Minimum Wage

When A Rising Minimum Wage Forces You to Close, Until It Doesn't

Over the course of the past six months we’ve seen two prominent restaurants declare that the voter-approved increase to the minimum wage, passed overwhelmingly in November, would force them to close. Though the owners were different, the script was the same—and the story of the minimum wage increase that backfired on the working man by forcing the closure of Abbot’s Cellar and Luna Park was widely reported.

As time went by, however, the businesses in question either remained open or posthumously changed their justification for closing—leaving the casual observer to wonder what was really going on, and what interests were served by all that minimum wage bashing. 

Take Abbot’s Cellar—in a January interview with SFist, co-owner Nat Cutler blamed the restaurant’s failure on the minimum wage saying that “while the restaurant was very well received, the long-term sustainability just wasn’t there — and that’s before two recent wage increases: 3% in January (2015), and 14% from 2014 levels in May.” Then, as promised, he closed the restaurant. 

But a funny thing happened next. Abbot’s Cellar co-owner and Cutler’s business partner Christian Albertson popped his head up to discuss the failure of his restaurant, and in the process spun a narrative quite different from Cutler’s. Speaking on The Beer Curmudgeons podcast, a partial transcript of which has been posted to Inside Scoop, Albertson explained why Abbot’s Cellar failed:

It was too big, and ultimately we’re a fine dining place — and were competing with the hundreds of other fine dining places that are kind of like us. And we didn’t differentiate ourselves. We were basically playing in a field where there are a lot of really good restaurants out there, and Abbot’s was doing that, but it has a craft beer program. It wasn’t enough to bring in enough people fast enough.

In other words, the restaurant’s failure was not a result of the increased minimum wage. Rather, it failed because people weren’t eating there. At no point in the interview did Albertson mention minimum wage as contributing to the decision to close Abbot’s Cellar.

And then there’s Luna Park, whose owner AJ Gilbert told Uptown Almanac this past October that the minimum wage was the deciding factor in his decision to close the restaurant by the end of 2014. Gilbert explained that he was preemptively closing Luna Park to avoid projected increases in labor costs, and went on to say that “waiters do not need to be making $15 a hour” pre-tip.

But again, the details surrounding the closure (and sale) of Luna Park were not as straightforward as the owner made them out to be. When Uptown Almanac determined that Gilbert was selling the restaurant to Gavin Newsom’s PlumpJack Group, he stopped responding to our inquiries. Shortly thereafter PlumpJack Group suddenly pulled out of the sale, purchasing The Lexington Club instead. 

Yet despite the increased minimum wage that Gilbert is now forced by law to pay his employees, Luna Park remains open for business. It appears Gilbert’s claims that increasing the minimum wage would result in the closure of his restaurant were likely just a smokescreen to provide political cover for what was sure to be an unpopular sale. With another hike in the minimum wage to hit May 1st, we may soon know for sure either way.

As we rapidly approach the scheduled May 1st increase to $12.25 per hour, it would serve us well to take a closer look at the business owners protesting a rising wage the loudest.

[Photo: Abbot’s Cellar]

Comments (15)

in other words, they were bad businesspeople, or just lied.

Luna Park should close because it fucking sucks as both a bar and a resturant

Borderlands is another store that initially claimed to be closing because of minimum wage increases, but when they went into detail about all of the factors influencing their decision, blaming minimum wage just didn’t add up. There were other issues that were almost certainly more relevant.

Went to Abbot’s for the first time about 6 months ago. It was very whatever and very empty for a Friday night, and the wait sucked.

The Valencia restaurant market is over-saturated anyways. 

Wait staff**

Thanks for the correction. I was reminded of the Yogi Berra-ism of “Nobody goes there anymore; the lines are too long.”

Nobody goes there any more, it’s too crowded.

And this is news to whom exactly?

The funniest part–the same owners of Abbott’s Cellar own Monk’s Kettle.  It is a smashing success–and paying its waiters minimum wage.  The difference between the two?  Monk’s kettle has better reviews, and cheaper prices. They just weren’t good enough to make it upmarket. So they blame their dishwashers. 

Exactly. you own 2 restaurants. Both are required to pay minimum wage. One of them fails and the othe doesn’t? You cant blame the wage law.

Where’s the closer look of Borderlands Books?

who cares about these overpriced ‘strants. What I care about is keeping my burritos under $10. This mini-to-maxi-wage-hike-shit is gonna put the kabash on that pretty soon, which blows. 

Yeh well the Luna Park thing was more xomplicated. The landlord, Nissam Lanyadoo, has been hassling both them and the barber shop next door for quite a while and wouldnt be unhappy if luna took a hike based on their long term hold on the spot. He owns several properties in the city and has recently been kicking the umpermitted renovation game into high gear next door and in other placeS in SF, which is pretty well docu’d by the local gov groups that should be concerned.

I think anyone thats been to the Abott expected a quick fail due to extreme odd overpricing on relatively standard draft beers and i dont see how they expect otherwise from anyone but hardcore dills slash tourista types. No big surprise for the gouger posse, i mean ‘lets make monk’s kettle more expensive’ isnt exactly a call to arms for the revolutionary types.

but the luna sitch is slightly more interesting i would admit. Go ax em and see. 





In my experience working for a group of bistros the owners refused to adjust for the effects of new competition that offered better food value and line efficiency. Their sales plummeted, and instead of finding out the real reasons, buried their heads in the sand and blamed it all on their employees.  Demanded more for less, created a hugh revolving hiring door, and added to more inefficiencies in customer service etc.   If one digs hard into the failures of restaurants you’ll see this pattern as a common one.  Increasing labor costs will close restaurants are no longer relevant.  Ignoring the customer by ignoring the marketplace where you do business will put a restaurant in a downward spiral and unless corrected will eventually put them out of business.