Summer Reading With Lessons From the Line
Nothing says summer like a reading list…this is what we’re reading to get a handle on what’s going on in the restaurant business right now.
Rising Wages, Lower Traffic: Traffic at QSR chains is falling in California as retailers grapple with price increases to offset the new $20/hr minimum wage. Tracking legislative intervention is particularly important as ballot initiatives and legislation across the country has put labor pressure on operators by eliminating the tip credit and forcing operators to pay more to servers. Turns out the laws of economics (higher prices, lower demand) are still in effect. We counsel our operators to pull the lever of increasing prices thoughtfully.
Changes to the White Collar Exemption: The recent changes to the Fair Labor Standards Act (FLSA) White Collar exemption bring substantial implications for restaurants – many of whom have managers on salary to lower the hourly labor burden. As of 2024, the U.S. Department of Labor (DOL) has implemented a raise in the minimum salary threshold for the majority of employees not paid hourly but paid a salary. The current exemption threshold is $684 per week ($35,568 per year) – but is set to increase by a whopping 64% over the next six months!
This is how the changes break down:
Increase in Minimum Weekly Salary
July 1, 2024 - The minimum weekly salary will increase to $844 per week, equivalent to $43,888 per year, effective July 1, 2024.
January 1, 2025 - The minimum weekly salary will increase to $1,128 per week, equivalent to $58,656 per year.
Increase in Highly Compensated Employee (HCE) Exemption: The HCE exemption total annual compensation will increase to $132,964 per year on July 1, 2024. This threshold will then increase on January 1, 2025, to $151,164, equivalent to the 85th percentile of full-time salaried workers nationally.
Future Updates: The earnings thresholds will be updated every three years based on up-to-date wage data.
Harmony covered this a little more in depth earlier this month with a CCPA post.
Starbucks Wins A Battle in Union Fight: The Supreme Court ruled in favor of Starbucks, making it more challenging for the National Labor Relations Board (NLRB) to reinstate fired workers, particularly in cases of alleged illegal suppression of labor organizing. The decision arose from a case involving the Memphis Seven, workers who were dismissed by Starbucks allegedly for unionization efforts. The court, with eight justices supporting the majority opinion by Justice Clarence Thomas, rejected the NLRB’s argument for a looser standard for reinstating workers, instead favoring a stricter standard requiring proof of "irreparable harm." This ruling potentially diminishes the NLRB's ability to deter companies from firing employees involved in union activities, signaling a broader judicial trend to curtail the authority of federal regulatory agencies. This ruling comes as the industry is grappling with well-funded unionization efforts – leading some operators to just call it quits.
McDonald’s Stops AI for Drive-Thru Orders: You can’t work in any industry without service providers and the press breathlessly exclaiming that AI is going to change everything. While the current chatbots have strong utility and the arc of progress is long – the current AI promises seem a little half baked. Maybe AI is the future but the Golden Arches pulling back is a sign that it may not be the present.
But never underestimate the power of Grimace who’s mere presence drew not horror but sparked a change in juju for the perennially cursed Mets.