Business Strategies to Overcome Wage Increases

If one-third of your costs rose by 20% over three years, would your business survive?


My first employer doubled my wages every year until Prime Minister, Sir Robert Muldoon, instigated a wage and price freeze to curb inflation. My employer was my Dad, I was aged six, and an increase from five cents to ten cents a week wasn't going to hurt his dairy's finances. The minimum wage increases are a different story.

On 1 April 2019 the minimum wage will rise to $17.70/hour, rising to $20/hour by 1 April 2021. Source: Workers on higher wage rates will want to keep relativity to the minimum wages. ANZ analysts suggest that a typical hospitality business could see an overall wages & salaries increase of 20% between March 2018 and April 2021. Sales would need to increase by 7%, or other costs decrease to compensate.

Your businesses already struggle with skilled labour shortages, and stress for overworked owners. Now is the time to prepare for change.

Values, Purpose & Uniqueness

If your values, purpose and uniqueness resonate with your customers, they will be back time and again. The right business strategies will incorporate these.

Your business's core VALUES are at the heart of what you do. It provides clarity and makes decisions easier. When your actions align with your values, you feel confident and at peace. If a behaviour annoys or upsets you, it may be that it is conflict with your core values. It reflects in the look and feel of your establishment and the food you serve (E.g. Fast and Fresh, Tranquil, Family Friendly).

If your customers and employees relate to your PURPOSE, they will remain loyal. According to Simon Sinek, the Wright Brothers were the first team to achieve motorised flight because their purpose was inspirational. Source:  Your purpose may be to share your signature style of cuisine with the world, to feed families with wholesome food or it may be to build neighbourhood communities.

If you offer a UNIQUE experience, then you can price accordingly. Dans Le Noir at Rydges Auckland has a blacked-out restaurant, with blind wait staff. Customers are led into the restaurant in single file, cannot see to eat and have a few giggles when a neighbour spills a drink. They leave with more empathy for the visually impaired.

Business Strategies

Two-thirds of hospitality employers told the Restaurant Association they would raise prices. But raising your prices too high will cause customers to go down the road or dine at home. Look at the table of strategies and compare it with your values. Which strategies align? If you adopt one strategy, what is the flow-on effect? What else would need to change?


Basic Business Strategies

Sell more

Increase prices


Flexible menu pricing

More advertising

Increase capacity

More tables

Breakfast service

Extra dinner service

Additional services

Rent space and equipment

Customer experience

Reduce food costs

Flexible menus

Seasonal produce

Reduce portion sizes

Supplier agreements

Reduce overhead costs

Better utility plans

Negotiate interest terms

Cut Staff Hours

Owner works longer hours

Reduce other staff benefits

Improve Efficiencies

Automate booking and/or ordering systems

Improve workflow

Cut wastage


Forecasting and budgeting

With business strategy in hand, how will you pay for it? Will you see a positive return from the effort? With the help of your accountant or bookkeeper, create a monthly or weekly budget of your expenses and capital expenses. Forecast your expected revenue considering seasonal fluctuations. Work out how much extra investment and borrowings you will need.

The minimum wage is rising and with it your labour costs, so the impact for your business will be huge. Increasing menu prices and working longer hours are not the only answers to this problem. Will you be ready with a clear strategy that aligns to your values, purpose and uniqueness?


First published in Savour magazine, March 2019 edition, alongside a Restaurant Association workshop "Business Strategies to Overcome Wage Increases".

Download a PDF version here or contact the author by email if you would like a copy of the workshop booklet. Like our Facebook page for regular tips.

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, auditors, business consultants, tax advisors, trust and business valuation specialists.