CONCORD,
N.H. — Ben Nawn, a sophomore at the University of New Hampshire, says
his friends who work at McDonald’s are envious of what he earns working
for the Boloco burrito restaurant here.
While
they make $7.25 an hour, the federal minimum wage, Mr. Nawn receives $9
an hour, which Boloco sets as the floor at its chain of 22 restaurants,
most of them in New England.
“That’s
pretty high,” said Mr. Nawn, who hopes to work in sports broadcasting
someday. “$9 is a good base, and the benefits are great.”
Mr.
Nawn works at one of the handful of restaurant chains that deliberately
pay well above the federal minimum wage. In-N-Out Burger, the chain
based in California, pays all its employees at least $10.50 an hour,
while Shake Shack, the trendy, lines-out-the-door burger emporium, has
minimum pay of $9.50. Moo Cluck Moo, a fledgling company with two
hamburger joints in Michigan, starts everyone at $15.
These
companies’ founders were intent on paying their workers more than the
going rate partly because they wanted to do the right thing, they said,
and partly because they thought this would help their companies thrive
long term.
“The
No. 1 reason we pay our team well above the minimum wage is because we
believe that if we take care of the team, they will take care of our
customers,” said Randy Garutti, the chief executive of Shake Shack.
The
nation’s fast-food restaurants, which employ many of the country’s
low-wage workers, are at the center of the debate over low pay and
raising the federal minimum wage — fueled by protests demanding that
fast-food chains establish a $15 wage floor. McDonald’s was pilloried
last year for a hotline that advised employees how to seek food stamps
and public assistance for heating and medical expenses.
During
the lunchtime rush at the Boloco here, four workers showed impressive
teamwork in stuffing beef, chicken, salsa and other ingredients
rapid-fire into burrito after burrito. Scott Newman, the restaurant’s
manager, said that Boloco’s above-average pay enabled him to pick from
among many talented job applicants, adding, “When you teach talented
individuals, once they get it, they’ll be a rock star for you.”
Complaining
of low profit margins that generally accompany inexpensive menu items,
most fast-food restaurants try to keep wages down — the median hourly
wage for fast-food workers nationwide is $8.83, compared with $11.50 at
Boloco and $10.70 at Shake Shack.
When
fast-food executives offer above-average compensation, it is good not
only for employees, but also for the brand. Starbucks, which also pays
its employees above minimum wage and offers several benefits, received a
public relations lift recently in announcing a program that would provide online college educations for thousands of its baristas.
Some
competitors assert that these fast-food companies are also influenced
by regional economics. They note that many of the companies that pay
more are based in high-wage, high-cost-of-living states, like
Massachusetts and California, that often have minimum wages well above
the federal law. California, where In-N-Out is based, has a $9 statewide
minimum wage, while Washington State, home of Seattle-based Starbucks,
has the nation’s highest state minimum wage, $9.32 an hour.
According to the M.I.T. Living Wage Calculator,
the living wage for a single adult in California is $11.20 an hour (and
$22.70 for an adult with one child), while in Massachusetts, it is
$11.31 for a single adult — $2 or $3 an hour higher than in many less
expensive states.
John
Pepper, Boloco’s co-founder, said the strategy for his Boston-based
company evolved after it initially adopted a low-wage approach.
“In
the company’s early years,” he said, “our goal, like much of the
industry, was to pay as little as you can get away with and have people
still show up and be reasonably productive.”
But
while watching employees mop floors and work late into the night, he
realized that for his company to be as great as he hoped, it needed to
treat its workers better.
“We
were talking about building a culture in which we want our team members
to take care of our customers,” Mr. Pepper said. “But we asked, ‘What’s
in it for them?’ Honestly, very little.”
So
in 2002, when the minimum wage was $5.15 an hour, Boloco raised its
minimum pay to $8. It also began subsidizing commuting costs, providing
English classes to immigrant employees and contributing up to 4 percent
of an employee’s pay toward a 401(k).
“If
we really wanted our people to care about our culture and care about
our customers, we had to show that we cared about them,” Mr. Pepper
said. “If we’re talking about building a business that’s successful, but
our employees can’t go home and pay their bills, to me that success is a
farce.”
When
the company raised its minimum pay to $8, “that was an immediate hit to
the P.& L.,” Mr. Pepper acknowledged, referring to the company’s
profit and loss statement.
