TGI Fridays CEO Ray Blanchette said that President Joe Biden’s proposal to eliminate the tipped minimum wage would likely result in fewer hours for the chain’s waitstaff and higher menu prices.
Biden has proposed raising the federal hourly minimum wage from $7.25 to $15 and eliminating tip credits, a change that would primarily affect the restaurant industry. The changes would mean that employers would have to pay every worker at least $15 an hour, even if they receive tips.
In 43 states, employers can pay their workers as little as $2.13 an hour as long as that hourly wage and tips add up to the locality’s pay floor. Otherwise, the employer has to make up the difference. The tipped minimum wage was last raised in 1991.
TGI Fridays already pays most of its kitchen employees more than $15 an hour, according to Blanchette. The pain would come from paying its waiters the new minimum wage.
“In the front of the house, where we spend a lot of hours, we would clearly be cutting back hours if something that dramatic happened,” Blanchette said Friday on CNBC’s “Squawk on the Street.” “And we’d have to materially raise prices, which doesn’t feel like that would be right.”
He also said that the changes would create inequity between the different types of workers.
“If the cooks are making $15 to $18 an hour and then suddenly the waitresses are making $40 an hour, that doesn’t make any sense to me,” Blanchette said.
In many states, significant wage disparities between front-of-house and back-of-house workers already exist because of tipping, particularly at fine-dining restaurants. Some activists have pushed for ending the practice altogether.
The full-service restaurant industry is largely opposed to ending the tip credit, arguing that it hurts workers, employers and customers. But advocates say that the tip credit creates too much uncertainty for workers and that employers often flout the law when it comes to making up the difference when tips fall below minimum wage. Three years ago, the United Kingdom fined TGI Fridays for failing to pay staff the country’s minimum wage.
Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington have already banned the tipped minimum wage. New York state has eliminated the tip credit for employers, except for restaurants and bars.
Blanchette also said that TGI Fridays will not mandate that its employees receive the Covid-19 vaccine when it’s available to them. Instead, he said that the restaurant chain would “probably” offer some kind of financial incentive to workers. Trader Joe’s, Dollar General and Chobani are among the companies that are opting to pay their employees to get their vaccines.