The Future of Seattle Area Restaurant Ownership?

     There is a case to be made that restaurant ownership is going to require a more skilled and knowledgable business owner in the future. Some major regulation changes and other surprising challenges have made their way onto the plates of restaurant owners, and not everyone is going to like the taste of things to come.
     The Employment Policies Institute recently published results from a survey and study entitled Paid Sick Leave in Seattle: Examining the Impact on the Service Industry. The Seattle paid sick leave mandate officially rolled out last September and has had some time to make an impression on the restaurant community and service industry at large in the Seattle area. The EPI survey found that more than one third of the respondents have executed on cost cutting/revenue raising measures in response to the mandate, and "roughly 56 percent said it would increase their cost of doing business in Seattle."
     Protests have been picking up steam in the Fast Food Industry as the debate over a $15 minimum wage has caused people to take to the streets in Seattle and other cities. Washington State already boasts the highest minimum wage of any state in the country, but part of the cause of this discussion may be the shift in the demographics of our local restaurant industry workforce. The Washington Restaurant Association reports that the percentage of teenagers in the restaurant workforce has dropped from near 20% in 1998 to an estimated 5% today, surrendering to an older, post-recession workforce. An older workforce generally has more liabilities and more obligations, requiring a higher income.
    Add in new regulations accompanying the Affordable Care Act coming this Oct. 1, and you have some blustery winds of change blowing through an industry already known for its low margins and long hours. More regulations to comply with and rising labor costs may mean an increase in prices for customers, but coupled with the decrease in the younger workforce, will more restaurant owners change the way they run their business?
     Tomorrow's successful restaurants could operate like today's successful professional services companies from an employee management perspective. With the smallest errors seriously depleting already thin margins, will an industry notorious for its turnover focus its attention on stronger HR and better employee management in an effort to reduce turnover, minimize unemployment claims, and decrease hiring and training costs? The money to afford these new regulations and rising labor costs has to come from somewhere. A highly trained, more financially stable, tenured workforce could supply the type of experience required to deliver high quality service - the type of service that could support an increase in customer pricing.

June Jobs Data and Thoughts on Current Small Business Challenges in WA State

Two new clients I worked with in June provide this month’s theme:

                  (1) A small construction company of 5 employees, marred by turnover, was trying to process payroll, deposit taxes, and pay garnishments themselves, struggling with the myriad of compliance challenges with doing so. The tasks ate up their time and frustrated their business, culminating in tax penalties and personal stress.

                  (2) A small flooring company looked to get mobile in their payroll technology to gain the ability to process payroll on the jobsite, and to accurately communicate pay information to employees, using a mobile device.

                   Echoed from last month’s job growth, June brought with it a significant increase in jobs across a number of sectors including the construction (21,000 new jobs according to the ADP NER) and restaurant (21,000+ new restaurant franchise jobs according to the ADP NFR) industries. The great thing about these industries is they often offer entry level employment opportunities alongside more tenured jobs, inducing more financially diverse employment opportunities for those in search. The challenging side about these industries, from a business owner perspective, is they tend to be more seasonal, carry a higher rate of employee turnover, and carry a higher risk  of employment in terms of compliance—i.e. garnishment payment processing, unemployment claims, etc…

                   The small businesses that support these industries are looking to not only manage compliance, but to provide quality communication to their employees in terms of their hours worked and pay, in an effort to minimize turnover. They are also trying to get more done in less time, opening a new wave of mobile payroll prospective clients interested in such services.

Data Overview:

Small businesses with 1-19 employees had a net jobs gain of 84,000 jobs nationally (ADP/NER)

Professional/Business Services Industry had a net gain of 40,000 jobs nationally (ADP/NER)

Restaurant Franchise Jobs grew by over 21,000 in June (ADP/NFR)

WA State had a gain of over 6,000 jobs (ADP/RER)

WA State Preliminary Unemployment Rate is 1.6% lower than at the same point last year, June 2012 (BLS)

WA State has added an estimated 67,000 jobs in the last year: June 2012—June 2013 (BLS)

Fiscal Cliff Diving for Small Business Owners

Jeepers, its been a year since my last post! I realized my hiadous started when my second child went mobile (parents know what that means...). Time to get back at it.

Fiscal Cliff !!! Yes its an overplayed term, but here's what is likely to happen...

Since its December 22nd and Congress is vacationing for the holiday, there are only two likely outcomes that will happen upon their return: #1. No deal by Jan 1 or #2. A short term fix to be adjusted in 2013.

Either of these paths mean a pain in the rear for small business owners trying to manage payroll.

For those managing payroll in-house using software, you'll likely have to perform a download of the tax tables that will be used starting Jan.1. If the download doesn't work, then you'll have to spend time with customer service. Hopefully service is state-side and they have a large team because if the download didn't work for you it didn't work for others.

You will have to do this twice - because there will again likely be adjustments at some point in Jan/Feb, maybe even March and the adjustments to the income tax tables or payroll tax holiday will likely be retoractive for some tax payers (maybe some or all of your employees).

What my clients are telling me...

I'm hearing owners and managers who have done payroll in-house for years finally consider outsourcing because they don't have the time to spend dealing with these adjustments and making sure they are correct. Obviously incorrect payroll tax calculations = fines and penalties.

It seems outsourcing payroll is a viable plan for the next six months to a year for even the most 'anti-outsourcing' small business owners, at least until we get some stability in the tax code.