Sonoma County’s booming restaurant industry drives wage shift

Famed Healdsburg restaurateurs Douglas Keane and Nick Peyton, who are seeking to reopen their former Michelin-rated restaurant Cyrus in the countryside of Alexander Valley, are making another bold move in an industry that deals with big risks and slim margins.

This time, the duo are wagering that they’ll retain a stable, loyal workforce at their downtown Healdsburg Bar and Grill by raising wages for prep cooks and dishwashers, widely recognized as some of the restaurant industry’s lowest-paid workers.

On July 1, all 22 non-tipped employees got substantial raises, to $15 per hour - $6 above the state’s minimum wage and a nearly 40 percent increase for some of the workers. The motive behind the move comes partly from the owners’ stance on wage inequality.

“For my entire career, the discrepancy between front-of-house wages and back-of-house wages in restaurants has been enormously lopsided, and this has bothered both Nick and me for a long time,” Keane said. “We’ve been looking at what we can do, and we are not saying every restaurant should do this, but we are in the place where we can make it work. Bottom line is we think it’s the right thing to do.”

The business partners said financially, they’ll take a roughly $100,000 hit per year for boosting the pay for their cooks and dishwashers. But in an increasingly competitive environment, and amid Sonoma County’s booming restaurant industry, the move could pay off by staving off turnover among staff and increasing worker productivity.

Keane and Peyton aren’t pushing fellow restaurateurs to do the same, but their move highlights an issue that food industry executives throughout Sonoma County are dealing with amid a low county unemployment rate of 4.2 percent and reportedly high turnover among restaurant employees.

Little by little, such moves are shifting the pay scale in Sonoma County’s signature service industry, which draws food workers, from servers to dishwashers to chefs, as well as patrons from across the world.

Fueled by skyrocketing tourism and the region’s financial recovery since the recession, Sonoma County’s service industry has become a powerful force in the local economy. The restaurant sector has far outpaced the overall economy in job growth and now employs one of every 10 workers, according to state employment data. There are also more restaurants popping up every year - the number of food and drink establishments is up 10 percent in the past five years, and this year’s Sonoma County Restaurant Week generated $3.35 million in economic activity, a five-year high.

“It was our biggest year ever,” said Ben Stone, executive director of the county’s Economic Development Board. “We have more tourists and foodies coming every year, and our restaurants have given rise to that. It’s definitely reflective of the changing economy.”

Mirrors national trend

Pay increases at the Healdsburg Bar and Grill underscore moves underway at the state and national level to boost wages for low-paid employees, spurred, in part, by labor activists and politicians who have advanced mandatory pay raises in the face of income stagnation. Ken Jacobs, chairman of the Institute for Research on Labor and Employment at UC Berkeley, said the region’s economic recovery and the national fight for higher wages is propelling upper management in some sectors to rapidly shift their pay and hiring practices. Restaurant workers, in particular, have become the face of the campaign for higher wages largely because their compensation is left to market forces, and their bosses, to determine.

“There’s no question the movement that has gained momentum in places like San Francisco and Los Angeles and Seattle is having an impact on private sector businesses, especially in the Bay Area,” Jacobs said, highlighting the national campaign for higher wages known as “Fight for $15,” sparked by fast food workers lobbying for higher pay. “We’ve seen more and more businesses do voluntary pay increases over the past year. Part of it is a social statement, saying this is what workers need to get by in these areas. The other is a smart business strategy.”

Jacobs said raising pay can create a more stable workforce and lead to better customer service.

Shortage of workers

Triggered by what some managers and chefs say is a shortage of service industry workers, other Sonoma County restaurants are also upping wages to attract and retain skilled employees. Many also are seeking more workers to keep pace with increased business.

“We’re really lucky - we’re super busy, and we’re getting busier every year,” said Shane McAnelly, executive chef at Chalkboard, an upscale farm-to-table restaurant in downtown Healdsburg. “But there’s so much competition up here that we’re struggling to find talented people.”

