents and limited return on investment than independent owners.
Bulka recently closed his second Howie’s in Redwood City temporarily to retool the concept and eventually reopen — a fun creative endeavor but with practicalities that give him “enormous pause.”
“It’s fun to think about a new concept; it’s fun to think about a new design and a buildout of a restaurant … but I know there comes a time in the future where I have to hire 40 or 50 employees,” he said, “and I’m not sure how that’s done.”
Imagine what will happen when most of the back room staff like Dishwashers and such get deported. Its going to affect local businesses and our pocket book BIGLY!!!
I disagree with Katz, owner of the joint where it’s ~$50 for burger, fries and drink for two.
Now, more than ever, it’s important to eat at home. You’ll save hundreds to thousands of dollars, likely be healthier, and this issue becomes irrelevant to you.
You may even see the parking problems improve, if that’s your concern!
an increase in Prices should also come with wuality service and quality food
when i eat out i expect to have both
too many restaurants in PA and surrounding area are charging a lot of $$$ for mediocre food and half hearted service
there are only a handful of places i will find at because of this
so sorry mr katz, not gonna eat out more
slapping a higher price tag on a meal doesn’t make it good
@Homey – You make a good point. When prices go up at restaurants, we stop eating at restaurants. It is a luxury and not a necessity.
Like you said, we can make a burger every bit as tasty as any restaurant — especially now that we’ve discovered Kitchen Accomplice Wicked Juicy Burger stock concentrate (that sounded like a commercial, didn’t it?).
When I go to a restaurant now, it either has to be an experience or something that isn’t so easily replicated at home. One of the great things about living in this area is that there are so many wonderful and unique restaurants that provide cuisine that amounts to cultural experiences. Neither my husband nor I are very adept in cooking many of the different types of foods that are found locally. So, we are willing to give them a try.
This is one reason why I really enjoy Elena Kadvany’s Peninsula Foodist blog here at the Palo Alto Online. We’ve visited several of the restaurants mentioned in her blog. Most of the time, we wouldn’t have known that those restaurants even existed!
If it isn’t for a unique experience (or a date), we go for the convenience factor. If we want a burger but either don’t have time to make one (or we are on the go), we can eat a burger at Oasis, Jeffrey’s, Kirk’s or even In-N-Out.
The principles seen in a demand curve are still in play. I don’t mind going out to eat a burger. However, if the cost of that burger rises to a certain level, then our demand decreases exponentially. By a certain price point, even convenience doesn’t matter. When minimum wage increases, most of us don’t see a similar rate of increase.
@Homey – I hadn’t thought of it that way, but indeed we are ending up eating more at home. It isn’t for cost reasons, – few $ increase here and there to menu items doesn’t make a significant difference. Rather, it is because of parking issues. Our fav restaurants are in PA downtown or MV Casto St. But parking is getting increasingly difficult. Sometimes it takes 20-30 min to find it! You have to circle parking lots, hoping to catch a car that is leaving. Soon going out to eat became more of a stress than fun, and hence we are starting to eat out less. I suppose we have to look at the positives – less expense and healthier food!
@Nayeli – yep restaurants are not a critical necessity. Easy enough to fix some food at home. Unless the experience is pleasant, more people will just eat at home.
I can see how restaurants are getting squeezed by rising min wage. They just need to figure out ways to create more unique experiences as Nayeli suggested. And frankly for us the bigger issue to fix is parking, for us to go out more. Circling around the lot for a long time kills the experience.
We rarely eat out except for grabbing a quick lunchtime bite. When we do it is usually for a good reason, a celebration or because we need to “get away from it all” for an evening. We want food to be better than we get at home and we expect to be served and waited on. For this experience, we don’t mind paying a bit more, but we do expect to get something worth paying for. We expect to be able to park, and if we have made a reservation be seated straight away. If we made no reservation a wait of 10 minutes is OK as long as it is the time we are told.
