An Antidote To Exploitation In The Restaurant Industry

Owen Meyer

The COVID-19 pandemic decimated demand for restaurants in New Orleans. While the new status quo presented unprecedented challenges to remain profitable, one New Orleans based hospitality company recognized an opportunity to develop a business model that increased employee compensation while reducing racial and gender wage disparities.

Data from Restaurant Opportunities Centers United indicates that low-level white restaurant employees, specifically white men, earn 56 percent more than their non-white counterparts. This disparity is attributable to their disproportionate representation in higher paying front of the house roles–customer facing jobs such as servers or bartenders–while non white individuals are disproportionately concentrated in lower paying back of the house jobs–kitchen jobs such as dishwasher, busser, or line cook.

Beyond the endemic racial and gender wage disparities, compensation in the restaurant industry is far lower than compensation in other industries. A 2014 report from the Economic Policy Institute revealed that the median hourly wage in restaurants is 10.00 dollars an hour with tips, compared to an 18 dollar median hourly wage in jobs outside the industry. Furthermore, while 48.7 of employees in other sectors receive employer sponsored health insurance benefits, only 14.4 percent of restaurant employees received such benefits.

There are 11.6 million people in the United States who work in the restaurant industry. The structural inequalities and low compensation in the industry are heavily entrenched, leaving those workers vulnerable to persistent exploitation.

In response to the 2020 lockdowns, Pruett-Jones*, a New Orleans based boutique hospitality company, saw the pause in operations as an opportunity to rectify their compensation inequalities. Scott Pruett*, the 44 year-old CEO and Creative Director of Pruett-Jones, was acutely aware of the perverse incentives and inequalities inherent to the industry. The kinetic pace of managing several restaurants, however, inhibited his ability to develop and implement new operating procedures.

Prior to COVID-19, Pruett-Jones paid its employees the industry standard for their respective roles; servers made $2.14 an hour plus tips, bartenders made $5.00 an hour plus tips, and back of the house workers made a flat $11 to $15 an hour, depending on tenure.

In the intervening months between the lockdowns and reopening his restaurants, Scott and his leadership team completely revamped Pruett-Jones’ compensation structure to reconcile pay inequalities. Their new model pays smaller teams more money. Front and back of the house workers earn higher hourly wages and split tips. Now, both sides of the house earn an equal average hourly wage of approximately 25.50 dollars an hour, 25 percent above the industry standard for New Orleans. Furthermore, Pruett-Jones sponsors health insurance for full-time employees.

Other restaurant managers told Scott they believed increasing labor expenditures would make the company unprofitable. Pruett-Jones, however, has fared well despite external obstacles. In 2021, the company took in 60 percent of its 2019 revenue. Scott maintained that the lower revenue had less to do with Pruett-Jones’ higher labor costs, and more to do with the COVID variants reducing demand for restaurant services, supply-chain bottlenecks, and the prolonged impact of Hurricane Ida.

The jury is still out on the long-term profitability of Pruett-Jones’ business model, but initial results are promising. If their model proves successful, there’s hope that more restaurants will begin to stop reproducing pay inequality and increase employees compensation. Prospective employees, after all, are far more likely to choose a company that offers higher pay and more benefits than one that doesn’t.

Hopefully, Pruett-Jones will enjoy success in the coming years and their model will be replicated. Were such a model to become more widespread, maybe other restaurants will have no choice but adapt in order to stay competitive. If nothing else, at least the blueprint for a better world exists.