Big Apple restaurants are feeling the heat from minimum wage hikes, cutting staff hours and even closing kitchens as they struggle to shoulder the extra payroll costs.
Gabriela’s Restaurant and Tequila Bar, a margarita and taco staple on the Upper West Side for the past 25 years, is closing at the end of September — and it has been a long, painful road downhill, according to its mom-and-pop owners.
Since the $15-an-hour minimum wage hit New York City in December, Liz and Nat Milner say, they’ve been forced to slash their full- and part-time staff to 45 people from 60. Quality has suffered, they admit, and customers have noticed: They’re not coming in like they used to, and when they do, they’re spending less.
“We started by having to let go of the ladies who hand-made our tortillas. It’s certainly better when you can make your tortillas fresh for every taco,” Nat Milner said. “It made sense at $8 an hour but not at $15.”
Gabriela’s was then forced to lay off “two overnight cleaners, a whole level of middle management, the general manager, the extra servers we’d keep on in case it got busy — and then we started cutting hours.”
“I’m not against people making more money,” Milner added. “These people have worked for me for 20 years. But taxes, groceries, everything is going up and people have a little less money to spend on guacamole and tequila.”
Gabriela’s isn’t alone. In a survey of 324 full-service restaurants, the New York City Hospitality Alliance found that 76.5 percent of respondents cut staff hours and 36.3 percent eliminated jobs, including whole layers of middle management, in response to mandated wage increases.
“It’s death by a thousand cuts,” says Andrew Rigie, executive director of the group. “The minimum wage increases put pressure on small businesses. They are well-intended but unsustainable. There’s only so many times you can increase the price of a burger and a bowl of pasta.”
Philippe Massoud, CEO and executive chef of the Manhattan-based Lebanese eateries Ilili and Ilili Box, says rising wages have forced him to cut hours for his 180 employees, yank labor-intensive dishes from the menu and cut back on staff education events like wine seminars.
That’s because new regulations require that employees who receive tips can no longer spend more than 20 percent of their time on work that doesn’t involve interacting with customers.
“I can’t even train or educate my staff the way I want to anymore,” Massoud said.
The restaurateur agrees that it has been a “social injustice” that wages haven’t kept up with the cost of living. The students and actors who used to be a great source of labor have been priced out of the city, he says, even as Big Apple restaurants have gotten slammed by tough immigration rules.
Nevertheless, “it’s unfair to put that burden on the shoulders of business,” according to Massoud. He says the industry’s margins have slipped to between 8 and 12 percent from pre-wage-hike levels of 10 to 15 percent.
“It has decimated our financial performance,” Massoud says. “We are a high-risk business with low returns and we are no longer attractive to investors.”
Ricky Passarelli, owner of Bobby Van’s steakhouse “The Original” and Lea Wine Bar in the landmarked Helmsley Building, says the minimum wage hikes were “the main reason” he sold his shares in 10 other restaurants.
“That’s why I sold,” Passarelli said. “I’d love to give all my staff raises to $1,000 an hour if I could. But as expenses are going up, the volume of sales is going down. There are more steakhouses, and even the price to buy steak has gone up 50 percent in the past two months.”
To cope, restaurateurs like the Milners are moving from large-scale restaurants to small spaces. The Milners have Gabriela’s Taqueria at West 44th Street and Eighth Avenue.
They are also working on the launch of a midtown vegan concept with their former chef from Elizabeth’s Neighborhood Table, which was adjacent to Gabriela’s before it closed in 2017.
“With common spaces, we share costs with other vendors in high-traffic areas,” Milner said. “And 14 by 9 is a tiny space that doesn’t cost a fortune to open up, and less staff is needed to maintain it.”