Table service means getting our orders right and food arriving together. Water being replenished is good. But, my pet hate, the first plate being removed from the table (before everyone else is finished) makes me feel rushed. If I finish first, please leave my plate until all have finished. If someone else finishes first, please don’t take their plate because it makes me feel I am being rushed and should be finished too so that they can clear away the table for the next group.
If all I get is food similar to what we make at home, it is a waste of a meal out. I expect something better or why bother?
How did these previous commenters veer so off course? This isn’t a debate about quality of food and experience. The labor squeeze is real, particularly on the mid-Peninsula. Lower wage employees are getting squeezed out because of rising living costs. They get pushed towards San Jose and it just isn’t practical to commute to, say Palo Alto, for work every day.
The other issue is, for practical purposes, Mountain View has a minimum wage that is $1 higher than Palo Alto, so for all intents and purposes, Palo Alto businesses have to compete for the same labor and in effect, the minimum wage has to be the same or higher as that of Mountain View.
We always hear the residentialists talking about community and quality of life and how important this it to them. Yet when a business that is local to Palo Alto has real struggles, these same people say, “oh well, if your food was better or your service was better, you would survive”. There is no magic elixir that can solve the labor issue, not even if the food/experience was a 11 out of a 10 scale. As others have pointed out, if it gets too costly to eat out, people will just eat at home.
Except in order to survive, a business has to keep up with wages, not to mention rising costs of workers’ compensation insurance. Easy to dismiss business owners when you’ve never had the struggle of owning/running one.
@Anonymous – the comments were all around restaurants, which is the topic of the article. Anyway, not much else to say about rising min wage other than that this will lead to price increases of menu items. Restaurants will just need to figure out ways of making the food and experience worth it. And frankly I think that a few bucks increase to menu items will not be a swing factor in whether PA residents eat out, given the avaerge level of wealth in PA. I think it will be driven more by whether issues such as congestion are resolved. Parking is so hard to find in key areas that it totally kills the dining out experience and makes us go out less. IMO that is th bigger problem to solve.
Key point in the article:
“The labor pool here — because it’s so expensive, the cost of living is so high — is much shallower than say San Francisco or even San Jose because the cost of entry here is so much higher,” he said. “When you’re talking about a one bedroom apartment for $2,000, not a lot people can afford that.”
The article says that restaurants are having a hard time finding employees even at wages that are well above the minimum wage. The problem is not the minimum wage. The problem is the rents and availability of housing within a reasonable distance of these jobs.
The article doesn’t say so, but I’m sure the rents for restaurants themselves have a huge impact on their business plans. They are less willing to take risks with new dishes or new cuisines, which in turn makes going out to eat less exciting for customers. This is why we have had much more restaurant diversity in Mountain View or Sunnyvale than Palo Alto or Menlo Park.
What part of Econ 101 did you sleep through. Raise the price of labor and you’ll get less of it. Watch for more machines doing what staff used to do, and for fewer restaurants overall.
Yet another sign of the painful imbalances caused by the out-of-control tech growth in a region that has long since maxed out its options for sprawl 🙁
time to re-tool and go back to the old ways where you get high school kids of
age to work at local resturants….in my day we all did that and we learned
people skills and the owners groomed us to survive in the real world…of course you would need to regroom new kids as ones graduate and go on to college.
@Adam Smith
Very true, unfortunately though we still have people who think local increases in the minimum wage is the main driver for the big increases in the price of labor.
After listing problems with minimum wage and labor shortage, the author of the article sums up her piece asking us all to eat out more.
If she wants us, the readers, to eat out more, then she should understand what different people want from the eating out experience. Every opinion in what people expect from a restaurant is as valid as the others. We do not all want the same thing. However, reading the comments, there are some common factors.
Parking is one of those things mentioned quite a bit in the comments. It is getting harder to park in downtown areas of Mountain View and Palo Alto. This does make a difference to where we choose to dine. One of our favorite places is in Sunnyvale on ECR where the restaurant has its own lot. The food is good too. Both of those things mean we prefer to drive to Sunnyvale for a night out particularly on a Friday or Saturday evening.
