After much financial scrutiny in July of 2023, we realized we had to do something to cover more of our labor costs. As of this writing we are all paid $15/hr with no gratuity in our cafe. We believe this is the base-level wage for Memphis, and we hope to be able to increase that for us in the future, but at the moment the prices on our menu do not accurately reflect the labor that goes into producing these items. With 6 months of data to back this up, we’ve decided to follow in the steps of many food-service establishments in recent years by adding a 20% Fair Wage Surcharge. In accordance with laws in the state of TN, this 20% surcharge also has to be taxed the standard 9.75% sales tax, otherwise it is considered gratuity and the rules get murky about how that is redistributed to us as workers. In order for us to maintain a healthy business, and at some point see a true profit to be shared amongst us as workers, we need take this step.
We decided to go this route rather than raising the prices of menu items across the board. We believe it adds a level of transparency about the costs of labor going into the food. You could think of it like the labor charge you get from a mechanic. We make nearly everything in-house so there is a considerably higher labor cost for us. We couldn’t imagine making food any other way, and we think people deserve this level of quality in food. It’s what drove us to create this business.
We’ve also decided to include our financials in this post for utmost clarity & transparency. The numbers are as follows:
At the end of June 2023:
Net Sales – $104,323.77
Labor Costs (includes payroll taxes/fees in addition to hourly wages) – $63,442
Costs of Goods Sold (Food/Packaging) – $34,862
Rent – $15,859
Utilities – $4,015
Taxes/Licenses (mostly sales tax paid to state on sales) – $8,651.13
Insurance – $2,414.85
Misc. Job Supplies – $3,100
Contractors (Fire Suppression System, Bookkeepers, etc) – $2,414.85
Total Expenses Listed – $134,488.83
Net Sales Minus Expenses – -$30,165.06
These are our biggest ticket items, there are a few other expenses but to get a general picture this data serves us. Quite the negative balance there! We do have access to a loan and that has helped us cover these expenses. However, that loan won’t last forever and we do have to pay it back. In total we’ve borrowed about $60,000.
Our data shows that we’ve been averaging about $4,000 – $4,200 in loan draws per month (the data above shows we would need $5,000 but we also have some outstanding credit card debt that has covered a portion of these costs).
We tend to average about $20,000 in sales each month. With the introduction of our 20% Fair Wage Surcharge we would see that number increase to $24,000 and should be able to reduce/ultimately move away from reliance on this loan.
All along we have strived to create an equitable workplace with a fair wage that doesn’t rely on the feast/famine aspect of gratuity. We are continually working towards that goal and this is another step in the journey.
On your ticket you will see this service charge reflected. An example:
Mushroom Melt – $13
Fair Wage Surcharge (20%) – $2.60
Sales Tax (9.75%) – $1.52
Total – $17.12
In Addition
Loyalty Program
This past week we’ve also introduced a loyalty program! This is handled through our point of sale, Square. For every dollar spent a point is earned, the Fair Wage Surcharge counts towards these points too! Right now we have the reward set to be $5 for every $100 spent. You can redeem that reward on any purchase. Feedback on this? We’d love to hear it! Let us know what you think: staff@lulusmem.com. In the spirit of Seth Godin we’re “shipping early and shipping often”. We want this program to work for our regulars and make sense for us too so the reward may change (potentially being sweeter (??!!) as we move forward).
Pay it Forward
We know this fair wage surcharge may drive the price of our items a little high for some folks so we’re also introducing a pay-it-forward system. If you are someone of greater means consider paying it forward with the following options:
Level 1 – cover an extra service charge
Level 2 – cover the cost of a coffee drink
Level 3 – cover the cost of a baked good
Level 4 – cover the cost of a sandwich or grab & go item
How This Will Work In Store
It’s a work in progress, as are most things, but we’ll have some form of a token at the register. If you decide to pay it forward we’ll add that to your ticket, reserve the token behind the register and when/if someone needs this we’ll use the token to cover the costs. Too easy!
At the end of each quarter we will take a portion of the pay-it-forward moneys and re-allocate them to an organization or person in need, reserving enough for in-store transactions to be covered.
Thank You!
Thank you for allowing us to get this far in the journey. We hope to be around for a long time to come and appreciate all of the support in our endeavors thus far.