Chef/owner Rebecca Foxman got into it with a customer one day this summer.

The customer quibbled with the price of his large order of habanero-seasoned fries from Fox & Son, Foxman’s stall in the Reading Terminal Market.

“He said to my cashier, ‘Sweetie, you make sure I get a lot of extra fries, because $7 for french fries is just ridiculous.’” When the order came up, he started to argue. The employee fetched Foxman.

“He says, ‘Ma’am, there is no way that $7 for this amount of fries is acceptable. This is unacceptable,’” Foxman remembers, raising her voice.

“And I said, ‘Sir, all due respect, potatoes are $30 a case. These fries were hand-cut 25 hours ago, brined overnight, cooked off in the morning, cooked to order when you order them, hand-tossed in salt, tossed in your seasoning, and then put in paper packaging for you. It’s a pandemic, and I’m more than happy to give you your money back, but this is what it costs.”

The customer backed down and apologized. For Foxman, the interaction was cathartic, but it underscored a point she understands all too well: The food-service industry and the experience its workers produce are undervalued.

“It’s like you’re an artist,” she says of the culinary profession. “You’re painting a picture, but you have to paint it 1,000 times and it has to be exactly, consistently perfect every time. People don’t realize how hard it is.”

Foxman strives to fairly compensate her workers for the demanding jobs they perform. Her nine employees make at least $20 an hour, are enrolled in a telehealth plan she covers 100%, and know their schedules three months in advance. Still, she doesn’t feel she’s doing enough.

“I want everyone to make $40,000 a year. That would be my dream,” she says. “I just wish that people were willing to pay what food is worth. And it’s not people’s fault that they can’t.”

Foxman is among a cohort of Philadelphia operators offering employees higher wages and better working conditions: positive workplace culture, predictable hours, paid time off, subsidized benefits. Philly restaurant workers recently identified those qualities as crucial to making the service industry more attractive.

» READ MORE: ‘This is a real job’: Philly’s restaurant workers dissect the labor shortage, and contemplate a different future

For business owners, providing this employment package often results in more challenging financials, and the strategy for doing so while making ends meet varies. Better pay and working conditions don’t guarantee a surplus of workers, either; most of these operators struggled to staff up in this environment.

Even so, they say these practices ultimately make good business sense, reducing turnover and improving morale and service. But they add that these are only modest steps toward tackling the restaurant industry’s problems — problems so broad and deep-rooted that addressing them will require institutional and cultural change on the part of customers and government.

Just as restaurant workers hope transformation is on the horizon, so, too, do these owners.

“There are a lot of people who want to be better, who want to do better. And I keep hearing, ‘Well, consumers don’t want to pay more.’ No, I think maybe what we need to do is educate the guests a little bit more,” says Judy Ni, owner of Center City’s Baology, where all five staffers are salaried with roughly four weeks of paid time off.

“We want to do these things,” Ni says of good employment practices, “but we need support in other ways in order to level the playing field.”

The cost of doing better

When Ringo Roseman opened the Bagel Place in Queen Village in 2017, he offered a $15 minimum wage in addition to an employee tip share. It was a cornerstone of his business, he says. “I wanted to prove that it works and then show other people.”

Even with the higher wage built into his business plan from day one, Roseman says there were times he wanted to tear his hair out for doing so. “But it wasn’t the thing that was making or breaking me,” he adds. “I also think that if I’d been paying less, it would have been even harder — I don’t think it helps me hire people, I think it helps me retain employees.” (Four of his 17 employees have been with him since his first year of business.)

It took him two years before he could offer health insurance, “in part, just ‘cause it’s crazy complicated” to pick a plan that is both helpful and accessible to employees. He offers the benefits plan to all of his full-time staff, but not all of them utilize it. Roseman badgered some into signing up, reminding them that health care is important. “A lot of people in this industry just aren’t used to self-care. We’re not used to more classically systemic employment benefits stuff. We think we get free food and discounts on drinks if there’s a bar.”