It’s too bad these discussions always seem to get framed as one side versus another. This is really not about who is right and who is wrong but rather about what will make our community stronger and a better place to live and work in.
Eating out is certainly not a necessity, but there’s no denying that the great restaurants (and small businesses) in this area add to our quality of life, provide choices and contribute greatly to the local economy (and City budgets. Cooking a great meal at home is a wonderful experience, but dining out and being served something wonderful with family or friends is special too.
So hopefully we can focus on how to improve the well being of all stakeholders, e.g. patrons/residents, employees and business owners so we can maintain the wonderful diversity of businesses we have in Palo Alto and the surrounding areas. It’s just the reality that some things will need to change, and it’s most likely to be prices. But we have all seen that local businesses, even in Palo Alto, are not immune to the impact of price increases.
Sometimes its not all about good guys vs bad guys but rather working to solve complex issues. Understanding of the difficult situation small business owners are in right now and most importantly patronizing these businesses is an important first step in making this all work.
There are many valid points here. I think the biggest issue is the across-the-board minimum wage which doesn’t factor in tips servers receive & leaves kitchen workers at a disadvantage. The estimated $20 in tips per hour is far lower than the real take at full service restaurants. A server I know at a local high-end restaurant gets ~$400 in tips per weekend night so his hourly wage rate is inconsequential.
If really good servers worked for tips only, service would improve & restaurant owners would benefit too. It’d be interesting to see an experiment on performance-based compensation.
@RestaurantOwner: “most importantly patronizing these businesses is an important first step” : for me, as well as other neighbors I know, the biggest inhibitor is parking. Can we think of ways to fix that? Certainly increasing housing will only make it worse. Maybe valet service?
When we go out to eat, we want to have a good experience. We are ok paying a little more. Having to drive around parking lots for 20+ min to find parking in downtown PA or MV is by far the #1 reason why we have been going out less to these areas.
Totally agree with all the comments about parking being a main impediment. Please read the article earlier this week concerning this issue and what merchants are asking for. Please help by advocating with City staff.
http://www.paloaltoonline.com/news/2017/03/08/cal-ave-merchants-urge-city-to-go-big-on-new-garage
The easiest way to free up parking for restaurant patrons is parking meters. I see parking meters in several cities along the peninsula. Parking fee is minimal, like 25 or 50 cents per hour, but there is a maximum time limit of 2 or 3 hours. The time limit is easily understood and easily enforced and does a good job of keeping office workers from hogging all the parking spaces that would be used by store and restaurant customers. Employers should build private off-site parking lots for their employees and run shuttles from there to their businesses. Letting employees park in customer parking spaces is really killing your own businesses.
What would you recommend for truly good restaurants (any cuisine)in the area that provide nice service, very good food and value for what you get or does the eatery standard here mimic the real estate where you get an unpalatable home for $2M?
I’m sure one of the biggest expenses for restaurant owners in Palo Alto is the exorbitant rent. I don’t know how restaurants survive around here. Maybe if the landlords would give them a break they’d be able to pay their employees a livable wage and also keep the meal prices down.
@New to Area – we like Joya, Eviva, Amber Dhara, Burma Ruby and Tangerine in downtown PA. For cheaper fare – Oren’s Hummus or Curry Up Now. Icecream: Scoop. I am sure others are good too – we just stopped going there too often due to traffic issues. Plenty of good choices.
Parking is solved by larger parking structures and better transit options.
Still, the core issue here is housing costs. Labor costs are increasing because housing continues to become more scarce due to all of the restrictions and roadblocks put up against high density housing.
@Reader – yes short term parking is best for retail. So parking meters can be a good solution. The only question is, doesn’t downtown PA anyway have mostly 2-3 hr parking? And the cops are pretty good about ticketing if you exceed the time, as I have painfully found out :-(. So I am not sure whether too many biz employees can park for the whole day. Seems like the area just has less parking than needed.
