Restaurants say No to Tips, Yes to Higher Prices

Prompted by a spurt of new minimum wage proposals in major cities, an expanding number of restaurateurs are experimenting with no tipping policies as a way to manage rising labor costs.

On October 15, 2015, Danny Meyer, renowned restaurateur and CEO of the Union Square Hospitality Group, announced that starting in late November, there will no longer be a tip line on patrons' checks and no need to leave additional cash at the table, coat check or bar. The new policy will kick start at The Modern Restaurant and will be instituted at the group's remaining New York eateries next year.

In Seattle, a fundamental inequity was found in restaurants where people who worked in the kitchen were paid about half as much as the people who worked with customers in front of the house. In San Francisco, menu prices at two restaurants include tips and taxes. An upscale restaurant in Manhattan tacks on a 20 percent administrative fee.

In some cities like New York, where tipping is subject to a welter of federal, state and local regulations and tax laws, eliminating it would simplify bookkeeping. Managers predict that it would allow them to better calibrate wages to reward employees based on the length of their service and the complexity of their jobs.

Although mandatory service charges are common around the world, restaurant tipping is deeply ingrained in the American psyche. There is a worry that potential diners will see significantly higher prices without realizing that they include gratuities. Restaurateurs also worry their best servers will leave as a result.

With further mandated wage increases scheduled, a hybrid model is coming into focus. This model includes guests being charged a mandatory 10 percent service charge and then encouraged to add a 5 percent to 10 percent gratuity. This means that restaurant owners are faced with giving servers a $2.50-an hour raise when they are already pulling in about $25 an hour in tips.

Since this new policy has gone into place, wages have risen between $3 and $12 an hour, with the lowest paid worker earning $15 an hour. Everyone, including part-timers, has health insurance and a 401(k) retirement plan.

While menus still state that the price includes service, the credit card slips now have a line that reads: "If you INSIST on leaving a tip, write it here."

 

Volkswagen Morale Still Strong

Sentiments proved resilient despite the scandal at the major automaker Volkswagen, which recently admitted equipping cars with software that enabled them to evade U.S. emissions tests. Despite the company facing heavy fines and the possibility of lost sales, business morale is still high. 

The Volkswagen scandal broke out last year when a clean energy advocacy group that had raised questions about emission levels in diesel vehicles commissioned a West Virginia laboratory. For more than a year, VW argued that it had been doing nothing wrong. Only recently did VW admit that it had installed "defeat devices" to get around emissions standards.

Volkswagen has announced a recall of 8.5 millions vehicles in Europe to remove the software, including 2.4 million in Germany, roughly 1.2 million in the U.K. and nearly one million in France. U.S. regulators have already ordered the company to recall nearly 500,000 vehicles. The recall in Europe will begin in January 2016. U.S. regulators are looking into a second piece of software that Volkswagen used to control emissions. They are studying what the software does, how it may affect vehicle performance and whether it may have been used to manipulate emissions. Volkswagen said it has withdrawn its application to register 2016 diesels in the United States.

Volkswagen is planning a massive savings to cope with the costs of the scandal; recalls, fines, compensation and lost sales. It has set aside $7.3 billion, but Credit Suisse analysts estimate the total cost to be about $87 billion in a worst-case scenario.

Remarkably, there has been an interesting reaction to the recent series of uncertainties and turmoil. Carsten Brzeski, chief economist at ING stated, "One should not interpret too much in a single confidence indicator but today's Ifo (Information and Forschung (research)) reading suggests that the German business community is filing the Volkswagen scandal as a one-off and also shrugs off the risk from a possible Chinese and emerging markets slowdown."

North Carolina Ranked #2 on Forbes' List of Best States for Business and Careers

Forbes magazine has named North Carolina as one of the top states for businesses and careers in the publication's 10th annual list. North Carolina moved up one spot from last year ending up at number two for the year. North Carolina is the only state to have appeared in the top five each year of the study. When compiling the list of states, Forbes looks at business costs such as labor, energy and taxes, and other factors such as labor supply, regulatory environment, economic climate, growth prospects and quality of life. North Carolina placed high on low business costs, its work force, and its pro-business regulatory environment. North Carolina alone has attracted more new facilities and expansions in 2014 than any other state.

