How Katie Button redesigned their wage model to adapt post-pandemic

How Katie Button redesigned their wage model to adapt post-pandemic
D. J. Costantino

By D. J. Costantino

After Katie Button's flagship restaurant, Cúrate, closed during the pandemic shutdowns, she saw an opportunity. Along with her partner, Félix Meana, Button took a microscope to the structure of her business and how her team got paid. Katie joined us on the Pre-Shift podcast to go along that journey from paying sub-minimum wage to a living wage and tip sharing model, and all of the challenges and rewards that come with that. But first, Katie shared with us her unique path through the restaurant business.

"I studied engineering and almost started a PhD program before I just realized I was not enjoying life and wasn't enjoying what I was doing, and I felt like I was on this path of the rest of my life doing something that I didn't like. And I was cooking on the side to get me through my studies, for fun. So, when I dropped out of a PhD program I was supposed to start and that's when I started working in restaurants. Because I needed a job and I was looking around, and I didn't know clearly at that time where my life was going to take me, I just knew I needed money. And I started applying for jobs in DC at different restaurants, and one of Jose Andres's restaurants gave me a shot. And I started as a server, so I started off working in the front of the house and learning, and they were the only ones who would give a PhD dropout with no previous experience a job.

It worked out well for me because I got introduced to Spanish food, Spanish cooking, and had an opportunity then. I met my now-husband working there and went and lived and worked in Spain and worked at a incredible restaurant, El Bulli. I met a bunch of the people, got connected there and then went back, worked at one of Jose's restaurants as a cook, and then went back to Spain and worked and cooked in the restaurant. So I've done both sides of the restaurant, a lot of different jobs in the restaurant industry before my husband and I decided to move to Asheville, North Carolina to open Cúrate, our first restaurant, which we opened in 2011. And we opened a Spanish tapas restaurant because my husband Felix is from Spain, and he's our front of house service guy and also idea man. And the only professional food I had cooked was Spanish food. I'm not Spanish, it just so happened that via Jose Andres and time cooking and living in Spain that that was where I was most comfortable. So, the two of us combined created this Spanish tapas restaurant, Cúrate."

Cúrate enjoyed success and accolades. As a chef, Katie was named one of Food & Wine magazine's Best New Chefs of 2015 and has had more than a few James Beard Award nods. In 2018, Cúrate was named one of the 40 most important restaurants of the decade by Esquire and recognized as one of the nation's 100 best wine restaurants by Wine Enthusiast. That run was put on pause when the pandemic forced restaurant closures, but Katie and her team took the opportunity to make changes across their business, one that's been brewing since even before COVID's arrival.

"It's something that we had been thinking about for a while, struggling, one, with the sub-minimum wage pay models for our front of house team, where you pay them the least that you legally can, $2.13 an hour. And then they make everything up on tips, which puts them very much at the whim and beck and call of whoever the guest happens to be that they're taking care of. And also we were seeing a really large pay discrepancy. I mean, we know, we would talk about how everybody in our kitchens and restaurants was one big team, that we all contributed to this incredible experience that we're trying to offer our guests. That it starts with the host, when the first touch that they have with a guest, and then to the last glass or plate or saute pan getting put back on the shelf at the end of the night. And the prep kitchen, everybody, the dish team they all work in...It's a ballet that all has to be working together. And if one piece is missing, the whole house crumbles.

It's like we were feeling this value of each and every individual, but then we were having a really hard time with the pay structure, and what goes along with sub-minimum wage pay, which is then the mandates, of course, for a reason of protection. If you're going to pay people $2.13 an hour, then they're going to be protected to receive all their tips. But it just didn't feel like a great model, and we were struggling with that a lot. And when we shut down, it was really, really hard. I think everybody has nightmares about whether they made it back or not. A lot of people didn't. But it was really hard for the restaurant industry to close.

But when we sat there, we were thinking about reopening and we were like, "Gosh, do we reopen and bring back the same kind of bad feelings we were having about the way things were going before, and just continue that?" Because we were having a hard time changing it while things were running. And then we were in this situation where at this point we didn't have a single employee. I mean, when we closed we had to lay off everybody because all of a sudden we had money and then we went into debt instantly, overnight, when we closed our restaurant. I mean, it's like a wheel, so you'd already spent — Do you know what I mean? — the money that you had on the payroll in order to pay everybody.

It was insane. It was crazy how devastating that was. But we looked at it as an opportunity to change the structure. We were like, we get to recreate these jobs, we get to recreate what they look like and their pay structure, and then all we can do is throw that back out there into the world and see who wants to come be a part of it. And we took that leap. It was really big and it's really hard, and I don't want to underestimate that type of change and how challenging it is."

That discrepancy was most noticeable during the holiday season, when the restaurant is busier than ever.