The article mentions that as labor becomes more scarce, hiring standards have to be relaxed. Our culture has been trending away from respect and politeness. Younger people working in retail seem to feel that being polite and providing service (professionalism) is beneath them. Lower quality servers with bad attitudes at more expensive prices: not worth it!
I prefer the line assembly restaurants where I don’t have my meal interrupted by rude or gauche servers; don’t have to wait ages for my food to arrive and discover they got it wrong; don’t have to feel rushed. It’s great having such a variety of interesting cuisines. We often pick up meals to eat in the comfort and quiet of home. A few 20 minute parking spots in the restaurant district, such as Los Altos’ Main St, can help.
The envelope please…and the winner is “parking, parking, parking”. Yes, it is by far the most aggravating thing for me when I want to go out and have a good dining experience. Price increases don’t bother me as much and I never notice them anyway. Do I actually remember how much my steak dianne cost at this fine dining restaurant the last time I dined here? No! I see prices on the menu, but I know what I like and want and that’s what I order. Dining out shouldn’t be a shopping experience. I know I feel differently about this than younger people and families who eat out. I’m an 80 year old widower, with just a few years left, so I don’t have that many years left of fine dining or dining out of any kind.
A good lady friend and I have made an agreement that I offered over a year ago. Let’s eat out once a month at different restaurants offering different ethnic foods. It’s worked out beautifully and La Bogedita was our last one to visit. A great meal and experience once we found parking and made our way thru the noisy bar area crowd to a table way back in the dining area. Our waiter, Charles, took good care of us. Yes, by all means, go there for a great dining experience.
We do stray out of town sometimes tho…to get Afghan food at the “Kabul” restaurant in Sunnyvale and Thai at “Tommie Thai’s” on ECR in Mt. View. I prepared one meal in my home during Oktoberfest. There are no German restaurants close anymore and I learned how to make all the good dishes from my former German daughter-in-law…rouladen, potato dumplings, red cabbage, etc. I love to cook and have made lots of dishes from other countries/ethnicities. We’ve done Korean, Greek, Turkish, Italian (who hasn’t?) and several others. The fun is in the dining experience…good food, good service, and lucky parking.
I understand the logic and economics of fast-casual counter restaurants, but I despise them. You’re asked to pay and tip in advance, and if your order’s wrong, there’s no one to help you fix it (and oh by the way, you’ve already tipped because you know how little these people are making). I know the ultimate solution, but unfortunately, we can’t ALL move to Oregon.
…I think that a lot of us saw this coming quite some time ago. This area, sadly, is choking on its own success. More and more service providers (restaurant wait staff, store clerks, the folks who mow and blow your garden once a week) simply won’t be here any longer. It won’t matter how much money us consumers might have, the man/woman power will no longer be able to live close enough to serve our needs and desires.
I wish that I had an answer or two but I’m coming up woefully short. As “Former Palo Alton” just mentioned, not everyone can move to Oregon or other places that are still less expensive. Putting a cap on growth is a rather unpopular idea among elected city officials, but that issue might need re-visiting. There is a limit to the demand of available resources just for a start. There’s no more room in the inn; time to start developing areas that could use and economic boost as well as provide more reasonable cost of living, i.e., Stockton, Modesto, etc.
Labor is a supply/demand commodity. So is supply of services. The market will determine the balance. The labor supply will adjust accordingly. 30 years ago people were driving in from Tracy and Manteca to work here, often using commuter vans. Commuter buses will be the future, and employers will adjust.
The days of illegal aliens driving down wages is over. Get used to it.
@YIMBY – dude you and I are guaranteed to disagree on every topic! Maybe we should just meet in a bar sometime and have a “lively” discussion :-). How about tomorrow at 6 at Nola? Missing their hurricanes.
Of course I disagree. The core issue here IMO is parking. There is no way you can construct BMRs cheap enough in this area for restaurant workers. No way no how. Market rate now for houses starts at almost $2M. Even BMRs that are 50% that cost will be far out of reach for someone a little over min wage.