Our very own BridgeCubator is one of these expansions. BridgeCubator assists individuals and businesses with cultivating relationships and creating new revenue streams for start-ups. It is a great resource for foreign corporations that want to successfully integrate into the United States business environment and culture.

German Conergy is going solar in NC

Conergy, a Germany-based company, recently secured a $55 million financing facility to support the construction of seven solar parks, making North Carolina the epicenter for its move from being a construction contractor for solar projects to being an independent power producer that owns and operates solar projects. The funds will be used to build the first set of assets it will own and operate under its new independent producer strategy.

Conergy is already a market leader for engineering, purchasing and construction contracts for solar projects in several U.S. states, but now it wants to take the next step by expanding into ownership. Eventually, Conergy would like to own and operate projects in California, New Jersey, Massachusetts and possibly Florida, which Conergy believes are states that allow solar to compete in their markets. The first projects Conergy has taken under direct ownership are a portfolio of five (5) ground mount PV plants in North Carolina, totaling 28 MW. Conergy completed construction of these five (5) installations in September. Also in September, it bought development rights for seven (7) more projects, totaling 36 MW, from Arizona-based Sunlight.

Its goal is to meet all requirements to qualify for the North Carolina state solar tax credit. It expects the solar farm to start commercial operations early next year. Their output will be sold to Duke Energy Carolinas under a 15-year Power Purchase Agreement.

Conergy will remain active in construction in the state next year after it finished building out the Sunlight purchases.

"German - American Mittelstand Forum" on December 8, 2015 in Stuttgart

Please save the date! December 8, 2015 from 8am to 3pm.
 

BridgehouseLaw LLP is pleased and honored to be part of the "German - American Mittelstand Forum" held at the Mercedes-Benz Arena "VIP-Lounge" in Stuttgart, Germany.
Careful planning, strong partners and networks on-the-ground are the keys to success when exploring new markets. This event will provide you with answers to  questions such as:
* What are the experiences of other German companies that have expanded to the United States?
* How do I choose a location, given how vast the U.S. is in size and market conditions?
BridgehouseLaw LLP will host a high-level U.S. delegation of representatives from industry and politics, development advisors and proven U.S. experts.
 

For more information on the event or to register please contact Henriette Morton via email: henriette.morton@bhlus.com

Online Data Protection: Consumer Protection or Fundamental Right?

On October 6, 2015, Europe's highest court, The European Court of Justice (ECJ), ruled that the long-standing international agreement called "Safe Harbor" was immediately invalid.  Safe Harbor allowed companies to transfer the digital data of individuals between the U.S. and the E.U., as long as there was an "adequate" level of privacy protection.

The European Commission's July 2000 decision to implement Safe Harbor was an attempt to regulate the E.U. and U.S.'s approach to privacy because the European Commission believed that an adequate level of protection lacked through domestic law or international commitments.  This level of protection gap stems from the different approaches the U.S. and E.U. have about online data security where the U.S. privacy is viewed as a consumer protection issue, but in Europe, privacy is viewed as a fundamental right, similar to rights granted in the U.S. Constitution.

Now with the ECJ's ruling, the EU may make their own determinations as to how companies will collect and use information gathered on its citizens, which removes the uniformity among the EU nations with regard to data privacy.  Moreover, because there are thousands of U.S. companies, which are certified under Safe Harbor, there is a concern that without the means to transfer data from Europe to the U.S., trans-Atlantic trade will suffer.

The ECJ's ruling suggests that there was not a problem with the Safe Harbor concept, but rather the lack of procedural safeguards in the Safe Harbor.  Therefore, until modifications to the Safe Harbor occur that may adequately protect the fundamental rights of the E.U. citizens whose data is being transferred to the U.S. and the U.S. passes legislation that restricts the power of the government to access personal data, there can no longer be transfers of data from the EU to the U.S.