Offering health benefits may seem costly, but the benefit common to so many outside of the restaurant industry may end up being more cost-effective when considering that hiring and training someone new can cost time and money—$3,500 for a single hourly employee. Plus, it’s a major way to keep talented team members from looking elsewhere.
“Turns out, taking care of the people who take care of your customers is good for business,” says Christine Cikowski, co-owner of Chicago fast-casual restaurant Honey Butter Fried Chicken. However, business concerns weren’t the driving factor when she and co-owner Josh Kulp launched the restaurant in 2013 with health insurance built into their pricing structure.
“We didn’t consider [not offering health insurance] to be an option,” Cikowski says. “It’s ethically the right thing to do.” But as it turns out, doing the right thing came with some unexpected advantages. “What we didn’t consider is that people work better [when they get benefits]. It’s good for business and it’s the right thing to do.”
“Taking care of the people who take care of your customers is good for business.” – Christine Cikowski, co-owner of Honey Butter Fried Chicken
With constantly high turnover, and a record low unemployment rate in the U.S. this summer, the restaurant industry could use benefits to tip the scales for a skilled worker looking for a new gig, and keep current employees from jumping ship.
“Employees stick with you much longer when they’re taken care of. So really, the cost you incur in insurance is made up for in reduced recruitment and training time,” says Cole Arimes, executive chef and owner of Coles 735 Main, a seasonally driven fine-dining restaurant in Lexington, Kentucky. “We offer benefits in order to retain excellent, long-term employees who really take ownership of their work and the restaurant.”
Many of the Coles 735 staff have been at the restaurant for more than five years—some since it opened in 2012—thanks, in part, to employee-oriented policies that include a 50-percent contribution toward health insurance for workers clocking at least 32 per week, and a 401k plan for those who work at least 1,000 hours a year.
“There is a tremendous expense to turnover,” agrees Rachel Miller Munzer, partner in a trio of restaurants in Cambridge, Massachusetts. Her organization, which includes State Park, Mamaleh’s Delicatessen, and Cafe du Pays, is just starting to track how much they spend on training, but she notes that while slowing turnover may not pay for the benefits they offer, it certainly helps. Workers at all three restaurants get a 50-percent health insurance subsidy after three months, which adds up to nearly $300 a month per employee, along with a simple IRA with a match after a year, a discounted gym membership, and half off the entire bill at each of the group’s three restaurants.
“There’s too much competition for good help these days,” to not offer benefits, Munzer says, noting that the group has offered health insurance since they opened their first restaurant, the bygone Hungry Mother, a decade ago. “It is a question people ask more and more, and a concern for younger and younger people as well.” As further incentive to retain kitchen staff, the restaurants give profit-sharing to the back of the house—an automatic 3 percent of all food costs is added non-tipped employees’ paychecks weekly.
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Profit-sharing is also on the menu at Honey Butter Fried Chicken. Since they are a non-tip restaurant, everyone enjoys “gain sharing” when the restaurant hits profit goals. That benefit was added over time, along with paid time off, paid sick time and even 12 weeks of paid parental leave. But Cikowski acknowledges that it would have been hard to include health insurance if that hadn’t been part of the initial plan.
“We knew we could get volume, and set our prices to what we needed them to be to cover the cost of doing business,” Cikowski says. “That’s the hard thing about the restaurant business. People want food to be cheap, and they want service to be cheap. … I’m not sure the world has quite caught up to the price of doing business. Most places aren’t charging what they need to in order to take care of staff.”
In addition to setting prices a bit higher than what might be average for a fast-casual spot in Chicago’s Avondale neighborhood, the owners keep the menu intentionally slim, holding food costs down to compensate for labor costs of around 34 percent. “Because we do a higher volume on less stuff, we’re able to get lower prices on those ingredients, so we’re able to offset our high labor costs,” Cikowski says. “It’s all a balancing act.”
At Coles 735, Arimes agrees that paying for benefits should just be part of the business plan. “We pay for benefits just the same way we pay the electric bill,” he says.
It’s not all bad news for restaurants that aren’t currently offering benefits, says Ray Camillo, CEO and founder of Blue Orbit Restaurant Consulting in Atlanta. “Most restaurants are not large enough businesses, as startups, to afford to offer health insurance benefits,” he says. “Once the restaurant company can get some economies of scale by opening several restaurants, they have more leverage to get better rates and they can spread the cost over several businesses. The key, then, is to get big enough, as a company, to afford better benefits.”
Starting small, with health insurance, and building up over time is a good plan, says Cikowski. While they already offer a generous benefits package, as the business grows, they will add even more. “This isn’t the stopping point,” she says. “This is the starting point.”
Indeed, growing benefits is clearly one way to encourage more people to view the industry as a real career option, says Munzer. “If we are going to make restaurant work a sustainable source of employment, we all have to pitch in,” she says. “It’s really important.”