Minneapolis cafe owners charge ahead with pay changes

A few Minneapolis restaurant owners plan as early as March to turn the minimum wage debate into what they believe is a better deal for employees.

And there's no small amount of risk involved.

Two owners have decided to move ahead with front-to-back-of-the-house wage increases to at least $12.40 per hour by raising prices and discouraging tipping. And a third plans to take up the matter soon with staff.

"To help my staff reach that livable wage in Minneapolis, there will be a menu price increase," said Dan Swenson-Klatt, the 11-year owner of Butter Bakery Café that employs 21 at 37th and Nicollet Avenue. "Tipping will not be available. We may have a donation [jar] where people who want can support our monthly mission … or for extra effort that would be shared with the staff."

Danny Schwartzman, co-owner of Common Roots Café, which employs up to 70 in its restaurant and catering business, is talking with his staff about the transition.

Swenson-Klatt and Schwartzman say they don't like a system where back-of-the-house workers at some restaurants make minimum wage and must turn to food stamps and other government programs to survive. And tipping for servers is rooted in a time when women and minorities were paid with subjective gratuities instead of full wages.

"It may or may not be job-performance related and is heavily biased by appearance and things that have little to do with service," Schwartzman said. "I'm still working through this … but we should confront the fact that the gratuity system is a bad system and leads to a disparity between pay to wait staff and pay in the kitchen. We have hardworking kitchen staff. Should the people making the food make less than people who serve it?"

Swenson-Klatt, Schwartzman and Tracy Singleton, owner of the recently expanded Birchwood Café in the Seward Neighborhood have been part of recent business discussions with the City Council on issues from eco-friendly takeout containers to minimum wage and paid sick time.

Singleton, who started her career as a waitress, isn't making changes right now. But she said she's ready to take up the tipping issue with her staff.

"I have issues with the tipping economy and unfairness to immigrants and women," Singleton said. "I've had this business for 21 years and I started out as a server at 14 who worked for years for tips. I liked the cash but I also put up with a lot of sexist B.S. We don't have that at Birchwood."

At Birchwood, customers pick up their order at the counter and the servers share a percentage of the tips at the counter with kitchen employees.

"I'm still conflicted on this," Singleton said. "But we need a new model and I'm proud to be a colleague of these two other owners."

Raising the minimum wage from the statewide minimum of $9.50 an hour [for employers with sales of $500,000-plus] to $15 an hour in Minneapolis, phased in over time, has met resistance from business owners.

They say it would make Minneapolis and St. Paul, where a similar ordinance is under consideration, an uncompetitive island. Meanwhile Republican legislators seek laws that would bar the city from deviating from the state minimum wage.

Abdirahman Kahin, the owner of Afro Deli in Stadium Village and Downtown St. Paul, said a move to $15 would be too much for his business to bear.

"It's a lot and it's not good for the small businesses," Kahin said several weeks ago. "We're not against people getting more money, but we are worried about how to keep running our business."

Minneapolis City Council Member Lisa Bender recently told a Minnesota House committee that she and her colleagues would like to see statewide laws that would mandate a higher minimum wage and paid sick leave for all workers. Failing that, Bender said Minneapolis must act unilaterally.

Deepak Nath, owner of the Pourhouse, a downtown bar-restaurant, said at the same hearing that he already struggles as a small-business owner because of high taxes and increasing regulations imposed by the city.

The Minnesota Chamber of Commerce maintains the growing Twin Cities economy and low unemployment rate means businesses already are offering higher wages and improved benefits to workers.

Schwartzman, Swenson-Klatt and Singleton are veteran, successful operators. They are free to raise prices and minimum wages and to educate customers to their thinking about discouraging tips. However, restaurants that have dropped tipping and raised prices also have had some trouble.

Star Tribune restaurant critic Rick Nelson told me that restaurants that "dipped into the no-tipping zone" have pretty much given up, including Upton 43 in Minneapolis, Heirloom in St. Paul and Northern Waters in Duluth. There have been similar stories elsewhere.

Consumers didn't like the higher prices, even when balanced against no tips. Some servers like tips. And, in some establishments, tips are pooled, at least a portion, and shared with back-of-the-house staff, mitigating some of the wage gap.

"The compensation system for restaurants is broken and there's no reason to keep supporting it," said Swenson-Klatt. "The history is not good. It came out of freed slaves not able to earn wages. And it created issues for women.

"There are better ways to reward people. We want to try this."

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.