RochesterSubway.com : Sticky Lips Restaurant Owner: “I’m fighting for the survival of my business”

Sticky Lips Restaurant Owner: “I’m fighting for the survival of my business”

June 21st, 2015

The following is a guest post submitted by Howard Nielsen.
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Howard Nielsen, owner of Sticky Lips BBQ, is currently in the process of renovating the 33,000 square foot building at the corner of Culver and Atlantic. He plans to rebrand the complex into a neighborhood entertainment district called “Photo City Junction” (derived from Rochester’s history in film and camera manufacturing).

Last week Nielsen went to New York City to speak at the NY State Wage Board hearings. He says his concerns for New York State’s proposed minimum wage increase led him to represent business owners like himself. Nielsen sent a copy of his speech from June 15 to RochesterSubway.com. Here it is in its entirety…

Hello, my name is Howard Nielsen, founder and owner of two Sticky Lips BBQ restaurants in Rochester, NY. I have been self-employed for 33 consecutive years, starting a pizza shop when I was 21 years old. I have employed over 3000 people and currently have over 180 full and part time employees on my staff. And that is an awesome responsibility.

I am a job producer. I ask how many people in this room ever took their life savings and produced a job, or ever had a weekly payroll to meet?

I am proud to be back in the city where my immigrant grandmother Anna Koener settled, after coming through Ellis Island by herself, with 40 cents in her pocket, just before the start of World War I. She worked as a domestic for upper west side wealthy families.

Prior to her arrival, she paid for and enrolled in the prestigious Heitz cooking school in Vienna, Austria. At the age of 14, the oldest of 10 children, her father was killed in an accident as the family had to be split up.

She worked hard, saved her money and by 1917, she was leasing a building, a boarding house at 311 West 30th Street. She would in turn rent out the rooms for $1 a week. Considering that women didn’t even have the right to vote until 1920, this was quite a feat and it shows what the human spirit can achieve.

As a young person, these are the stories I heard that inspired me to have a strong work ethic. To this day I still put in 50 to 60 hour work weeks.

At last week’s public hearings in Buffalo, I heard a lot of stories of fast food workers who said that they worked 26-28 hours per week at $8.75 an hour and could not make ends meet. You can thank the Affordable Health Care Act for making 30 hours the new full time work week. Another mandate with intentions to help people, but actually hurting them by cutting their hours back. As for the people who come up with these humanitarian ideas, they have very little knowledge of business economics.

The restaurant business is labor intensive, low profit margin, and highly competitive. We work on only 5-10% profit margins and that is if we are the successful ones. I am against big one-time wage increase jumps and more in favor of smaller, more gradual increases to the minimum wage.

You see, even before our customer gets their meal, there are a lot of people who help in that process. There is the host, the server, the expo, the food runner, the dishwasher, the managers, the chef, the line cooks, the busser, the food prep, and the morning cleaners. All of that goes into that one meal. Taking your family and friends out to a restaurant is one of those simple pleasures that we Americans love to do after a long work week. Well, that simple pleasure is again going to cost you more.

In 2014, protein and dairy prices hit historic levels. Now in 2015 and 2016, due to historic labor law changes, new taxes, health care mandates and these new big minimum wage increases, we will again see more consumer price increases. I’m worried that upstate NY cities have been reporting actual average wage decreases to the 2007 levels. If these mandates go through, this could be the perfect storm for government mandated inflation to thrive.

Here are some examples of how those increases will affect my business. The tipped service workers’ minimum wage increase from $5 to $7.50 will take $178,000 from my bottom line. That $178,000 includes a 25% in payroll taxes and insurances.

By the way, my servers on average make from $20 to $30 per hour.

Because I have been successful and have hired more people, I am getting penalized for having over 50 full time employees. The health mandate could potentially take another $88,000 per year.

The governor’s proposal to increase the minimum wage from $8.75 to $10.50 per hour will take another $120,000 from my bottom line.

Add in the recent Added Unemployment Tax. In NY State, we were all too willing to extend unemployment benefits from 26 weeks up to 2 years during the last recession. This new tax in 2013, took $11,000 directly out of my business banking account. By 2014, it went up to $17,000. This is a tax that only the business community seems to shoulder the responsibility for.