Roseman says it was a year before the Bagel Place broke even, and two before he paid himself. Even then, he allotted himself a less-than-$15/hour wage. “I didn’t start paying myself a reasonable rate until this past year,” he says.

That tactic — paying themselves less, or in some cases nothing — seems to be a trend among small-scale owners paying higher wages. Foxman admits she probably skimps on her own pay so that she can maintain her high standards and not overwork her staff. At Baology, Ni doesn’t collect a paycheck at all, though she says she does pay her culinary director and husband, Andy Tessier, enough for them to live on.

“I probably make the least of [the adults] that work here,” says ComfortFood and Kitchenette owner Kim Quay, who has offered her adult workers living wages since she opened her Bucks County cafe and catering business a decade ago. (Her teenaged employees start at $10 an hour and earn raises the longer they stay.)

As with most restaurant owners, Quay’s margins are razor-thin, more so as a BYOB. While having a higher cost of labor could theoretically be offset by keeping down food expenses, she’s unwilling to sacrifice local or high-quality ingredients.

“You’ve got these two things that cost a lot, and they’re what is really important to me and what we base the business on. We have to figure out other ways to make up for the ridiculously high budget, so we have a small staff that works really, really hard,” Quay says.

That’s another potential trade-off to paying more. If she had the means, Quay would bring in one or two more line cooks. It would make scheduling easier and lighten the load on her 14 employees, but it’s not feasible. “We can’t afford to pay a large staff a living wage and stay open.”

Even if they might short themselves to accomplish a greater goal, these owners acknowledge that’s not something everyone can afford to do. Quay leads a relatively sparse lifestyle and says she’s “insanely lucky” to have expenses in her life — house, car, kids’ college tuitions — squared away at the moment. “It works for right now.”

Foxman puts it another way: “There’s privilege in sacrifice.”

Making it work

Lokal Artisan Foods owner Charisse McGill has nine employees, mostly teenaged. She has paid $10 an hour since she launched Lokal’s traveling French Toast Bites stand in 2018, and she doles out incremental raises to employees who stay on from season to season.

“While we grow, their salaries grow, too,” she says. McGill’s approach to her workers is one of reciprocity: “Every day you guys come in, you help me reach my dreams. What can I do to help you?”

When asked if she pays herself a living wage, she laughs. “I’m living. The lights are still on, the mortgage is paid, I can eat meat twice a week.” She’s last in the pecking order of who gets paid. But, she adds, she makes more now than she did working as a director at a local college.

McGill has recently focused on making her business more pandemic-proof. In addition to setting up shop at Spruce Street Harbor Park and City Hall’s Christmas Village, she’s in talks to open a permanent space on University of Delaware’s campus. She’s also collaborated with other companies to sell French Toast Bites-branded beer, coffee, and spice. “The ancillary businesses help,” she says.

As wages increase, owners are exploring ways to afford the higher cost of labor. Some are reducing hours of operation and raising prices. Others, like McGill, have diversified revenue streams. That’s a tactic cited by a recent how-to guide, “Restaurants Can Provide Livable Wages,” from the advocacy nonprofit One Fair Wage. The guide outlines a few models for paying higher, more equitable wages for both front- and back-of-house workers and suggests cost-saving and moneymaking strategies to achieve them.

In Philadelphia, the most popular method for swinging higher pay has been to ditch (or sideline) tipping and levy a service charge instead. It’s not a new concept, but it’s gained much broader embrace during the pandemic, with dozens of restaurants tacking them onto checks in the last year.

Service-charge pros and cons

The local new-wave leader of this model may be Martha in Kensington, which implemented a 20% service charge last June, when it reopened for outdoor dining. Co-owner Jon Medlinsky announced it in a lengthy post on Instagram and an even lengthier one on the restaurant’s website, detailing the racist history of tipping, how the fee would work, how employees would be paid and evaluated moving forward, and the goals the new model hoped to achieve (position equity, health insurance, respect, and social justice, to name a few).

