Food News

With Rising Wages and a Talent Shortage, Denver Kitchens Feel the Heat

Two percent of each item sold at Ultreia goes to the back of the house — a $2/hour boost in pay.
Danielle Lirette
Two percent of each item sold at Ultreia goes to the back of the house — a $2/hour boost in pay.
Ask Denver chefs about challenges in this city’s burgeoning restaurant industry, and one theme will come up over and over: We have a major talent crunch in the kitchen.

“There are not enough cooks in this town,” Frank Bonanno said bluntly in July. (And he’s about to add to the demand, with the massive Milk Market coming to the alley behind the Maven.)

“Staffing is hard; that’s not a secret,” Bar Dough chef (and Top Chef contestant) Carrie Baird said in November. “We try to stay competitive with pay and benefits, but also make an environment of teaching and cultivating.”

“The labor crunch is killing me,” says Duo co-owner Keith Arnold today. “My chef says, ‘I have an ad out, I’ve done all these stages, and I can’t find anyone.’ How can we be more competitive?”

The crunch is so bad that it’s putting a crimp in the business. “It’s hard to think about trying to open more restaurants when we can barely staff the ones we have,” said Blake Edmunds, chef and co-owner at Señor Bear, when we sat down in August.

“It’s hard to think about trying to open more restaurants when we can barely staff the ones we have.”

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While the labor shortage plagues both the front and back of the house, it’s felt more sharply in the back. That’s thanks, at least in part, to a growing disparity in wages between servers and cooks. In short, restaurateurs just can’t pay back-of-house staffers enough, explains Sonia Riggs, executive director of the Colorado Restaurant Association. “Wages are already high because of market reasons — I’ve heard stories of starting dishwashers with no experience at $15 an hour,” she says. Meanwhile, in the same restaurants, servers may make $35 to $50 an hour because the majority of their wages come from tips.

“Maybe it’s just my restaurants, but when our servers are making $55,000 to $60,000 a year and cooks are making $25,000 to $30,000, how can the cooks stay in this business?” asks chef Jen Jasinski, who co-owns Rioja, Bistro Vendôme, Euclid Hall, Stoic & Genuine and now Ultreia.

And the disparity just got worse.

On January 1, 2018, minimum wage for both tipped and un-tipped workers in Colorado rose by 90 cents, to $7.18 and $10.20, respectively. It will rise by 90 cents again in 2019, and one more time in 2020, to $12 an hour ($8.98 for tipped workers), to meet the standards set by Amendment 70, which the state’s voters approved in November 2016. Most of the restaurant industry opposed the measure for one reason: Because kitchen staffers in the state’s independent restaurants are generally paid more than minimum wage, the amendment had the effect of giving servers a raise — without touching the incomes of the back-of-the-house staff, where restaurateurs feel an acute need to redirect money.

But evening things out isn’t as easy as simply paying cooks more. “Labor costs tend to be 30 percent of menu prices,” Riggs explains. “Restaurants have very small profit margins — 3 to 6 percent, on average.” Raising wages would mean raising prices, and diners might balk. It also doesn’t balance the restaurant-wide wage discrepancy. “If I increase menu prices, the front of the house gets a raise,” says Arnold, pointing out that tips go up with the size of the check.

Tip pooling has its own challenges. Historically, it’s been illegal, although that may be changing: In July 2017, a Tenth Circuit Court of Appeals ruling gave employers leeway in spreading tips between the back and front, as long as everyone makes at least full minimum wage. But Riggs says restaurateurs are wary of acting on that decision because the Ninth Circuit Court ruled the opposite way, setting up a potential Supreme Court fight.
Despite the complicated legal framework, some restaurants are still working to close the gap.

The most talked-about method is a no-tipping policy. Restaurateurs circumvent the tip-pool rules by tacking a mandatory 20 percent service charge onto every bill and discouraging other tips. That service charge goes to stabilizing wages across the restaurant, often giving the back a boost while lowering the servers’ cut. Legendary hospitality professional Danny Meyer created a major buzz when he announced that his Union Square Hospitality Group would gradually phase tipping out of all of its restaurants, but the policy has been slow to catch on elsewhere. “It’s such a cultural shift from what we’re used to and what servers are used to,” says Riggs. “That’s one of the most frequent calls we get — how to conduct a legal tip pool.”
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The Preservery’s no-tip policy allows for a more equitable distribution of wages.
Danielle Lirette
Whitney and Obe Ariss have been committed to a no-tipping policy since they opened the Preservery in April 2016. “We knew at the outset that we wanted to embrace a system that was more equitable and took better care of our workers,” says Whitney. “I’ve worked in both the service and food-preparation capacity, and I’ve experienced firsthand the downsides and inherent evils of the tipping system. The last entry-level line-cook gig I had, which was twelve years ago now, I was making $8.50 an hour — and it was a super-fancy, $30-to-$40-a-plate restaurant. We knew we wanted to do things differently and try to improve on the system.”

