As San Francisco restaurants face increasing labor costs from the city's soon-to-rise minimum wage, already the country's highest at $11.05 an hour, Corey Lee's three-Michelin-starred Benu has become the latest fine-dining establishment to hike its prices and institute a service charge. A wine-paired tasting menu for two at the four-year-old SoMa restaurant will now cost over $1,000.
More specifically, Benu's tasting menu is now $228, up from the old price of $195. So dinner for two, after tax and the new 20 percent service charge, will run $595. Add on wine pairings, which remain $160 each, and you're at $1,013. Patrons who wish to leave any additional tip are free to do so.
Lee did not respond to inquiries last night about the developments at his restaurant, but during an email exchange in November, he told this reporter that a price hike was in the cards. "Benu's price will change in the near future. I'm not sure yet exactly when or to what amount, but if we just absorb all the increases that are happening in 2015, the numbers simply won't work."
San Francisco's minimum wage rose to $11.05 at the start of the new year, a rate that will increase to $12.25 an hour in May, then $13 in July of 2016, and then by a dollar every year until it hits $15 in 2018. SF restaurants have begun changing their pricing models in recent months, presumably to adjust to the higher cost of doing business. The two-Michelin-starred Atelier Crenn raised its entry-level price to $220 in January and instituted a service charge, while the three-Michelin-starred Saison switched over to offering a single menu throughout the week for $398, up from its earlier starting price of $248. Quince, which holds two Michelin stars, raised its prices by a more modest $5, to $195.
Lee, in his same November email to this reporter, took issue with the fact that California is one of seven states without a tip credit (the others are Nevada, Alaska, Minnesota, Montana, Washington, and Oregon). That means businesses in the state aren't allowed to use an employee's tips to meet their minimum wage obligations. As a result, California waiters earn the full minimum, plus gratuities, as opposed to the tipped minimum, which can fall as low as $2.13 in states like New Jersey and Texas. "I am a strong proponent of increasing the minimum wage, and feel it's something we need to do given the current and rising cost of living in SF, but I think we missed a big opportunity by not simultaneously implementing a city tip credit," Lee wrote.
The lack of a tip credit means that funds that could've theoretically gone toward improving the salaries of back-of-the-house staff, who often earn less than tipped workers, are instead applied toward front-of-the-house pay, even if the tipped wages of those employees already put them well over the minimum. And when combined with San Francisco's rising minimum wage, the lack of a tip credit can make it even more difficult for employers to rectify the pay disparities between tipped and non-tipped workers. A Payscale report released yesterday showed that while San Francisco waiters typically make $7.20 more per hour than cooks and chefs in that city, that differential is just $2.30 per hour in New York, where there is a tip credit.*
Instituting an across-the-board service charge is one solution to this problem. While tips can normally only be distributed to waiters, runners, bussers and other front-of-the-house employees, service charges are often used to better compensate everyone at a restaurant. Indeed, when contacted anonymously, a receptionist at Benu said that the service charge is used to pay the wages of the entire staff, a policy that jibes with Atelier Crenn's approach. Crenn published a note on its website informing guests that its so-called guest experience fee "will help contribute to the costs of providing benefits to our employees and is shared by the entire staff."
In addition to Benu, Saison and Atelier Crenn, the other marquee Bay Area restaurants who have effectively eliminated the need to tip are Coi in San Francisco, Chez Panisse in Berkeley and The French Laundry in Yountville. Another point worth noting: While most of these establishments have sidelined gratuities through service charges, which range from 17-20 percent, the Laundry does so though a service-included policy where all prices are higher, to reflect the cost of providing full benefits and wages to its employees.
This news also means that all four of The Bay Area's three-Michelin-starred restaurants now employ a service charge or service-include pricing in all or part of their dining rooms (though the fourth, The Restaurant at Meadowood, is only service-compris for the $500 chef's counter menu). By contrast, only two of the six three-Michelin-starred restaurants in New York, Per Se and Brooklyn Fare, employ such policies.
*Bay Area cooks still make a higher base salary than their NYC counterparts, typically at $14.30 an hour versus $13.00 an hour, likely due to the higher minimum.
An earlier version of this article incorrectly stated that San Francisco's minimum wage is $11.01 per hour. It is $11.05 per hour.