Punch Pizza has the last laugh over its higher wages

It was nearly two years ago that Punch Pizza raised its lowest minimum wage to $10, at the same time increasing pay significantly throughout the company, from pizza chefs up to general managers. This was before any minimum wage plans had passed at either the local or national level.

I wrote a column about the plan and got a lot of response, a surprising amount of it critical of Punch's owners, John Puckett and John Soranno.

"I hope you write about it when this company goes out of business in two years" was a common comment.

Puckett said he got angry calls too, accusing him of trying to make a political statement. It didn't help when President Obama praised the company during his State of the Union speech that year.

"I'm an independent, I have supported both Democrats and Republicans," said Puckett. "I don't really have a dog in the fight. It had nothing to do with politics, I just wanted to build a good business. I've always believed that if you invest in quality, whether it's people or equipment, you get it back."

Puckett and Soranno raised pay for beginning workers like cashiers and servers to $10 an hour, pushed pay for pizza chefs to $13, with top pizza makers earning around $30,000 per year. New manager salary and bonus packages rose to $50,000, and an experienced general manager now can make $100,000.

Not that Puckett and Soranno didn't worry it was mistake. I asked him then if the $3 million the raises would cost was sure to help the bottom line.

"Ask me in a year," Puckett said at time. "It did make us gulp a little bit when we saw the financial impact. We wouldn't do it if we didn't think it would pay off."

I figured Labor Day was a good time to circle back to Puckett and see how his business was doing.

Since they raised wages, Punch opened another restaurant last year. They haven't announced until now, but they plan to open another one in Eagan next year, making a total of 10 restaurants. That's in a market where six chains have opened in the past year or so, according to Puckett.

"That's had exactly zero impact on us," Puckett said. "It's been kind of like In and Out Burger in California, the more burger places open up, the more [In and Out] grows" because customers recognized how distinctive they are.

Punch probably could have grown even faster, but Puckett learned from his experience with his previous venture, Caribou Coffee, that "it's best to grow a company organically."

Puckett said the higher wages did not cause Punch to increase prices. He also said it "has had a big impact culturally in the company." He said that retention of employees is up, which helps them save money on hiring and training. He estimates the average worker in the front — cashiers and waiters who are often students — work about three years, while the kitchen workers average five years of employment, which is very high for this transitory industry.

"Our retention is light years ahead of most restaurants," Puckett said.

Sales are up about 15 percent since the change, though Puckett said he couldn't attribute the growth solely to the raises. Punch has beefed up management and leadership training and employed new equipment such as "Pizza cams" for quality control. "It's still not a great economy," said Puckett. "It's been so long that we've had an economy that's rocking and rolling."

"There is nothing magic with the $10 starting wage," Puckett said. "Someone will start at $10, but our hope is that they become a general manager and earn $100,000. That is a success.

"We just weren't getting the quality of applicant before. Now we have a lot more applications that we don't have jobs for. If you pay people more, I think you can demand more. When we did this, we got everybody together and said, we need to blow people away with our service."

Asked about those strange, angry calls when he increased raises, Puckett laughed.

"The cynics didn't win," he said.

jtevlin@startribune.com • 612-673-1702

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