The solution IMO for businesses in PA is to increase revenue. It is not practical to expect a significant cost reduction at scale. Instead, restaurants need to get more revenue. And at least my view is that the single biggest way to make it happen is by providing parking. When someone in PA goes out to eat, cost is probably not the #1 criterion on their mind (if so, they would just cook at home). They want to have a relaxing and pleasant dinner experience. And the biggest blocker right now is parking.
@Honor Spitz, you’ve nailed it. To me it feels like we’ll continue in this choking mode until the last restaurant, nanny, landscaper, mechanic etc has left the area and quality of life takes a big hit as a result.
As for answers, there’s a link in today’s WIRED newsletter that discusses restoring some balance by shifting some of the tech growth to the parts of the country that currently are experiencing “brain drain” when their best and brightest head off to SV. Title, in case the link doesn’t post: “Hey, Coastal Elites: Don’t Dis ‘Flyover Country’—Fund It” (The article is more constructive and less arrogant than the title suggests.)
https://www.wired.com/2017/03/hey-coastal-elites-dont-dis-flyover-country-fund/
Humans are pricing themselves out of the market for fast food restaurants–
Caliburger Installs Burger-flipping Robot:
http://www.breitbart.com/tech/2017/03/09/burger-flipping-robot-replaces-workers-at-fast-food-restaurant/?utm_source=facebook&utm_medium=social
The Telegraph reports that the robot, named Flippy, was developed by Miso Robotics and began its first day on the job at Caliburger this week. “Much like self-driving vehicles, our system continuously learns from its experiences to improve over time,” said David Zito, CEO of Miso Robotics.
Zito continued, “Though we are starting with the relatively ‘simple’ task of cooking burgers, our proprietary AI software allows our kitchen assistants to be adaptable and therefore can be trained to help with almost any dull, dirty or dangerous task in a commercial kitchen — whether it’s frying chicken, cutting vegetables or final plating.
Wendy’s Installing Self-Ordering Kiosks:
http://www.foxnews.com/food-drink/2017/02/28/wendys-installing-self-ordering-kiosks-in-1000-restaurants.html
According to The Columbus-Dispatch, a typical fast food restaurant location would receive three kiosks for around $15,000. Those machines would likely pay for themselves in less than two years based off of Wendy’s projected labor savings’ costs and increased sales (customers who really need to talk to a human will reportedly still have the option of classic counter service).
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While fine dining restaurants are probably not going to see a robot replacing a wannabee Michelin star chef, it’s difficult not to believe that dish washing, and other entry-level jobs might not be seeing robot competition in the coming years.
Given that most restaurants fail in their first two years, one might wonder if fewer restaurants might not be the way of the world.
To Former Palo Altan: you got it wrong. It’s FORTUNATELY, we can’t all move to Oregon. I was snickering about the woes of restaurant goers in Palo Alto, so self-satisfied, until you mentioned Oregon. Please don’t spread it around! My response, taken from either the Creamery or Fog City Diner (I can’t remember which) is Eat and Get Out!
First World Problem
It would be a shame to see our wonderful variety of affordable restaurant offerings decline and with it our privileged lifestyle.
This is why we need a steady stream of illegal immigrants to make up for the shortage. They will settle for less wages without benefits and accept a lower standard of living and housing arrangements such as sharing an apartment room with other families.
And the shortage of labor also affects our ability to hire the cheap house cleaners and gardeners we have all grown so accustomed to having and which raise our standard of living here in Silicon Valley.
I’m going to settle this mishigoss by opening a restaurant located next to a parking garage and that serves robot-made burgers the customer orders via iPad and picks up at the counter. Taking a page from our tech friends, any positions that absolutely must be held by humans will be filled with unpaid interns.
Oh, and bus your own darn table.
Restaurants will always be here, but what will happen is that the “mid priced” restaurant will eventually go away in the Bay Area. Soon there will be only fast-casual chains or mom-and-pops that can avoid certain regulations and taxes, and the big expensive restaurants.