Do the math, that’s $400,000 a year from my bottom line, which puts me out of business. And that’s only the half of it, since there has been at least another dozen labor law changes that also nickel-dimes small business.

How come nobody talks about how many small business people live under the national poverty level?

There is no magic pill. This is why the business community HAS to push back, in order for our survival. We are talking about the potential of thousands of upstate and downstate NY businesses closing their doors. And not to mention the thousands of jobs that will go with them.

In my opinion, this issue speaks directly to the poor economic condition of New York State and the high tax structures that have New Yorkers leaving this state faster than any other in the country.

In 2015, we find ourselves in a situation whereby a fast food job is of such value that a family bread-winner relies on that job as their primary source of income. A short 20 years ago, that same breadwinner, the same people in this room, would be working at a large profile employer.

Ask your NY State government what happened to those jobs. Did government mandates and laws push costs up so high that businesses moved to more friendly states or overseas? The unions also have to share the responsibility of driving up business expenses to the point of not being able to compete. If the fast food minimum wage goes to $15.00 per hour, and then as we all know, the next movement will be for everyone else to get $15 an hour.

As for the unions who are going for the fast food worker… has there been mention of weekly union dues that will be taken from this new wage?

The businesses that will survive these major wage hikes will do so by spending heavily in technology and reducing their work force. These tests are being done right now as we speak.

Don’t get me wrong, I would love to pay all my workers $20 per hour with full health insurance, but we all know that would not be sustainable unless the American public doesn’t mind paying 40 to 60% more for their goods and services. If that’s the case, let’s be honest with the American people and let them know that consumer pricing has to go up in order to bring everybody’s wages up to these historic minimum wage levels.

If everybody’s good with that, then this discussion is over!

I beg of you to please keep the wage increases at a rate that both businesses and consumers can adjust to.

• • •

The first business on the Atlantic side of Photo City Junction is now open; a mircrobrewery called The Lost Borough. Photo City Improv & Comedy Club is scheduled to open this July 16, followed by The Pink Flamingo Restaurant. Neilsen says his new complex will create between 200-300 part and full time jobs.

Tags: Affordable Health Care Act, fast food restaurant, Howard Nielsen, labor, local business, minimum wage, New York state, Rochester, Rochester NY, Sticky Lips BBQ, workers

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34 Responses to “Sticky Lips Restaurant Owner: “I’m fighting for the survival of my business””

kahomono says:

June 22, 2015 at 5:09 am

Oh, boo hoo. What a load.

His Escalade collection implies he ain’t exactly flirting with the poverty line.
Nicholas Fiocca says:

June 22, 2015 at 7:13 am

Does he not know how to adjust his business model to handle new cost of business increases? This is just more bellyaching from a known oligarch. If his success is affected so much by state wage policy then he deserves to go out of business. I and others I know already boycott his businesses because of the way he treats his employees. This rant only reaffirms our convictions.
Adrian says:

June 22, 2015 at 7:49 am

I agree with him that health insurance should not be the employer’s responsibility. Unfortunately we have no chance at socialized medicine for people under the age of 65…
Also I don’t really think of people employing 180 workers as “small business.”
Ryan says:

June 22, 2015 at 8:04 am

i am disappointed that this blatantly political and biased message is being published on this blog. If he really wanted to make his case, he would tell us how much money he made last year. I don’t believe that 400,000 is enough to put sticky lips out of business.
Vicki says:

June 22, 2015 at 8:07 am

I think initially that these changes will strain small businesses, but remember that most of these employees are not investing their money in offshore accounts; they’re spending it, and spending it locally. Low-wage workers don’t have much choice but to spend their paychecks on the essentials with little left over. More money to the worker means more money flowing through local business. Like Henry Ford said, it was just good business to pay his workers enough that they could afford to buy one of the cars they were building.
Dan says:

June 22, 2015 at 8:44 am

For a perspective from the other side of the story:
http://www.rbj.net/article.asp?aID=191629
RochesterSubway.com says:

