The news is not getting any better – or easier – for restaurants in Washington state.
New profit margin data shared recently by the Washington Hospitality Association indicates the average profit margin for a restaurant in the state was just 1.5% in 2023, compared with 4% nationally. Given an average annual revenue of $1.1 million, that puts pre-tax profit at just $16,500, reported the Puget Sound Business Journal (PSBJ).
For months now, Seattle restaurateurs have voiced concerns about the health of the industry. According to data from the Department of Revenue, sales are down about 5% in the first quarter of this year compared to the same period in 2023, the result of both economic and political factors.
Restaurants have been hit hard by higher food costs and reduced consumer spending due to rising inflation. In-person dining has declined, with more people opting to eat at home.What’s more, local policies – including the City of Seattle’s delivery pay ordinance – have decimated app-based delivery for Seattle restaurants. As costs went up, orders declined and restaurants faced another wave of losses. The ordinance has been a disaster for app-based workers, who’ve seen massive declines in orders within the city since the new regulations took effect in January.
Now, another policy change looms large on the horizon.
Beginning in January, a new minimum wage hike kicks in. Until the end of the year, businesses with 500 or fewer employees can pay a minimum wage of $17.25 per hour, given an employee makes at least $2.72 an hour in tips or gets paid $2.72 hourly toward medical benefits. Employers with 501 or more employees, and those who don’t pay toward medical benefits or don’t have a tipping model, already must pay employees at least $19.97 an hour.
Effective Jan. 1, the tip credit expires and all Seattle businesses must pay their employees a minimum wage of $19.97 per hour. Mayor Harrell confirmed as much in a recent statement, praising the minimum wage and seemingly ignoring the input of the city’s small businesses and restaurants.
The cumulative effect of the city’s policies have restaurateurs frustrated and feeling left out of the conversation about the city’s business climate.
Charlie Anthe, owner of Moshi Moshi in Ballard told the PSBJ: “Everybody agrees Seattle is outright hostile to small-business owners and entrepreneurs. We’re begging to be heard…We’ve been ignored at every step of this process.”
For now, the City Council continues to sidestep any efforts to help restaurants find their footing by eliminating costly regulations like the delivery ordinance. With razor-thin profit margins getting sliced thinner and thinner, how much longer can Seattle’s restaurants and small-businesses hang on?
Help restaurants make their voice heard. Call your city councilmember and Mayor Bruce Harrell today and tell them to lower food delivery costs and support total compensation for small restaurants!