Core issue isn’t parking. Restaurants make single digit margins. Eventually increased costs will price mid-tier restaurants out of business. Wondering why burgers that should only cost $8 now cost $15?
Minimum wage hikes and anti-housing policies don’t come for free.
Can anyone who owns a medium sized restaurant in Palo Alto
give us a general ratio of what you pay in staff costs versus
what you pay in rent? Now, go backwards and tell us what your
rent costs have done in the past 10 years versus what your labor
costs have done?
I have my favorite places of course, but for going out to eat I
have all but cut it out. Not because of the budget, but because
the quality of the food is so bad, and particularly in Palo Alto.
I love Chinese food, but when I see what has happened to the
average dish all ingredients are less, more filler, more inexpensive
things like zucchini replace things like mushrooms. There is a real
difference in the food I have gotten over time.
As economic warfare squeezes out more and more of what we take
for granted as a civilized society we should realize that it takes more
than parks, roads, bridges, schools, etc to make a city. It is not right
to allow all the burdens to fall on the lower class working people and
then blame them when the bottom gives way and they demand some
rights and a life.
What I noticed in fast food was that say in the 80’s you would get
real food. It was cheap, and fast, but they made it right and the
service was there. Over time costs got cut so that they hired the
incompetent, and not just in restaurants, and service suffered, but
everyone did it so we had to put up with it. Instead of going to a shoe
store for example and getting someone who knew about shoes, you
have to either know about shoes yourself or learn over time by getting
bad shoes because everything the wait staff told you was a line from
management to increase profit.
I hope that with a mandated raise in the minimum wage some of
these jobs will now be able to afford and to attract and pay people
who can actually do the job. Taking back that marginal raise in rents
as businesses who cannot survive go out of business because ( as
we see the rent inflexibility with Sand Hill for example ) rents are slow
to back down to something reasonable.
I think a lot of turmoil could be reduced if landlords would compromise
with businesses that are hit by these costs.
Ok, you asked for a restaurant guy to compare lease cost vs labor..No problem and this is based on our 25+ QSR locations: lease=12% (max) and labor is 22% (min) and that 22% does NOT include employer taxes, nor workers comp. Also it does not include salaried managers (add another 8%). So there you go, see the problem in this equation? It’s labor. Last year we raised prices 9.7% and that move cost us 7.1% of our customer….if you keep up that practice, we end up with 1 customer who spends 900k per year.
It will all work out just fine — restaurants that can not adapt will close, and those than fulfill the customers’ needs will thrive. It is OK. Other towns may gain more dining establishments business, so people will drive there for dinner and free up parking in Palo Alto. Let’s just use Howie’s as an example, they have one and only one size of pizza, it is too large for one person, yet not big enough for two, so to order two pizza for two people would run around $38 and left overs would not be enough for a leftover meal. They are inflexible in listening to the customers, so I live a few blocks away from Howie’s, yet I drive to Amici’s in MP to pick up an outstanding pizza that easily feeds two for the price of one at Howie’s. The same for Chinese and Indian, I drive to Mt. View. I like the creativity of Tender Greens and many other assembly like restaurants that opened up in Palo Alto.
” It is not right to allow all the burdens to fall on the lower class working people and then blame them when the bottom gives way and they demand some rights and a life.”
(sigh)
This flat earth approach to social programs the problem. This country was built on socioeconomic *mobility*. Just handing out increased minimums for salaries ironically keeps people down and continues their plight, kind of like the people held hostage to their rent-controlled apartments in SF (or Prop 13 for that matter – just look at all the elderly residents that can’t even afford to downsize from their house in Palo Alto).
Just enough to live on, but not enough to move up.
We should be finding opportunities to get lower class working people to become middle class (or even upper middle class). Education. Opportunity. Not just throwing small sums of cash (i.e. living wage) that only barely maintains their existence.
Living wage is flat earth science (just like some other things being touted by faux-geologists and fake soil mechanics engineers around here)
This is all a trick question, right?
