The new higher minimum wage promises pain for restaurants and diners.

A night out for dinner and drinks may cost a bit more this year, thanks to a hike in minimum wage for restaurant workers. But as owners of these establishments grapple with how to balance their books, workers earning the extra pay say the cost of living all but negates the raise.

The California legislature has raised the statewide minimum wage to $16 an hour, up from $15.50 in 2023. And for restaurant workers, the new hourly pay is $20. That increase has local restaurateurs, already buffeted by inflation and the lingering aftereffects of the pandemic, worried about the future — for themselves, for diners, and for the restaurant industry as a whole.

What does the increase in the minimum wage mean for diners? Simply put, menu price hikes are “inevitable,” says Sara Arbabian, who owns The Rind, a cheese-centric restaurant and wine bar in midtown. That seemingly small 50-cent increase will cost her an extra $10,000 a year, she estimates. With restaurant margins already razor-thin, there’s not much wiggle room for restaurant owners. “I have to make it up somewhere,” she says. “I will have to raise my prices.” 

When she opened her restaurant more than a decade ago, she recalls, the minimum wage was $8 an hour. In the intervening years, her total guest cost — which includes rent, overhead, and cost of goods, in addition to labor — has almost doubled. Her menu prices, meanwhile, haven’t kept up. Even though she feels the squeeze, she worries diners will balk at a price increase. At what point, she wonders, will people say, “I’m simply not going to spend that much for a grilled cheese.”  

Even before the minimum wage increase, diners had already changed their behavior in response to the pandemic and inflation. “They’re demanding more and eating out less,” Arbabian notes. As a result, restaurateurs have had to be both nimble and creative to draw in customers. To goose business, Arbabian recently added two special events to The Rind’s weekly calendar: Sunday Fondue Day and The Thursday Melt, featuring raclette, a showy dish in which melted Alpine cheese is served over roasted fingerling potatoes, Brussels sprouts, and house-pickled vegetables. Looking beyond the four walls of the restaurant, she’s thinking about leading cheese tours of Europe.

Buffeted by the Government

During the COVID pandemic, the word on every restaurant owner’s lips was “pivot.” Restaurateurs tried all sorts of tactics to keep their doors open and business alive: amping up takeout, building sidewalk patios so diners could eat outdoors, selling scarce pantry goods like flour, offering Zoom cooking classes, and more. Just when they thought their pivoting days were finally over, the minimum wage increased. “We’re all still reeling from the last few years,” says Billy Zoellin, co-owner of Bacon & Butter in Tahoe Park and The Green Room in East Sacramento.

Zoellin blames government leaders for relying too heavily on small businesses like his own to address major economic and social policy issues, such as affordable housing, that are better solved at the macro level. During the pandemic, for instance, Sacramento city leaders encouraged restaurants to build outdoor patios. Restaurants complied, and makeshift patios sprang up on sidewalks and streets throughout the city. It was a win for restaurants, for diners, and for the city. Now, however, Sacramento is requiring restaurant owners to get the patios permitted or tear them down. Either option could cost thousands of dollars. “The government leans on us in a million different ways,” says Zoellin.

“There’s a big disconnect. They keep putting more and more on the restaurant community. We’re just chasing our tails.” -Billy Zoellin

But what about restaurant employees? Don’t they deserve a livable wage?        

For many restaurateurs, the livable-wage argument is, well, a joke. They say $16 is not a livable wage in Sacramento, where the average rent is close to $2,000 a month. Even with the 50-cent increase, “Workers still won’t be able to afford a place to live,” says Arbabian. “They’ll still be living paycheck to paycheck.” Zoellin agrees. “If we could make housing more affordable,” he says, “a wage of $10 an hour would work.”

Looking Ahead

Higher menu prices aren’t the only possible outcome of the new minimum wage. Some restaurant owners may try to recoup those costs by offering either less service or lower quality food. Nowadays, new restaurants, like Juju Kitchen & Cocktails in downtown Sacramento, often open with streamlined operations: shortened hours, no reservations, no phone, no host at the front door. Owner David English, who closed his midtown restaurant, The Press Bistro, just before COVID hit, says the old way of doing things had become unsustainable for him as a business owner. At Juju, he realized he could save money by not paying people to answer the phone or seat customers.

Instead of no phone at all, some restaurants utilize a so-called ghost phone — a digital answering system that can be monitored at the owner’s convenience. Bacon & Butter has an automated telephone system that “makes it hard for the guest to get to a person,” says Zoellin, who doesn’t take to-go orders over the phone. “The system still costs me a couple hundred bucks a month, but I don’t have to pay somebody a couple hundred bucks a day to tell callers we’re open or we don’t take reservations.”

Patrick Mulvaney, the OG of Sacramento’s restaurant farm-to-fork scene, takes a philosophical view of the new state labor laws, which include the increased minimum wage and more paid sick leave (from three days to five days) for full-time workers. It’s all about equity.

“I understand systematically why it has to happen,” Mulvaney says. “It’s up to us as business owners to figure out how to adapt.”

He’s lucky, he notes: Mulvaney’s B&L has a remarkably loyal customer base that won’t stop coming if menu prices go up a few dollars. Instead, he looks around and feels generally pretty positive about the industry and the city he loves. Locals have embraced Sacramento’s identity as the country’s Farm-to-Fork Capital. Outsiders have started taking notice of the region (witness The New York Times story in December, headlined “How Sacramento Turned Into a Great Restaurant City”). People everywhere are starting to recognize the importance of what they put in their bodies, as well as the value of the farmers who grow our food. “Things are not moving as fast as I want, but it is heartening when I look back at how much change there is,” Mulvaney says. “I feel pretty good about where we’re going.”