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Here's why a restaurant paying employees $15 an hour failed

It's not as cut and dried as you may think.
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What will happen to Minneapolis' restaurant industry when the government-mandated $15 minimum wage kicks in? Many believe countless eateries – especially small businesses with fewer than 100 employees – will be forced to shut down.

Some have been pointing to Byte as an example. The downtown Minneapolis "geek pub" that opened in March with the promise of paying all of its employees $15 an hour, is now closing down only eight months later.

"While we have enjoyed a steady and loyal customer base, we’ve also struggled with getting the volume necessary to make our business model fiscally viable in this location," owners Travis Shaw and Mark Lowman announced in a Facebook post last week. 

While Shaw admits that labor costs were high, he doesn't think that's the reason why his restaurant didn't make it. 

"Ultimately we just didn’t get enough people through the door," he told GoMN. 

Location, location, location

No matter how much a business pays its employees, downtown Minneapolis is not an easy place to run a restaurant – just ask Vincent A. Restaurant, Masa, or La Belle Vie.

Shaw says he and co-owner Lowman knew they had the cards stacked against them from the start, but they also saw a lot of potential.

"We knew that downtown is a tough spot for restaurants, but you see stuff happening all around that district, and you have Target Field right there," Shaw told GoMN. "And when we pitched the idea, people in the neighborhood were very receptive."

On top of that, efficiency was the focus of every aspect of Byte. Food costs were low because the restaurant used economic cuts of meat like chicken thighs, flank steak, and pork shoulder that could be made into a variety of dishes. Service was assembly style, which required less labor. Typically only three employees and a manager were needed to operate the restaurant. Shaw says the business was like a "well oiled machine."

"Nobody was standing around. All of the front of the house servers and cashiers were also prep cooks and dishwashers – people were always working. It was a super efficient system," he told GoMN.

Shaw said Byte received a fantastic welcome to the neighborhood, with workers from nearby businesses flocking to the restaurant every day for lunch. 

Dinner, on the other hand, was lackluster. He blames the Warehouse District's "out of the way" location, along with the lack of parking, for the low volume of dinner guests.

"Our biggest challenge has been getting enough people in the door. Our model was based on selling a lot of affordable food, and we were just not seeing the volume we needed to get to our projected goals," he said.

"If I could go back, I would have waited for a better location to become available. We were so enthusiastic to get started that we got caught up in all the possibilities and opportunities and ignored a lot of the drawbacks of the Warehouse District," Shaw added.

So wages didn't have anything to do with it?

Byte's owners knew that pretty much any restaurant anywhere isn't a huge success right from the get-go, so they had a good amount of money saved to get things started.

But with the restaurant consistently not meeting its revenue goals, Shaw says his commitment to paying employees $15 an hour quickly chipped away at the funds.

"I think the $15 an hour definitely hurt us a little off the bat because we weren’t hitting the numbers we needed to hit, so it burned through our cushion a lot faster," he told GoMN.

But Shaw says even if he'd paid lower wages, the restaurant probably wouldn't have been able to sustain itself without more customers.

"While I know a lot of people will blame our higher wage model ... it really was only an issue early on when we were getting staff trained and working out the kinks of operations," Shaw said. "After we got our team to the point of being a well oiled machine, staff were efficient and productive, which helped us get our labor to a more acceptable level."

And he stands by his belief that all restaurant workers – from dishwashers to chefs – deserve to be paid a livable wage.

"I think if you're going to own a business, you have a responsibility to pay your workers a living wage. I still strongly believe that," Shaw said.

That doesn't mean he thinks local government should make it mandatory.

"We’ve always advocated that businesses should do it [pay employees a livable wage] on their own and people who support that should patron those businesses," he said. "Minnesotans need to put their money where their mouth is. We rely on government for simple solutions, but what we need is a change in culture. We need to value labor more."

Byte's last day of business will be Saturday, Oct. 28.

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