There’s less to this discussion than meets the eye. Restaurant owners can’t find staff at the prices they’re paying, and they can’t pay more without going broke. OF COURSE the answer is to pay more and raise meal prices.
What else is anybody possibly thinking? Who is supposed to bear the cost of housing and transportation around here: restaurant workers, by stuffing tighter and commuting farther? Restaurant owners, by working for free and treating their personal investment as a charity?
The only reasonable answer is to pass the costs to restaurant goers who want to eat out in Palo Alto instead of Santa Clara, or at home. And if that price means fewer people dine in Palo Alto and there’s an oversupply of restaurants here, then maybe landlords might have to charge lower leases to compete for the ones that remain. Maybe we’ll have a more diverse mix of businesses downtown. And so on, and so on.
This is how it’s supposed to work. It’s a sign of health, not sickness.
— This is how it’s supposed to work. It’s a sign of health, not sickness.
You have some good points in your post, resident.
In a perfect world we would not need a minimum wage because in a community of
people who were human beings no one would want to see people and their families
starve or not thrive. Soon this will become apparent as our economy finds it does
not need the people who populate it in order to produce enough, and how we
react to that eventually will say a lot about us as species.
We have minimum wage because people from outside our economic sphere are
allowed in here to work because they are so desperate in their own countries and
communities, and not just randomly or because they are failures or inferior.
Things are messed up so that the average person on this planet is not treated
justly or humanely, and that ripples out all the way to restaurants in Palo Alto,
CA.
I think what you seem to be saying by “This is how it’s supposed to work”, is
that we need, and have always needed some kind of permanent low-wage slave
or virtual slave class, and we have evolved ways to socially and economically
make that look normal. It shouldn’t be normal, but neither is it easy to understand
or fix, or politically agree on and implement.
We will reach a new equilibrium state, but people in our modern world should
be able to expect and demand better than to have to wait years and lose big
chunks of their lives waiting for market forces to equalize, when there are so
many invisible fingers tipping the scale … fingers with loud and pervasive voices.
The competition is how long it takes to go from the house to the steps of the restaurant. It takes us much longer to circle around down town PA to go out to dinner on Saturday night than drive to MV and go to Amber with plenty of parking. We like Italica on California Avenue and go there often, parking is not an issue there, the food is good, the service is fine, and the owners are amazing and engaging and always stop by the table and give a complementary glass of desert wine and a hug. Once we’e in the car and driving anyway, we often go to San Carlos, with several excellent Italian and Asian restaurants, including many of the same ones that are in PA. San Carlos may be a bit of a drive, but overall, takes us just as long door to door as looking for parking in Palo Alto. I don’t mind if a few restaurants close in Palo Alto and set up shop elsewhere to spread the goodness and let the other town’s commercial districts thrive.
I am kind of loving this. Its all coming full circle now.
The notion that the overlords of Google and Facebook expect to get the highest quality food and their money’s worth while the lowly dishwashers and cooks are there to serve them… and yet you feel empathy for their plight if they get deported. Limousine liberalism on display. Maybe they’d be better off in their homeland, than slaving away for you in a kitchen?
Maybe young people should be doing these jobs and learn a work ethic, instead of being pressured to rush off to college as soon as they get out of high school to get a leg up on the rest of society and become part of the narrow, elite technological class? Maybe its better for their bodies to perform manual labor than sit in front of laptops all day? This is where the real income inequality occurs: stratification caused by academia and big government, NOT race, which is the constant topic of obsession.
Instead of FORCING a minimum wage on restaurant owners and making them crack at the seams, why don’t workers simply demand a higher wage, or seek jobs elsewhere? Isn’t that the way its naturally supposed to work? A forced minimum wage & taxes interfere too much with the consistent operation of a restaurant. You wonder why they’re understaffed, you wonder why the food isn’t that great. Can’t have it both ways, limo libs!
This is from someone who grew up working in restaurants and I have seen the effects firsthand.
