Buffalo Wild Wings CEO Sally Smith on Minimum Wages

 

Higher labor costs will have an impact on expansion sites, she says

 

Source: WSJ

By Julie Jargon

Oct. 25, 2015

 

Sally Smith, chief executive of Buffalo Wild Wings Inc., has a problem many restaurant companies would love to have: strong growth.

 

As she prepares to grow the chain of more than 1,000 sports bars by about 10% before the end of the year, Ms. Smith is facing the tightest labor market the restaurant industry has seen in years, rising minimum wages across the country and a federal legal determination that could make hiring even more difficult.

 

The Wall Street Journal talked to Ms. Smith about how she’s seeking to attract workers, reduce labor expenses and prepare for the possibility of becoming a “joint employer” with the franchisees who operate half of the company’s restaurants. Here are edited excerpts from that interview.

 

WSJ: What is the biggest challenge facing restaurant operators today?

 

MS. SMITH: Labor availability and wages.

 

WSJ: Do you have to pay more or offer other perks now to attract and retain good employees?

 

MS. SMITH: Offering paid time off is something we’re looking at to attract and keep great employees. Part of it is talking to employees to find out what they value most outside of wages and hours. We introduced the position of guest-experience captain as a way to augment our team members. It’s an hourly position between a server and a manager, and we think it’s a nice steppingstone. Their job is primarily to interact with guests to make sure the game they want is on TV or to help guests learn how to play trivia on a tablet.

 

WSJ: How are minimum-wage increases affecting the way you make business decisions?

 

MS. SMITH: You look at where you can afford to open restaurants. We have one restaurant in Seattle, and we probably won’t be expanding there. That’s true of San Francisco and Los Angeles, too. One of the unintended consequences of rising minimum wages is youth unemployment. Almost 40% of our team members are under age 21. When you start paying $15 an hour, are you going to take a chance on a 17-year-old who’s never had a job before when you can find someone with more experience?

 

WSJ: Are you turning to automation to reduce labor costs?

 

MS. SMITH: We are testing server hand-held devices for order-taking in 30 restaurants now, and we’ll roll them out to another 30 in the next month and another 30 by the end of the year. Servers like it because they can take on more tables and earn more tips. Eventually we’ll have tablets where guests can place their own order from the table and pay for it.

 

WSJ: Are you also offsetting rising labor costs with menu-price increases?

 

MS. SMITH: The price of chicken wings has remained stubbornly high this year, and we’ve also seen price increases on beer kegs, so we’re raising menu prices as a way to cover commodity-cost increases and wage increases. We feel comfortable with the 2.1% price increase we’re taking in November. That should offset those cost increases this year, but I think there will be continued wage pressure, so we have to continue to look at how much to automate and how to be more efficient.

 

WSJ: The general counsel for the National Labor Relations Board determined that McDonald’s Corp. could be treated as a joint employer with its franchisees in labor complaints. If that determination is upheld, how would it affect your business?

 

MS. SMITH: Half of our restaurants are franchised, so it’s going to be interesting. I don’t think our franchisees will want us involved with how they determine what to pay their employees and how they schedule their hours. But if we’re going to be responsible for our franchisees’ employees, we’ll develop tools to monitor their employee training and hiring. I do think it puts the whole franchising model at risk.

 

WSJ: Are there any kitchen efficiencies you’re working on?

 

MS. SMITH: We’re looking at the optimal number of hours to spend on food preparation. But consumers want freshly prepared food, so you’ve got two competing forces-how do you become more efficient but provide what the consumers want?

 

WSJ: What are your best-selling products?

 

MS. SMITH: Traditional wings make up 20% of our sales, boneless wings make up 20%, and alcohol, mostly beer, represents another 20%. Within wings, we have 16 sauces and seasonings, and the most popular sauce is our honey barbecue. Burgers make up 5% to 7% of our sales.

 

WSJ: Do you have any new products?

 

MS. SMITH: We have a number of new limited-time offers, like our Havana pork sandwich, which is our spin on the traditional Cuban sandwich. We’re using a blend of our mango habanero sauce and Caribbean jerk sauce. We also have new shrimp tacos. We’ve had popcorn shrimp as an appetizer for a long time, and we’ve turned them into tacos. We also have cheese curds on our menu, and we’ve added them as a topping to our bacon cheeseburger.

 

WSJ: What other new things are you offering in your restaurants?

 

MS. SMITH: In about two-thirds of our restaurants, we allow guests to upload their favorite sports videos online and when they tell us when they’ll be in a restaurant, we show it on the big screen. So, you can post a video of your son’s little-league baseball team or your daughter’s cheerleading squad and see it in the restaurant. Guests are very excited about it.

 

WSJ: Five of the eight top officers at Buffalo Wild Wings are women. Is that a concerted effort on your part?

 

MS. SMITH: I’d love to be able to take credit for it being a concerted effort. It’s just been that way for a long time. The newest female member of that group has been with us for seven or eight years and she was promoted into that position. But for all the young women out there working at Buffalo Wild Wings, it says that there is opportunity in this industry and company.