Minimum wage profit sharing experiment

A pizza joint shared its profits with its employees and that meant the employees made $78 an hour. I’m curious if the pizzeria used a realistic calculation for profit. If so? This makes the “I cannot afford to increase my starting pay rate to attract employees, the problem is the gov’t is making people all lazy and stuff” argument clearly disingenuous.

Profits are what you make after paying for the business’s expenses — so the ingredients, power, water, advertising, insurance, employee benefits, real estate, business loans, taxes, and such are all taken out before you call it a profit. Good accounting includes future predictable expenses as well — the facility is going to require occasional sprucing up, maintenance expenses pop up, at some point they’ll need to replace the pizza oven or refrigeration units. Just like a personal budget should include “replacement car, every 10 years, that means I need to accrue $5 a day to fund that replacement” … these expenses should be estimated out and included in the net/profit calculations. It’s possible they used a far simpler algorithm for computing profits — net proceeds minus food cost (which is something most restaurants track very well) … which would render my calculations here meaningless. But I’m going to assume “profits” actually means profits in the accounting sense.

In a lot of businesses, the owner takes a salary too — no idea if owner, well, takes a salary in the first place but if they took their salary out before calculating the daily profit. I am going to assume the owner’s salary was not already deducted. Then $78 an hour isn’t sustainable because the owner needs to eat too, but the owner could take $50 an hour per employee and still pay everyone $28 an hour.

Not that the owner gets $50 an hour for being open, but $50 a man-hour worked by any employee. Think about that for a minute — say they’ve got three people doing prep from 1P-3P and five people working when open from 3p-10p, then thee people staying on for close from 10-11P … that’s 44 man-hours worked that the owner’s keeping at $50 a man-hour. Owner keeps $2,200 each day, plus has his business has all of its expenses covered. For each of the 300 days a year they are open (since they’re open 7 days a week, this is a low estimate too), that’s $660,000.

Say I’m overestimating the owner’s share a lot — let’s cut that in half. Maybe they did the profit sharing on an unusually profitable day. Maybe they did it on a weekend day where they’re open a few more hours. Let’s say the owner can keep $1,000 a day . That means the owner pays the staff $28 an hour, pays for all of the business expenses, *and* has absolute minimum $300,000 in profit.

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