On Instagram, Medlinsky says, the response was “total applause. Everyone loved it. When it got a little broader ... we started to get negative feedback from people who’ve never been to Martha, never understood it.” When the restaurant opened in 2015, it aimed to bridge divisions, financial and cultural, between front and back of house; every worker trained to perform every job in the restaurant. The new pay system is another outgrowth of that mentality.

“I really wanted the sort of moral clarity and cleanness of the service fee and the breakdown equally amongst the staff,” Medlinsky explains.

Despite some grumbling Yelp reviews, most Martha customers haven’t objected to the fee. Some still leave additional tip via an employee-run Venmo account, which likely brings Martha’s average gratuity to 22%.

Medlinsky acknowledges FOH workers likely do earn a bit less than they would (he estimates the previous average was closer to 25%), though not enough to cause complaints. And the equitable pay structure doesn’t magically increase productivity, he adds.

“That’s a pretty ornery, mean thing to say, but it’s just the truth. People don’t work harder when they get paid more. They just get paid more, which is important,” he says. “It’s a long game.”

Matt Hendricks considered using a service-charge model when he opened Fairmount’s Thirsty Dice in 2018, but he got talked out of it. It wasn’t until the board game cafe reopened for service this spring that it added an 18% charge to checks, something he did to ensure everyone got paid regardless of whether customers turned out.

But ultimately the service charge has enabled Hendricks to offer all staff at least $15 an hour, plus 12 days of paid time off and subsidized health benefits. (Previously, he paid FOH staff about $8-9 an hour plus tips, and BOH made at or about $15 an hour.)

“The vast majority of guests are fine or fine and then some with it,” Hendricks says. Still, he recently discovered not all employees fully understood the new pay structure, which has different tax implications from the traditional tipped-wage model. Money left as a tip is considered property of an employee, whereas service charges are counted as part of a restaurant’s revenue, and can be distributed at an owner’s discretion.

The service-charge model excludes owners from claiming the FICA tip credit, which can reduce one’s tax liability. For workers, it means wages come as a paycheck — taxed upfront and on a more regimented basis than tips. It potentially reduces take-home pay, as well as their end-of-year tax burden.

In recent interviews, the Inquirer found many workers were enthusiastic about service charges; they appreciated having predictable monthly income and felt the model had potential to secure benefits like health insurance.

But Hendricks said the new structure was a turnoff for at least one employee. A part-time server recently left, saying he could make more money at his other job at a Center City restaurant. The server mentioned a busy night at Thirsty Dice in which his total sales had amounted to $2,500 — for which he received his standard hourly rate rather than a percentage of sales through tips.

“‘If I had done that at the place that I work at downtown, I’d be making way more,’” he told Hendricks.

Hendricks understood but meditated on the employee’s reasoning afterward. He thought about the contributions of other workers at the cafe that night who wouldn’t have stood to make tips “and thought, ‘That was the number at the bottom of a piece of paper next to your name, but ... It takes everybody to pull that together and make that experience, and it’s not just you.’”

“To be honest with you, it just made me feel like, yeah, there’s really a lot of merit to this model.”

Bringing customers along

Fitz and Starts owner Pat O’Malley switched to a service-charge model last October, when the Queen Village restaurant (formerly Hungry Pigeon) rebranded. Like Hendricks, O’Malley viewed it as an insurance policy against pandemic conditions: Employees would get paid for their time, come what may. The system has been tweaked to allow hourly employees to benefit from higher sales volumes. While $15/hour is the base wage, he says take-home pay can rise to $23 an hour.

That wage isn’t always competitive. It’s taken O’Malley several months to staff up enough to reopen for dinner service, in part, he believes, because he’s competing with restaurants where servers might stand to make $25 or $30 an hour with traditional tips.

O’Malley gets it. “I’ve been in the industry for a long time, and money talks. You’re talking about people that are probably under 30, if not under 26. They’re healthy. Health benefits and stuff like that, it’s maybe just not as important to them.”