Fueling that drive to equality was a shared conviction that tipping’s implementation is deeply problematic. “There are inherent discrimination issues with tipping,” says Whitney. “A lot of literature points to major discrepancies in terms of how people are tipped based on looks. Tipping evolved from feudalism, from white business owners not wanting to pay recently freed slaves. It’s a really dark system, when you start to look at the history of it. And it doesn’t make sense to me that the guest should have to make sure that our team is paid. All of these factors really made me loathe the whole system.”

Despite their convictions, it hasn’t been a cakewalk. “Since the beginning, it has presented challenges,” says Whitney, in no small part because the Preservery switched from a fast-casual model to full-service after its debut. One big challenge: It’s hard to keep the typical restaurant server, because those employees are often after the higher wages to which they’re accustomed. But the Preservery has managed to amass a tribe of front-of-house staffers, people who are often looking for more stability, Whitney notes.

"Everyone is working for the same goal and outcome. It’s a less competitive atmosphere.”

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There have been unexpected benefits, too. “There is a lot less of that inherent conflict between front and back,” Whitney says. “It’s not just more equity in terms of pay, but feelings and camaraderie. And that goes for server to server, too: No one has to be pissed off that they’re working on a Tuesday or got seated fewer tables; no one has to think that they can’t talk to another table that needs help because they’d be interfering with tips. Everyone is working for the same goal and outcome. It’s a less competitive atmosphere.”

Many restaurateurs salute the no-tipping movement in theory but are reluctant to follow. “I think that works for Danny [Meyer] — his restaurants are mostly fully booked,” says Arnold. “If you’re full every night, you can base your revenue on that. But with a small restaurant in a smaller town, I can’t do that. I can’t have 25 employees in on a rainy night when the Broncos are playing.” So Arnold is attempting to find a middle ground at Duo: He’s adding a 2 percent service charge to each check, which goes directly to the back of the house. “It ends up being $2, $3 on a bill, but it’s just shy of $2 per hour for the cooks,” he notes. Servers continue to be tipped as normal.

Duo implemented the change in June but has yet to see big benefits on the hiring front. “I wanted there to be a line out my door of people handing in résumés,” says Arnold. “That didn’t happen, but when push comes to shove, if everything else was equal, I can pay a couple bucks more per hour, and that might make a difference here and there.”

While there’s been some concern about pushback, customers have generally responded well. “Overall, it’s been a positive experience,” Arnold says. “I don’t want you [the guest] to care about this — I want you to come in, be fed, relax. But I have a big problem, and I need to change it — and I need your help.”

Anticipated pushback from guests inspired a different approach at the recently opened Ultreia, where Jasinski and co-owner Beth Gruitch were skeptical that they’d be able to keep top-notch servers if they went no-tip. And they had another challenge: a 2 percent preservation fee already tacked onto every restaurant check in the historic building. “Some guests don’t notice and some do,” Jasinski says. “It doesn’t come to us — it goes right back to Union Station. But we thought if people saw a 2 percent service charge in addition to the 2 percent preservation fee, they’d be like, ‘Wait a minute.’”

So the team built a 2 percent charge into the price of each item: What would otherwise cost $4 goes on the menu at $4.08; an $8 item bumps up to $8.16. Two percent of those sales goes into back-of-the-house paychecks. “This doesn’t fix the security, but it helps pay the kitchen people something decent,” says Jasinski. “Last week, it was $80 extra, which is about $2 more per hour. My cook can see that; it’s on a separate line on his paycheck. I want them to see what that 2 percent is.”

She hopes the policy will not only create a more egalitarian work environment, but also encourage back-of-house staffers to take more interest in their role in sales, from putting food out quickly to graciously accommodating guests who come in late. The policy has been successful enough during Ultreia’s short tenure that the owners are planning to institute it at all of their restaurants.