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Could Papa Gino's be the tip of iceberg lettuce for the new state minimum wage rules?
The parent company of the pizza chain in Dedham declared bankruptcy under Chapter 11 today after the sudden closure of 47 Papa Gino pizzerias and 45 D'Angelo sandwich shops, putting 1,100 employees to death. Chief Financial Officer Corey Wendland highlighted one of the main reasons his company needed more pulp: minimum wage increases in many of its markets, combined with higher health insurance expenses.
Since Papa Gino operates in only four states, it is not difficult to know which "markets" are mentioned in the Wendland court affidavit. The mandatory minimum has increased in three years to $ 11 an hour in 2017 in the state of Massachusetts, where the company is located. The minimum wage in Connecticut rose from $ 9.60 to $ 10.10 in 2017. Rhode Island followed suit a year later, raising the minimum wage to $ 10.10 and increasing it to $ 10.50 next year. (New Hampshire, meanwhile, has no state minimum, but follows the federal floor, currently at $ 7.25 per hour.)
Of course, the increases are not yet over in Massachusetts. As part of a "grand agreement" between businesses and workers, state lawmakers approved another big rally in June that will result in a minimum of $ 15 per hour over five years starting in January .
The Massachusetts Retailers Association won a major concession during these negotiations: the phasing out of the one and a half time pay requirement for Sundays and holidays. But that did not stop the members of the trade group from complaining about increases in the minimum wage. The president of the Retailers Association, Jon Hurst, says the impact goes beyond the simple salary increase: the costs of unemployment insurance, the labor costs and the new fees to cover the states Medicaid costs are all influenced, to some extent, by wage rates. Companies with a large number of part-time, low-paid workers, such as Papa Gino's, are particularly affected.
Chris Carlozzi of the National Federation of Independent Business said he expects more closures as the minimum of the mass goes up. He added that small businesses would deal with other ways, for example by reducing hours of work or by planning hiring plans.
Of course, the costs of salaries and insurance were not the only problem at Papa Gino. The company's owner, Bunker Hill Capital, had tens of millions of dollars in debt. Wynnchurch Capital has acquired the majority of this debt and is the main candidate for the resumption of control of Papa Gino after the bankruptcy. Papa Gino's also had to deal with increased competition from national chains of pizzas and sandwiches and found himself with too much footprint – both in terms of number and size of locations – while more and more consumers were opting for delivery and takeaway orders in restaurants.
Harris Gruman, executive director of the Massachusetts Council of Service Employees International Union, said Papa Gino is making the pay rise a scapegoat for management errors or miscalculations. Many fast food chains are doing well in Massachusetts, he said, and many pizzerias are already paying up to $ 15 at the hour.
But small business advocates would say that doing well will not be any easier for Papa Gino or others in the retail and foodservice sectors, and there is no increase in wages at all. come.
Jon Chesto can be contacted at [email protected]. Follow him on Twitter @jonchesto.
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