He
said his privately held company, unlike some fast-food chains, did not
sense an urgency to achieve a 20 percent profit margin per restaurant.
Zeynep
Ton, a professor at the M.I.T. Sloan School of Management, said many
companies did not pay their employees well because they had a short-term
focus on maximizing profits.
“It’s
not easy to create a business where you pay your employees well and
have low prices and generate great profits,” said Ms. Ton, author of
“The Good Jobs Strategy.” “You have to get a lot of things right. You
have to have continuous improvement and an excellent mind-set. Achieving
excellence is always harder than achieving mediocrity.”
Fast-food industry officials have long contended that raising the minimum wage would result in fewer jobs and higher prices.
Scott
DeFife, an executive vice president at the National Restaurant
Association, said it was inappropriate to compare restaurants like
Boloco and Shake Shack with chains like McDonald’s and Subway.
“The
price point and convenience factor are more appropriately compared to
casual table restaurants that have wait staff,” Mr. DeFife said.
But
prices at Boloco and In-N-Out are largely similar to those at Chipotle
or McDonald’s. The prices at Shake Shack are higher, but consumers flock
to it because it is known for its premium hamburgers.
Mr.
DeFife noted that restaurants paying higher wages tended to be in
places where consumers were willing to pay more for their meals.
In
addition to its higher-than-average hourly wage, Shake Shack, which is
part of the restaurant impresario Danny Meyer’s Union Square Hospitality
Group, offers a 401(k) match and a monthly bonus based on store sales.
Those working more than 30 hours a week qualify for health coverage.
Ruben
Mojica recently moved to Winter Park, Fla., to be a manager at the new
Shake Shack there. He started as a line chef at a Shake Shack in
Manhattan in 2008, working two other jobs to make ends meet. After two
months at Shake Shack, he was earning enough to devote his time to just
the one job.
“The
company has developed me, given me training and the opportunity to
achieve more — and paid me better than any other restaurant chain
would,” he said.
Because
of the health insurance the company offers, Mr. Mojica said, he and his
wife were able to start a family much sooner than he had imagined.
At
the McDonald’s shareholders meeting in May, Don Thompson, its chief
executive, defended the company’s compensation policies, saying many
managers there started as hourly workers.
“We
continue to believe that we pay fair and competitive wages,” Mr.
Thompson said. “We provide job opportunities and training for those
entering the work force.”
“We are trying to be a really great employer,” he added.
The
founders of the well-paying restaurant chains often point to Costco as a
model, saying that it has found a formula to thrive even though it pays
its workers well. Like Costco, they have all sought a way to single
themselves out — Boloco emphasizes fresh, healthy food; Shake Shack,
high-quality burgers; and In-N-Out, superquick service.
When
Harry Moorhouse opened his first Moo Cluck Moo restaurant 15 months ago
in Dearborn Heights, Mich., its minimum pay was $12 an hour. Since
then, it has raised that to $15 and opened a second restaurant in
Canton, Mich., with plans to open a third in October and perhaps
additional restaurants in Chicago and California next year.
“Our
people work really hard, and $15 impacts their lives in a very positive
way,” Mr. Moorhouse said. “The whole notion that it’s all kids starting
out and they don’t deserve to be paid much, that’s all specious. We’re
paying people $15 an hour so they have a living wage, so they really
care about you when you come in the store.”
A
major benefit of paying $15, he said, is “we don’t have any turnover.
We don’t have to train people constantly.” His restaurants serve upscale
hamburgers, chicken sandwiches and salads, and a full meal generally
costs around $1.25 more than at McDonald’s.
Rachel
Troutman, 34, said she was thrilled to be earning $15 an hour, $600 a
week, with Moo Cluck Moo. She used to earn $10 an hour as a top manager
at a sit-down family restaurant.
Thanks
to her higher pay, Ms. Troutman, a mother of four, has replaced her
1996 Oldsmobile 88 with a more reliable 2005 Ford Taurus and has gone
from renting an 850-square-foot home to buying a 1,900-square-foot
house.
“I
no longer need food stamps,” she said, “although the government still
helps me out with child care. I don’t know how families are making it on
the minimum wage. It would take two full-time minimum wage jobs to make
what I make.”
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