June 22, 2015 at 10:22 am

@Ryan, thanks for taking the time to read and comment. I publish 95% of what people send in. As long as it’s got some kind of serious message and isn’t hateful, a product sales pitch, or something completely uninteresting or irrelevant to Rochester. An opinion letter from one side of the political spectrum will usually draw comments and thoughts from the other side(s). And that makes for interesting and productive dialog. Anyone should feel free to submit their own opinion or counter argument.
Jimmy says:

June 22, 2015 at 11:22 am

All of these comments so far except RochesterSubway’s are coming from people who have no understanding of economics and who are not small business owners. The rule is simple, if someone can make more money in another state, they will move there. How much money Howard is making right now is irrelevant because to him, $400,000 is a lot of money. Otherwise he wouldn’t be wasting his time protesting. There is a reason that jobs are fleeing the state. And don’t say it’s the weather, look at booming Toronto, Canada, and what Rochester used to look like. Please, everyone who cares about Rochester’s prosperity should be protesting New York State’s wealth redistribution policies.
Adrian Martin says:

June 22, 2015 at 11:30 am

@Jimmy
I could make much more money in another state (or in NYC). I am not moving due to family ties, affordability of Rochester, and quality of life. Your rule is simplistic. I find the simplest explanation to Nielson’s letter to be more likely: that a business owner doesn’t want to have to pay out more money, because he likes money, so he’ll tell legislators whatever will help him keep more money.
Jimmy says:

June 22, 2015 at 12:03 pm

@Adrian, New York State is not actually helping Howard make more money. The State takes money away from people through taxes and fees. He is not asking legislatures to help him keep his money, Howard already knows how to keep money. He is pleading with legislators so that the State does not steal (forcibly remove) his earned money. Howard started from scratch and now employs almost 200. Of course this man likes money, that’s why he busted his ass and found 200 people to help him. But there is nothing wrong with this. This is how capitalism is supposed to work. The people who want money the most, will on average end up making more money than people who don’t like money as much. But Howard isn’t even that rich, as stated in this D&C article on Howard… http://www.democratandchronicle.com/story/lifestyle/rocflavors/2014/01/27/sticky-lips-expansion-on-track/4921389/ If New York State continues to steal his hard earned profits, maybe he will shut down his business.
Adrian Martin says:

June 22, 2015 at 12:08 pm

@Jimmy
If you consider a law requiring a high minimum wage “stealing” then I doubt we’ll find any common ground here.
I’ve got no problem with Nielson making money. Sticky Lips has IMO the best BBQ in Rochester. But I don’t think his skill in running a restaurant should translate into getting to determine laws and policy.
Mike B says:

June 22, 2015 at 12:28 pm

Is Jimmy really trying to make a point of New Yorks tax policies being too harsh while citing Canada as his example? LOL. Too perfect.
Paula says:

June 22, 2015 at 1:18 pm

Perhaps he should concentrate on improving his management of his Henrietta location. I will never go there again. I have had 3 VERY bad experiences there, the last being the LAST. I will not go into details, because the subject here is his survivability. The food & service at this location is abominable. What he can’t survive is the bad reputation he is earning for this venue.
Jimmy says:

June 22, 2015 at 1:31 pm

@Adrian, I agree his skill in running a restaurant should have nothing to do with determining policy. But what should determine policy is the principle of personal liberty, and capitalism which are things New York has forgot about. Taxing is considered stealing by people who do not want to pay taxes. A raise in the minimum wage is a difficult restrictive policy against businesses that has effects similar to a regressive tax. Businesses with relatively smaller profit margins will be adversely affected. This presents a major disruption to capitalism. Texas has a minimum wage of $7.25 and is thriving. Most Texas cities are adding more jobs and higher paying jobs at a faster rate than Upstate NY cities.
rottenchester says:

June 22, 2015 at 2:10 pm

Oh, poor Howard. So many bad things seem to happen to him. This time it is the awful possibility that he might have to pay his employees a living wage.

A few years ago, it was the awful possibility that he would have to pay taxes for his Jeff Road location.

