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Amid the battle between San Francisco's restaurants and City Hall over universal health care, an issue has arisen that could be the savior of struggling restaurants, or spell financial doom for low-paid service workers, depending on who's doing the talking.
It's the idea of a tip credit for waiters, which would reduce the minimum hourly wage that restaurants would have to pay them.
Kevin Westlye, director of the Golden Gate Restaurant Association, said the group might consider dropping a lawsuit it has filed against the city if San Francisco would enact a tip credit.
"It would certainly be a very interesting discussion to have," he said.
At issue is the city's mandate that employers provide health insurance or pay fees to the city to support its universal health care program, Healthy San Francisco. The restaurant association supports the idea of universal health care, but not saddling businesses with more fees.
It sued over the requirement, lost at the U.S. Court of Appeals and has now asked the Supreme Court to take up the suit - and issue an emergency injunction blocking the city's mandate. The court's ruling on the emergency stay could come as soon as Monday.
Restaurant owners say the health care fee is just one more burden in a city that also requires paid sick leave and has one of the nation's highest minimum wages. A tip credit, some owners say, would help rebalance what they consider an off-kilter situation.
But union representatives say restaurants have been asking for a tip credit for at least a decade - whenever a new law comes up that would hurt their bottom line - and the answer now is the same as it's always been.
"It would be ridiculous to even consider something like that," said Tim Paulson, director of the San Francisco Labor Council. "We're proud of having a minimum wage. Though it still doesn't get people out of poverty, it is movement in the right direction."
California is one of seven states that prohibit a tip credit, requiring that waiters earn the same minimum wage as everybody else. In other states, restaurant owners can pay waiters as little as $2.13, the minimum permissible under federal law.
Westlye said San Francisco, which has its own $9.79 minimum wage, could legally decide to reduce waiters' pay to the state minimum wage of $8 without breaking California's no-tip-credit law.
"That would be something that might make the business model of a restaurant in San Francisco a whole lot more sustainable," he said.
Westlye said that whenever the city's minimum wage goes up, restaurant owners raise their menu prices. That means that in addition to the higher minimum wage, waiters earn more in tips, because customers usually calculate that as a percentage of the bill.
Meanwhile, restaurant workers who don't receive tips, like managers and chefs, don't see much of a bump. He said a full-time cook often earns $15 an hour, or $31,000 a year. A waiter, with tips, often makes $30 an hour, or $62,000 a year.
"It creates a delta between the front of the house and the back of the house," he said. "Since restaurants sell food, it would be difficult to take a position that a full-time server has twice the value of a full-time cook."
Dan Scherotter, owner and executive chef at Palio d'Asti downtown, said his kitchen workers haven't received a raise in years, and he recently had to lay off a pastry chef and general manager.
"We're in this perverse situation where every year when the minimum wage goes up, we're giving a raise to our best-paid employees," he said. "You can understand why the health care mandate is the straw that breaks the camel's back."
Mike Casey, president of the local hotel and restaurant workers union, said restaurant owners have been scapegoating tipped employees for years. A tip credit, he said, wouldn't just harm waiters at swanky restaurants, but also those manning coffee shops with a tip jar on the counter.
"You really want to lower the wages of anybody who gets a tip?" he said. "Our members are hit very hard right now - let's not try to subsidize health care on the backs of low-wage workers."
Supervisor David Campos agrees. Last week, he sent a letter to the restaurant association asking it to drop its lawsuit.
"I'm a strong supporter of minimum wage laws, and Healthy San Francisco is a separate issue," he said. "The Golden Gate Restaurant Association should drop its lawsuit because it's the right thing to do, regardless of the tip credit or anything else."
What do you think about this?
Now consumers are cutting back, and dining out is among the casualties. Finer restaurant chains have been hit hard, and so have the casual sit-down places that flooded suburban shopping centers and tourist districts across the country, aimed straight at middle American tastes.
A few chains have boarded up already. Many others are going into survival mode, trying to renegotiate their loans, cutting staff, offering bargains to customers and closing less profitable restaurants. Analysts predict thousands more restaurants could close in the next year or two.
The pain is evident even amid the neon glitz of Times Square, which draws big crowds of tourists used to eating at places like Red Lobster and Applebee’s.
Zane Tankel opened an Applebee’s franchise there eight years ago. At the time, he said his nearest real competition, an Olive Garden, was about six blocks away.Now, Mr. Tankel could sit in his restaurant and throw rocks through the windows of a half-dozen competitors, including ESPN Zone, Dave & Buster’s, Chevys and Dallas BBQ.
“We’ll see some weeding out,” he said one recent lunch hour, sitting in a near-empty Applebee’s dining room overlooking 42nd Street. Noting a restaurant above him and another across the street, he said, “One of the three of us is not going to be here.”
Mr. Tankel’s fears are shared by many analysts and consultants, who say that a decades-long expansion produced too many restaurants even for a good economy, let alone the worst malaise since the Great Depression.
Since 1990, the number of restaurants and bars has grown to 537,000 from 361,000, a 49 percent increase, according to the National Restaurant Association. Population in the United States grew 23 percent in that period.Amid the seeming prosperity of a credit-fueled era, people got in the habit of eating more and more of their meals out. The association’s statistics show that 48 cents of every food dollar is now spent at restaurants, compared with 40.5 cents per dollar in 1985.