McAnelly said Chalkboard has recently raised wages for some back-of-house employees, including dishwashers and line cooks, who earn $11 to $13.50 per hour.

Ken O’Donnell, owner of McNear’s Saloon and Dining House in Petaluma, echoed McAnelly in discussing workforce challenges faced by restaurants.

“It’s almost impossible to get good people for lower than $12 an hour,” O’Donnell said.

O’Donnell said competition in the restaurant industry led him to raise wages for kitchen staff and increase opportunities for them to move up. Dishwashers start out earning $10 an hour, he said, but there are training opportunities to work as a cook, which can pay as high as $17 an hour.

“Cooks and dishwashers are worth their weight in gold right now,” he said.

Other restaurants - from high-end dining establishments such as the Farmhouse Inn and Restaurant in Forestville, to national chains like Applebee’s, to local steakhouses such as Cattleman’s - declined to disclose how much they pay their kitchen employees, but they said local wages are in line with state employment data.

Some restaurants in Sonoma County already pay $15 per hour or more to their cooks, but it can take years to reach that pay level. Dishwashers and prep cooks, on average, earn less. Hourly pay for dishwashers in 2014 was between $9.21 and $9.70 per hour, according to the state Employment Development Department. Cooks, ranging from prep cooks to line cooks, earned $11.07 per hour on the lower end of the spectrum, to $14.06 on the high end, state data show.

Deciding to ‘take hit’

Keane and Peyton met during their tenure at Gary Danko, a San Francisco fine dining restaurant. They went on to open Cyrus, which closed in 2012. They are vying to reopen the restaurant on a vacant parcel owned by Jackson Family Wines off Highway 128.

Keane and Peyton took over Healdsburg Bar and Grill, across from the downtown plaza, in 2008.

They said they’ve sought to raise the pay for their back-of-house employees at the restaurant for the past year. They tried making it work by first cutting costs in other areas - saving money on electricity bills, installing low-flow toilets and reducing the kitchen space they rent. The savings, about $4,000 a month, equates to roughly a third of the cost of the employee raises, they said.

“We’ve been talking about it since Cyrus,” Keane said. “And we’ve been paying attention to what’s going on in the world, and thinking about what is a living wage here. Finally, we just made the decision. We’ve been really successful here, so we just decided to take the hit, and we think it will pay off.”

Other opportunities

Other restaurant executives say there are other meaningful ways to create a stable workforce, including offering opportunities to move up, and treating employees well.

Mark and Teri Stark, who own Stark Reality Restaurants - a network of five restaurants, including Stark’s Steak and Seafood in Santa Rosa and Willi’s Seafood and Raw Bar in Healdsburg - said their pay for dishwashers and line cooks starts at $10 per hour and can go up to $14. They also earn a small portion of server tips every month.

The Starks said they offer other incentives to retain their workers, including health benefits, on-the-job training for higher-paid positions and a business practice of hiring from within.

“We’ve discussed the discrepancy between what the front-of-house and back-of-house makes, but right now we’re doing other things to foster a great work environment,” Mark Stark said. “We train people without experience so they can move up the ladder, and we hire from within. Those are great perks that equate to professional growth and more money in the long run.”

Prior to their boost, wages for non-tipped employees at Healdsburg Bar and Grill were $10.72 to $13.52. Front-of-house employees, such as servers, are paid about $30 per hour on average, including tips, according to the restaurant’s financial records. California’s minimum wage is $9 per hour.

Veronica Mondragon, 35, a cook who previously earned $13.50 per hour, said she was “happy and surprised” when she learned of the increase.

She said she plans to help her son, who graduated from high school this year, purchase a used car so he can get to his classes at Santa Rosa Junior College. She also said the extra money could allow her to drop her second job so she can take classes at the college - something she says he has long desired.

“I could focus on one job and going to school,” Mondragon said. “And I’ll have an easier time paying my rent and helping my son.”

You can reach Staff Writer Angela Hart at 526-8503 or angela.hart@pressdemocrat.com. On Twitter @ahartreports.