See, Howard tried to be clever by building his second location in a tax-free zone, but to be in that tax-free zone, you have to use union contractors. Of course, Howard didn’t use union contractors, because rules are for little people. Howard’s last heartfelt cry was documented on his blog: http://stickylipsbbq.com/stickylips/archives/507 Here’s the reddit thread tearing it apart: http://www.reddit.com/r/Rochester/comments/tv6gi/so_you_want_to_do_business_in_new_york/

As for the matter at hand, Howard’s article ignores the fact that restaurants in other cities where the minimum wage has been raised have raised prices slightly and survived. Here are the results of a study of 21 cities:

http://www.seattletimes.com/seattle-news/studies-look-at-what-happened-when-cities-raised-minimum-wage/

“Potential price increases at restaurants was the biggest negative impact identified by the Berkeley researchers. The cost of eating out went up 2 to 3 percent when the minimum wage rose 25 percent. […]

But another Berkeley researcher said there isn’t an overwhelmingly negative impact on any type of business where the minimum wage has been raised.”
Chris says:

June 22, 2015 at 2:38 pm

His 20-30 dollars per hour for servers needs qualifiers; servers only make $20 – $30 dollars an hour Friday 5pm to 9pm and those same dinner rush 5-9p on Saturday. So while for 8 of their hours each week they are averaging those figures. Factor in a Monday and Wednesday opening shift 10a – 3p where they’re doing stocking, cleaning, prep work (cutting fresh veggies, stocking salt/pepper/condiments, vacuuming, polishing brass and glass) for five dollars an hour and the first customer won’t arrive until perhaps noon or later, and they’re not getting upwards of 30 dollars an hour the entire 28 hour work week.

Also realize that a fair number of guests don’t tip, or under tip. Large parties, older folks on limited income, teenagers and foreign folks (Canada and the UK don’t tip for instance, so visiting tourists don’t understand the concept of tip), are all tables that a server will have to wait on while not making a single cent in income.

While more taxes and fees will harm the owners sure, the meager pittance most restaurant folks earn isn’t enough to live on.
Jimmy says:

June 22, 2015 at 3:08 pm

@rottenchester, first of all your username makes me question how much you actually care about the well being of our city, Rochester. The article you posted from the Seattle Times; Implying that the effects of a minimum wage hike in San Francisco would be similar to a state-wide hike in New York is outrageous. San Francisco is the most expensive city to live in in the U.S. To say that the entire state of New York should dramatically increase its minimum wage because the cities of Seattle and San Francisco did is not smart. I’m sure NYC will be fine with a minimum wage hike, but Rochester, and the rest of upstate, not so much. I actually liked both articles you posted though, they both support my argument that NY state is bad for business and a minimum wage hike should not be imposed.
rottenchester says:

June 22, 2015 at 3:18 pm

@Jimmy: You need to work on your reading comprehension. That study covered the following:
“San Francisco, eight other cities that raised their minimum wages in the past decade, and 21 states with higher base pay than the federal minimum.”

It is a broad-based study that shows that there will probably be little or no adverse effect of a higher minimum wage, at a city-wide or state-wide level. In other words, it shows the exact opposite of what you claim.
Jimmy says:

June 22, 2015 at 4:07 pm

“Businesses absorbed the costs through lower turnover, small price increases at restaurants” This would not help people looking for a job.
The minimum wage is actually notorious for hurting primarily minority populations, – “Other economists say there are more negative effects, particularly for the youngest and least-skilled workers who might lose hours and see the number of entry-level positions reduced in favor of more skilled workers.”
Sadly the most common skilled workers are not the poor. – “And with Seattle contemplating a 61 percent jump, low-skilled employment could drop as much as 18 percent, Sabia said.”
Jerry says:

June 22, 2015 at 6:09 pm

His argument made sense right until he started to complain how unions were hurting him. Labor union participation is under 7% in the USA. (the lowest % since 1932) Labor unions don’t drive up wages eliminating jobs, corporations wanting to pay nothing for labor, (overseas) is what eliminates jobs. Look at the states that have raised the minimum wage. It has little or no effect on employment.
Dee says:

June 23, 2015 at 12:26 am

http://www.dailymail.co.uk/news/article-2905049/Pittsburgh-restaurant-gets-rid-tips-pay-waiters-35-000-year-salary-WON-T-raise-menu-prices.html
Clem says:

