B.C. restaurant staff brace for HST impact

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      From slinging eggs in family diners to uncorking Merlots in fine-dining rooms, for the past six years, server Putu Duff has paid her tuition largely through tips. So far, restaurant work has financed a bachelor’s degree in biology and a master’s in global health; this September, she’ll begin a PhD in public health and epidemiology at UBC.

      On July 1, B.C. diners will likely start paying an extra seven percent on their meals, due to the introduction of a 12-percent harmonized sales tax. Frontline workers like Duff anticipate lower tips and, ultimately, lower incomes as customers reel from the HST.

      “Tips are the main reason I work in this industry,” Duff, who works at Jethro’s Fine Grub (3420 Dunbar Street), told the Georgia Straight in a phone interview. “If I relied on minimum wage, I couldn’t go to school, or even make ends meet on my own, even without going to school.”

      The tax won’t just affect the industry’s frontline workers, 177,000 strong in B.C.—10 times the number of loggers and foresters. For those who own restaurants, the tax is like the fourth horseman of the industry apocalypse, following the past decade’s rise in food, lease, and labour costs; the skills shortage; and the recession. That’s according to Mark von Schellwitz, the Canadian Restaurant and Foodservices Association’s vice president for Western Canada.

      “The challenge has been getting politicians to understand this,” von Schellwitz told the Straight in a phone interview. “They just use their own anecdotal reasoning: ”˜Hey, I’ll go out to eat just as much.’ For anyone who lived through 1991 [when the GST was introduced], it really was the most difficult year in this half of the [last] century.” According to von Schellwitz, restaurants saw a 10.3-percent decline in sales that year.

      In a presentation at an HST symposium on January 21, von Schellwitz painted a bleak picture of the industry’s future. Six percent of B.C. restaurants plan to close due to the HST, according to a member survey conducted by the CRFA in 2009. Restaurant profitability is at 4.4 percent of sales, down from 4.9 before the recession. That represents a paycheque of just $29,049 for the average owner, von Schellwitz noted. With an anticipated 7.5-percent dip in annual sales due to the HST, many more restaurants could shut their doors, he said.

      And 71 percent of restaurants plan to cut back on staff—meaning people like Duff could be out of work.

      “This is not a bunch of fat cats,” von Schellwitz said, claiming that the province lost 311 restaurants and 10,500 jobs in 2009, largely due to the recession. “These are starving people who have invested a lot in their business.”

      In Gastown on March 22, Old Spaghetti Factory customers lined up for two hours or more to take advantage of the company’s 40th-anniversary pricing: $1.75 for a full dinner, complete with bread, salad, spaghetti, and ice cream. The location served 2,200 people that day—the most ever, according to the vice president of operations, Chris Kanuka.

      “If that doesn’t show you that people are value-conscious,” he told the Straight in a phone interview.

      The Old Spaghetti Factory, one of B.C.’s most successful chains, depends on budget-minded families for its business. During the recession, the restaurant’s customers adapted by eating out less often and sticking to water instead of ordering pop or alcohol, Kanuka said, which reduces profit. He expects more of the same behaviour when the HST arrives. The company will survive, he said, but the new tax will have an impact.

      “You come in and dine with us, and you judge the value of your experience by the total bill,” he said. “The price is up, so the value perception is going to go down.”

      In Nova Scotia, where the HST has been at 13 percent since 1997, the tax on restaurant meals may rise to 15 percent this year. The executive director of the Restaurant Association of Nova Scotia believes that the restaurants hit hardest by high taxes are those like the Old Spaghetti Factory: those offering midrange, casual dining. Still, Gordon Stewart said, the industry won’t die.

      “Everyone’s dream is to open a restaurant,” he told the Straight by phone from Halifax. “There will be that sticker shock and the customers might stay away for a while, tips will go down, but they’ll be back.”

      Stewart supports some B.C.ers’ fight against the HST, but said it will probably fail. He noted that as restaurants struggle to stay afloat, customers will see more prepared and frozen foods being served and fewer staff.

      Ultimately, Stewart said, high restaurant taxes will hurt those in the industry who are most vulnerable: servers like Duff, owners of independent restaurants, and customers.

      The CRFA’s antitax consumer petition, which can be found at nomealtax.ca/, had attracted over 200,000 signatures at press time.

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      Apr 5, 2010 at 11:33am

      Remember people, tips are to be calculated on the subtotal BEFORE tax, so the HST should make absolutely no difference to the amount of tip you leave.

      Yes Anon

      May 2, 2010 at 2:10pm

      Exactly Anon...if the meal is $20.00 before tax a standard tip of $4.00 should be added to the bill. The tax will come to $2.40. The cost of the meal will be $26.40. Service staff should only tipout on the pretax amount (to bussers, bartenders, hostesses, kitchen staff) which @ 4% would be $.80. All restaurants should require service staff to tipout on the pretax amount of food / beverage sold and customers should tip 15-20% on the pretax amount of the bill. The HST is just a fact of life so please don't take this out on hard working peoples at your favourite eateries!


      May 2, 2010 at 2:26pm

      While I agree that servers and other restaurant employees should be paid fairly, I think that 20 percent expected tipping has become the restaurant industry's way of offloading labour costs directly onto their customers.

      Hey, wait... that's what the provincial government is doing, through the HST: offloading business costs to consumers.

      Suddenly, that homemade box of KD is looking more and more appealing - for financial and political reasons.