Business Models

Rep. Don Young (R-AK) has recently given us a one-word solution to our homeless problem – wolves. To this i’ll add that the more able homeless can evade the wolves and will be left available for forced labor in our fields, forests, and mines.

That we have industries with a business model based on paying employees a wage too small to live on, a la Walmart, McDonald’s, et al. is reminiscent of the minimal labor cost business model of the American cotton plantations before the Civil War.

Unfortunately, people are so desperate for a job, any job, that there are many industries that exist in their present form only because they can get away with paying wages insufficient to sustain life unless those wages are supplemented by donations from charitable organizations and by welfare payments from the state and federal governments, thus subsidizing those industries at taxpayer expense.

A good example of this is the restaurant business as practiced in the United States, where the front of the house is able to take home a decent salary because of the tips but the back end must subsist on a very low wage.

And what causes this?  Well, the restaurant business is one of brutal competition, and while a handful of restaurants make a lot of money for their owners, the majority fail after short runs, and the rest just barely cling to survival, caught between the need to attract patrons with low prices and the ever increasing costs of the food they cook and their payroll.

I had dinner a few days ago at my favorite San Francisco restaurant, Hoffmann’s Grill, and during dinner the owner dropped by our table, worried over San Francisco’s recent minimum wage increase and its impact on her bottom line.  She has no choice but to increase her menu prices, and she fears that this will drive away enough business to bankrupt her.

Frankly, i think she’ll survive for a couple of reasons.  First, her prices are now low enough that she definitely undercuts her competition, and i think she can raise them enough to continue to make a profit while remaining competitive.

More importantly, the minimum wage increase affects the entire city, so all her competitors will need to raise prices, too.  So she’ll still be a great bargain, considering the quality of her food and the wonderful ambiance.

Thinking about this situation has led me to realize that an increase in the minimum wage that affects everyone is the solution to the problem of certain businesses being based on an exploitative wage situation and the social damage this causes.  Without a livable minimum wage, a restaurant owner cannot pay all his employees enough to live on without placing himself at a severe disadvantage with his competitors.  With a livable minimum wage, all restaurants can remain on the same competitive level for wages, and those that survive will be those, like Hoffmann’s, who find ways of giving good value with better food rather than figuring out ways of paying their employees less.

Meanwhile, here’s just one of the reasons Hoffmann’s will survive, Karen’s divine take on the classic moules à la marinière that she brightens up by adding some exciting seasoning to the wine and then takes them over the top after plating them by drizzling them with an aioli so fine that i lick every last molecule off the shells, i don’t care who’s watching.

And to make sure Hoffmann’s Grill will be there when you want it,  go eat there this week.  Start with the mussels.