What’s more frustrating to him is the industry’s uneven playing field. Fitz and Starts is fastidious about its sourcing, which comes at a price. A higher labor cost makes its business plan even more challenging. And the restaurant’s casual vibe can set expectations of a lower price-point with customers. O’Malley can’t charge what one might for a tasting menu at a downtown restaurant, even if the quality is the same.

He poses a converse example. “Think of the worst grilled cheese you’ve ever had. White bread, whatever American cheese. How much does that cost? It’s probably $3.99, $4.99,” he says. “Now take the Fitz and Starts grilled cheese, prepared by professionals using local, ethically produced cheese and bread made in-house from regionally milled flour, brought by a well-informed server paid a minimum of $15 an hour. “How much is our grilled cheese supposed to cost? How much more should it be? Two times? Three times? Four times?’”

Fitz and Starts explains on its menu, website, and on online checkout that the service charge enables it to pay for higher wages and benefits. The carefully worded language helps customers understand the real cost of dining out. But the reality of the service charge, he says, is “it’s a way of getting more for our products.”

If customers were willing to pay the true price of dining out — accounting for the total experience, beyond the cost of ingredients on a plate — a separate fee might not be necessary, O’Malley argues. But in an environment where everyone plays by different rules, it is.

“If we’re all [raising prices to pay higher wages], it makes it easier. The fact that there’s only handfuls of us doing it makes it super-hard for the ones that are.”

Institutionalizing change

Avram Hornik of FCM Hospitality operates seasonal venues like Morgan’s Pier and Parks on Tap, and year-round restaurants like Harper’s Garden in Center City and Craft Hall on Delaware Avenue. FCM has 450 employees spanning eight locations, who all earn at least $15 an hour in tipped and non-tipped wages. The company recently standardized wages by experience levels to streamline hiring and eliminate pay disparities.

Hornik’s business is a long way off from a mom-and-pop operation — later this year FCM is taking 350 employees on a three-day trip to Mexico as a thank you — but he can still relate. Of owners who say they can’t afford to pay higher wages, he says immediately: “They’re not lying.”

“Most people in restaurants ... if they have one extra person on staff, well then, that money is coming directly out of the money they’re taking home for their families. If they have to raise the wages up 10%, well, that money has to come from somewhere,” he says. “It’s not simple.”

Hornik is eager to discuss systemic changes that could be implemented to promote industry-wide change. “I think there’s things that we could do public policy-wise that don’t require a mandate, but that will allow competition to create these policies.”

His biggest idea might be to create a “blue-star business” rating that would publicly denote restaurants following fair-wage policies, like New York City’s letter grading for restaurant inspections. Such a rating might give blue-star restaurants a competitive advantage, incentivizing employers to raise standards.

It would also present a clear path to business owners. “There’s so many things that a restaurant owner has to address and deal with on a daily basis. If the decision was easy — like, ‘Here are the policies, I just have to choose this’ — they’re far more likely to do it than if they have to invent a whole policy out of nothing,” Hornik says.

Success of such a plan would hinge on two external forces: an organization — say, the City of Philadelphia — that outlines and upholds the policies, and customers who buy into the idea.

“If the consumers don’t care, then nothing is going to change,” Hornik says. He believes many customers, at least in Philadelphia, would support restaurants that treat employees better if they had that knowledge.

Baology’s Judy Ni and Jill Weber of Sojourn Philly have discussed a similar idea, brainstorming about the metrics that restaurants would be evaluated by and who might administer them. In Ni’s recap of their conversations, the patchwork nature of the restaurant business resurfaces again.

“There are a lot of different metrics which you can measure, and none of us run our businesses the same way. ... Why are we expecting the consumer to navigate this when, even as owners, we’re in conversations that we can’t even begin to possibly process?” Ni says. “We have to find a way to kind of simplify that.”

These owners say that widespread change in the restaurant industry can’t come from individuals diligently balancing budgets and patiently explaining their prices. Instead it will fall to policymakers and customers. If they look within the restaurant community, they’ll find allies waiting.

“We’re a very fragmented industry, and very small. But we have the opportunity to rise to this moment,” Ni says. “We can be a better version of what we knew and what we thought we could be.”