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October 22, 2008
Saigon Grill to close?
It seems that those strikers outside the Siagon Grill have won. The NY Times is reporting that Saigon Grill Must Pay $4.6 Million to Workers. A NY Post article on the same topic reports that "The court papers say that some of the workers did collect $3,500 to $4,000 a month in tips."
California (I guess like NY) is a state where the minimum wage does not include any tips as part of the job. Which actually means that the minimum wage in waiting and delivery is actually much higher than the minimum wage. Seems like there is a great natural experiment in there if you could get the tipping data. Unfortunately, tax fraud by those in the cash economy makes that difficult.
Saigon Grill is a pair of restaurants with tasty food that always seems to be able to accommodate a group at reasonable prices. They are both seem pretty successful in that they attract crowds and everyone seems to have eaten there. But $4.6 million is an awful lot.
I wanted to do a back of the envelope calculatin to see if they could possibly have the sort of profits to pay. The average restaurant profit margin is about 4%. Let's say we double that because many restaurants are unprofitable. The average bill there has to be about $20, but call it $15 over their 17 years of business. To make $4.6 million to repay the legal fees would be $4,600,000 / ($150 per meal * .08) =3,833,333 meals. They've been open since 1992. Let's assume they've been uniformly successful and they opened on January 1st and that we are at the end of 2008.
That makes for about 225,000 meals a year or since they are open seven days a week, 617 meals a day. My understanding is that this a reasonable number of covers for one large, busy restaurant, so for two such restaurants it is easy. It would seem they could afford the suit, they probably have learned twice as much. Of course, if they are only of average profitability then this seems close to the total profits they every made.
Posted by OneEyedMan at October 22, 2008 7:06 AM
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