June 23, 2015 at 1:09 am

I was trying to find a good source to see what percentage of operating costs labor is for a small restaurant. Just throwing a thought out there: as a European, I was surprised at how much larger food portions are here in the US. After accounting for exchange rates, I could spend the same amount of money and typically get twice as much food, Sticky Lips being a good example (we never really had the concept of leftovers when dining out in the UK). At first, that sounds great, but aren’t we really either feeding our obesity problem (which in the end drives up health insurance rates from related diseases), or letting a lot of food go to waste (most likely filling up landfills faster than they should)? Maybe if restaurants can keep prices flat but reduce portion sizes (assuming labor and material costs are somewhat the same right now), an unintended benefit from a minimum wage increase could be a healthier nation?
Adrian Martin says:

June 23, 2015 at 12:51 pm

@Clem
That’s one reason Atlas Eats in Irondequoit is a great place. Reasonable prices for fantastic food because the portion sizes are small(er).
Vicki says:

June 23, 2015 at 2:44 pm

Hi Clem. A lot of us routinely box up half of a restaurant meal and take it home for lunch or even another dinner. My European friends thought it was both hilarious and kind of disgusting that we ask for our leftovers, but your server won’t bat an eye. It used to be called a “doggy bag” because the polite conceit was that you were taking your scraps home for your dog, but no one even pretends anymore. I recommend it. You’re right; no one needs the amount of food we get served; on our visit to England I was delighted to find smaller portion sizes. (To tell the truth, on our last visit to Sticky Lips, we brought home enough to feed two adults three more meals.)
DJ says:

June 23, 2015 at 3:45 pm

I’m as liberal as they come, but I feel for this guy. Sticky Lips is awesome and it would suck if it went under. I don’t agree with some of his stuff about Unions are ruing everything & robots are going to replace workers. However, he’s correct that his & other businesses have been/will be hit with adjustments due to the ACA & potential wage increases.

This is where liberals have to own it and take the ugly with the good. The current system allows businesses to pay workers wages that must be supplemented by welfare. If there ever is a big adjustment, Some businesses will not make it. That is a fact. The govt should probably do something to ease it in gradually so they have a chance to adjust. But in the end the system is broken & businesses are the ones that need to change. If they can’t change & pay workers a living wage then they never deserved to exist in the first place.

Basically I feel for him and respect what he’s done with his lfe & for The ROC, but I don’t think that’s a reason to stop moving forward on progressive ideas like paying living wages.
Eric says:

June 24, 2015 at 10:39 am

Howard is a renowned stunt queen. Let’s not forget the scam he pulled in 2013 when he cried that Chester Cab was going to have to close because he wasn’t receiving support from the city (I guess he expected someone to magically create a parking lot for him in the middle of the Park Ave neighborhood?), only to create a massive rush of business right before selling it to someone else. Which was obviously his plan the entire time. And that’s just one example. He knows how to use the media to further whatever agenda he’s currently pushing.

Which is fine. He’s a business owner. He’s shrewd. He is working the system to his advantage. But to cry poor as a tactic for keeping his workers poorly paid — GTFO, man. Yes, you are a job creator, and you have reaped the benefits of that. You are owed absolutely nothing from absolutely nobody else. Anecdotal evidence suggests that your restaurants are routinely packed, you do brisk business in catering. If that is your definition of struggling, I urge you to actually listen to the realities your hundred-plus employees are working with.
Pedro says:

June 25, 2015 at 11:55 am

I started at $15 an hour in my entry level job out of college, 4 years later I make $20. Is my wage going to go up too?
Minimum wage jobs were never supposed to be for a family of 4, but it seems that is now the norm in many places. Maybe wait to have kids until you aren’t working for minimum wage?
Ed Barnum says:

June 25, 2015 at 7:06 pm

Couldn’t agree more Pedro – minimum wage is NOT for supporting a family! It would be irresponsible to attempt it. Minimum wage was $5.15 an hour when I started my first job in highschool as a dishwasher – a job I was happy to have.

