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Restaurant ‘bartaco’ leverages technology to pay fair wages

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Scott Lawton, bartaco Co-Founder and CEO, joins Yahoo Finance to discuss the company’s positive movement in hiring and handling the supply chain issues.

Video Transcript


ALEXIS CHRISTOFOROUS: The casual dining chain, bartaco, continues to expand and retain its workers during the pandemic. So how are they doing it? Joining me now is bartaco's co-founder and CEO Scott Lawton, along with Yahoo Finance's Corina Mitchell. Scott, welcome to the show. So the labor shortages we keep hearing about that are wreaking havoc among lots of different restaurants in the country. Have you experienced that at all at Bar Taco?

SCOTT LAWTON: Of course, we have, everybody's experienced it. I think we fared it, we fared our way through it pretty well. We are pretty much hired up now. We're actually doing a hiring in Washington, DC for our new location and we have a line out the door for applicants. So we're really excited. We're starting to see a lot of positive movement in hiring.

KARINA MITCHELL: I'm really surprised, sir, by one of the facts that you sent our way, which is that you pay entry level staff $45,000, yet you've been able to increase EBITDA to 30%. How do you do that? The National Restaurant Association, for example, said half of all restaurants in September couldn't make their rent. How do you survive and pay a fair wage?

SCOTT LAWTON: We were able to leverage technology. We actually use ordering at the table with your phone. And in doing so, we eliminated the way, the typical waiter position. So now we have food runners and drink runners who are bringing the product back and forth, making sure the tables are cleared. And we have managers on the floor who are actually making sure that the guest experience is great and making sure that everyone's engaged and having fun.

So in doing that, we were able to actually reallocate the tip pool to the kitchen. So in spreading that out, we're able to pay the state minimum wage. And then when you take the tip cut, it actually takes everybody up to over $20 an hour, averaging around $22, $23 an hour. We're as high as $30 an hour in some markets. So everyone makes the same money who works hourly. And it starts at about $45,000 a year if you're working full-time.

ALEXIS CHRISTOFOROUS: How are you weathering the supply chain issues? Has your business been impacted? Is it tougher to get certain ingredients right now? How are you dealing with it?

SCOTT LAWTON: Yeah, we've experienced it just like anybody else. Like our glassware, we had to change all of our glassware because we just couldn't get it any longer. We also are waiting on restaurant equipment for some of our buildouts. It's holding us up a little bit. But it's sort of splotchy in different areas. It hasn't been crippling yet to us, but we certainly are seeing it happen.

KARINA MITCHELL: And tell me, sir, what about as far as passing on costs to customers? Are you having to increase the price of menu items? Have you streamlined what you're offering on your menu at all to compensate?

SCOTT LAWTON: We've had one price increase in the last year, about 5%, which sort of followed commodity pricing. We haven't done anything else, and we don't intend to. Because of our labor model working, we don't feel the same pressure that other businesses are feeling on their labor. So a lot of the price increases that I hear other restaurants are doing is because they have to raise their pay for employees. But with our new model, we haven't felt that same pressure. So we're able to pass it along to our customer, the savings.

ALEXIS CHRISTOFOROUS: Now like a lot of different industries, you had to pivot pretty quickly at the onset of this pandemic and get a delivery platform up and running. You did a number of other things to help the business sustain and then ultimately grow. What from that time do you think is going to stick around post-pandemic, Scott?

SCOTT LAWTON: Well, you know, I think digital ordering is here to stay in some form or another. We can't, you know, everybody, including my parents now know how to order food for delivery on their phone. So that was not the way it was pre-pandemic. So we've seen a big increase in our takeout business. And we've actually recreated our takeout business in a way that we're really proud of it. And we think that's going to be a part of our business forever.

We also think that customers have a little more comfortable, are a little more comfortable with digital engagement. So we want to utilize that in ways not that it takes away from the service experience for the customer, but in ways that they enjoy it and that it makes their lives easier.

KARINA MITCHELL: How much of your business is now sort of takeout and delivery versus people returning to the restaurant? How does that break down?

SCOTT LAWTON: Well, pre-pandemic, I think takeout delivery was about 7% of our sales and went as high as 100%. And during sort of last winter, I would say it was 25% to 30%. We're down to about 12% to 15% now depending on the location. We expect it to go up a little bit in the winter as our patios close and our capacity shrinks in the restaurants.

ALEXIS CHRISTOFOROUS: I want to switch gears for a minute and talk about your restaurants and climate change, because I know you've made a big investment in reducing the restaurant's carbon footprint. You were able to offset 11,000 metric tons of carbon this year. What was the inspiration behind that? And how are you able to afford to do that?

SCOTT LAWTON: Well, the inspiration was we just see what's going on in the world. And I have five kids and I think about it and we want to be part of the solution, not part of the problem. I mean, that's the inspiration. The challenge for our industry has always been, how do you do that? It's the restaurant business, it's hard. There's a company called Green Places out of North Carolina that has created a way where you can buy an offset, your carbon footprint. They have a calculator that they developed through UC Berkeley that really helps you figure out what your carbon footprint is.

And they've set up partnerships with different companies that are planting trees and doing all sorts of green things that can help us offset. So normally that was never something available to smaller companies, it was only available to big companies that could create a division to figure out how to do it. So we were really excited about the idea of being part of it. And we also saw it something as being really important to our customer, which is a young clientele. And also, our employees. So for us, we see it as something that's going to attract great employees, that our customers are going to be proud to eat there. And we saw it as a real investment in the business.

ALEXIS CHRISTOFOROUS: All right, Scott Lawton, co-founder and CEO of bartaco. Good to see you. Thanks for being with us.

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