The “altruistic” politicians — people who’s number one expertise is writing essays and taking tests — who never worked a manual labor job in their lives and never faced the challenge of running a small business are totally oblivious to this reality.
And now we see the results.
— Instead of FORCING a minimum wage on restaurant owners and making them crack at the seams, why don’t workers simply demand a higher wage, or seek jobs elsewhere?
Instead of engaging in exaggeration and sarcasm so thick that your meaning is lost or impeached by its own heavy-handedness, why not seriously try to answer that question? There are lots of reasons that people are stuck in one place, at least until a disaster. Could be their family or support network is here. It could be that in other places they are treated bad, threatened or exploited. It could be they have what they think is an inexpensive way to survive while they make a higher wage in this area than they could and they send money to support others who cannot work of where the economy is depressed.
That is a real question that you can find facts about, support or question … the rest of it is clever ways to put people you don’t like down or dismiss ideas you oppose.
I mean …
Google and Facebook workers are overlords
Dishwashers and cooks are lowly … and here illegally
better off in their own countries than being slaves
Young people have no work ethic
college grads are an elite technological class
Liberals are all hypocrites with limousines.
Everyone but you seems to have a blindspot that impeaches their opinion.
That’s fine, I get it, you have an opinion. I’d like to hear some actual reasoning rather
than unsupported zingers that seem to imply that there is nothing to be done about
anything, that we should just allow those with the power and money to do what they
want with no responsibility for anything else, because people can just walk off to some
unspecified place and live the way they want elsewhere? Am I missing something?
I am curious though. Was that growing up as a kid in a relative’s restaurant, or trying
to support yourself and build a life working in a restaurant? Both positions have a truth
to tell, but they do not imply authority or authority simply because of familiarity.
So we’ve had our Day Without Women. How about a day without Hispanics (or weeks without) to really focus our minds on the issues.
Some of us really dislike having to purchase, cook, clean the kitchen and repeat the process endlessly. Every day. Specially when you have to do it all just for one or two people it’s not easy, because ingredients come packaged or even fresh family size , but not for singles or couples. In any case, it’s a chore I do not want at all and for which I see no glory at all. So, for those like me, restaurants with uneventful food, just good enough, nothing special but “feeds me” are an essential part of good living. I can pay to have the food chores taken away from me. That’s my choice and my definition of quality of life. But those restaurants I speak about are precisely the ones that will suffer from the high
cost of living we have. I would say “well put prices up” but it’s not so simple. I don’t know if there is a solution for the problem, But I do sympathize both with employees and employers and therefore I tip well (22% to 25%) even at lunch time.
I know first hand about employing a staff and the cost of doing business. The one main fact I would like to point out is that the policiticians and those that vote for a minimum wage to $15 per hour will not get those people working the minimum wage to live in the area. This “solution” does not work to make a “living wage”. The cost back at the consumer happens in every industry. Why is it so surprising in the restaurant business. We all must support small independently owned businesses. They took the risk and did all the hard work to provide consumers with a service, brand etc. NOT A the staff they employ. They should reap the benefits of all of what the hard work. Don’t you get paid for the work you do in your career? ehem you see an increase in your community justckmow it’s for a good damn reason and just support them! They have earned it!!! Trust me!!
@First hand,
If a business, small or otherwise, can’t afford to pay a living wage and provide benefits to its staff, it should fail so a better run business can take its place.
One solution would be to buuld sufficient housing in Palo Alto so that rents were low enough…
There are a lot of comments here. I’m not sure if this hasn’t come up before but a lot of these restaurant workers are not the typical college student/teen getting experience in working after school and at weekends.
From my (granted limited experience) of being this age, most if not all affordable restaurants were staffed by those gaining work experience and paying for life’s necessities while still at school or college. At this stage of life, myself and most of my friends had part time jobs in retail or restaurant in order to have some spending money if not in order to live. Don’t local students both at college and high school, work any more?
Why is my burger flipped by a middle aged family person at weekends? Why are college grads complaining at not being able to get a job when they have had no work experience?