Also, a thrifty person making the minimum wage of $8.75 an hour can do pretty well Rochester. It is very cheap to live here! A basic health insurance package is essentially free though the health insurance exchange if you’re earning min. wage.

I made around $17K my first year out of school. I didn’t live luxuriously, but I always had plenty of good food to eat and even saved up enough for a down-payment on a house around a year later.
Adrian says:

June 25, 2015 at 10:29 pm

Let’s rephrase that. A thrifty single person with no children can do fine in Rochester on minimum wage if they get 40 hours a week, never get sick (cheap health insurances have rough copays/coinsurance), have no debt and have no other obligations (taking care of a parent for example) and have made no past mistakes (like a damaged credit score or a heavy car payment).
However in the real world with real human beings who are imperfect, minimum wage is rough on a lot of people.
Mike says:

June 26, 2015 at 12:07 am

What a bunch of crap. You can afford to build a new building in Henrietta and complain you only work on a 5%- 10% profit margin. I didnt read anything about much you take home weekly its probably plenty. You sound very greddy
Carl says:

June 29, 2015 at 4:42 pm

What it really comes down to is that the government may have the power, but it doesn’t have the right to tell a private business what it must pay its employees. If you’re not making enough money at your current job, then quit and get a better paying job. I speak as someone who needed a better paying job and, rather than wring my hands and wait for the government to rescue me, I looked everywhere for work, found a job 1800 miles away in rural Louisiana, and went to work. Entry level jobs are meant to be just that; entry level; they’re not designed to offer a living wage; for that you’re supposed to better yourself and get a better job.
Vicki says:

June 29, 2015 at 6:24 pm

In this economy, where minimally-skilled people have to work 3 jobs just to make ends meet, where are they getting the money to move their families 1800 miles? Bus fare to the suburbs can be too much. I’m glad you could do it. Not everyone can.

It would be great if entry level jobs could actually be for young folks’ first jobs. But all of those next-step-up jobs are in Viet Nam, Indonesia, and other developing nations. There is no next tier. If minimum-wage jobs are the only jobs around, what are people to do?
Carl says:

June 30, 2015 at 5:44 pm

I’d like to see the data that supports Vicki’s comments, otherwise I’m afraid they’re nothing more than the victim mentality brainwash that people keep trying to live down to. The fact is that, yes, you can afford to do what you need to do. My welfare neighbors always have money for cable (which I don’t have), internet, cigarettes and beer, and expect me to loan them money as well. So, yank the cable, use the internet at the library (which is within waking distance for my neighbors any way), save the “lord knows how much it costs every month” and start your job search. But, even if your comments are factually based rather than just emotionally based, the fact remains that it’s not the government’s place to dictate wages. I’m not against charity, but I’m against the government doing it because it will always be wasteful and will go to the wrong people.
Jordan H says:

July 23, 2015 at 3:54 am

Funny, every time somebody tries to make life better for the working poor employers star predicting what always sound like an end-of-days economic collapse. And yet, this apocalypse never really comes to pass. The economy didn’t crumble after the minimum wage was first introduced. It didn’t crumble when obamacare took effect. Fact is, if paying your already chronically underpaid employees an extra TWO DOLLARS (10.50 is still nothing near a living wage for somebody with kids) puts you out of business, then you’re not running a viable business. I’m heard this story (valiant rich person fights government overreach so that he can keep on “producing jobs” for greedy, ungrateful poor people) way too many times, and like with any other fairy tale, I stopped taking it seriously when I grew up and began working 65 hours a week just to keep a roof over my head and food on the table. It blows my mind that anybody making more than $100,000 a year (I don’t make a fourth of that at the moment) has the audacity to whine, publicly, about the prospect of the poorest, hardest working people in the economy getting the first real raise they’ve gotten in decades. I don’t know what economic hardship is to a man who owns three resturants and employs fifty people, maybe he won’t be able to buy that audi or he’ll take two vacations to florida a year instead of three. Hardship to most of us is homelessness. Or going hungry. Or an inability to pay for medical treatment. Goodness, I can’t begin to describe how grateful I would be to be in a position where hardship was paying my employees the bare minimum and not wanting to have to pay them slightly more.