"Holiday weeks are crushing. So, in Asheville, that's when everybody comes to Asheville. It's like, "The holidays are here and we're all going to Asheville." So, Christmas week for example is crushing. And you're just working as fast as you can, whether you are cooking, prepping, washing dishes, whatever you are doing, you are hustling. But then with the model that we had, the only people who were receiving the benefit of the hustle, because the hustle means that more diners are in there. When you're hustling that hard, it's because there are more diners sitting down, there's more work to be done, and therefore there's more tips.

And the only people who were receiving that was a very small number of people, and then the rest were just having to work super hard for an hourly wage that, yes, was above minimum wage, but it was nowhere near even close to what the other...The discrepancy between the positions, between the front and the back of the house, became enormous, because of the volume of tips that were coming in our door. And it felt like we were saying to our people, "You are less valuable." And that just really didn't feel right."

Now, Katie knows firsthand the differences in comp from front to the back of house. She lived it in her career. But the changes she's made for her business are for good.

"I started in DC working in the front of the house, and I remember the tips and things that I would bring home. I remember, and that felt great. And then because my passion was always for cooking, I switched into cooking. And I remember trying to ask, trying to get $15 an hour, you know what I mean? Having to bargain to try to get that amount, and it was a very distinct difference. I was doing it because I was excited and passionate about cooking, so at the time, I didn't mind at the moment. But then when you're like...I don't know, there's something about being an employer and looking at your people and how you see them and how you feel and their work ethic and just what's going on and how all of a sudden you're like, "Wow, this is messed up."

And honestly, it's the sub-minimum wage pay piece that has made everything messed up. Because it all starts with that, because once you allow the sub-minimum wage pay, it's then all of a sudden the tips have to go to those individuals, which makes total sense. But it's because you're starting at a place of not paying people for work as an employer. And the moment that we got out of that, it has now opened up conversation and understanding and pay visibility between our team members. And it's been a hard road for sure to get to that, it's been bumpy, the first year in particular. But I would never go back. I mean, we're at a tip sharing model right now. I would love to just do away with tips entirely. That's the next hurdle, and each hurdle is hard. So you do what you can in the moment that you're in."

At the center of her restaurant's new pay structure is an entirely new way of managing tips. They started with an even tip split across the board before moving into a weighted tip pool structure, all the while creating transparency around base pay rates and opportunities to improve.

"Basically, what it means is we apply certain weights to positions. And we're trying to create a path. The end goal is to create a path for people through promotion to move up and receive more pay through the positions. That's the ultimate goal of what we're trying to achieve. And the way the tip pool came out of...We can't totally break the system, you know what I mean? It's also been there for so long, and we were the first ones in a casual fine dining restaurant, full-service restaurant in Asheville to go to a tip sharing model. And so it was hard and we needed to think about how do we do this in a way that makes sense for us? And so the weighted tip pool works well. We're able to share tips across the team. But we give a little bit higher tip percentage to those workers who do have the opportunity to sell, to our front of house servers and bartenders and things like that.

But it's still drastically improved where we were before we implemented this. And now we've coupled that with going into this year with clear base pay rates and abilities to achieve raises for all positions that are based on education and training. So, in the kitchen, as you learn new stations, that's how you get potential bumps. And in the front of the house, as you learn and pass a wine test, you get bumps. And we're creating equality in those areas. And in the prep kitchen and things like that, if you move from peeling and cutting potatoes into recipe production where you're reading a recipe and creating a sauce or something like that, there are moments to move up so that those base pay wages, people see an opportunity to gain more money as well.

We're seeing that the really nice thing is in the slow season also. It's like when you go to a tip sharing model, there aren't quite the big, drastic peaks and the big, drastic drops, because the base wage is so much higher for everybody that it normalizes things for people. And honestly, they can therefore plan. And it's true that in the winter our labor percentage goes up because of that situation, but then it evens out when you look at the full year."

In addition to results on the pay stub, these new practices have had a positive effect on team morale in the front and the back of the house.

"The people in the restaurant feel more connected to each other, and also they feel less at the mercy of the situation and potential guest situation that they have going on. They're doing a job and it is our responsibility as managers and owners to do performance reviews and evaluations of that job and offer training and development and improvement in order to develop people to make the...You know what I mean? To have them succeed in their job and be great as in the service industry. The balance of your entire paycheck being left in the hands of how someone is feeling that day does not work. I mean, it creates opportunities of harassment and racial and sexual assumptions and judgments of individuals, and therefore it's just not right."

On the surface, of course, it sounds like something every restaurant can and should do, but that's underselling how difficult it is to make this work. It requires a lot of dedication, strength in the face of change and the willingness to go against the grain and do things differently. Button and her team are putting in the effort every day, working with economics firms and looking hard at their food costs and menu prices to make it happen.

"We're like, "Okay, can we do this? And we create these different jobs at these different rates. What does that look like?" We also, here in Asheville, have a wonderful company, Just Economics, they calculate the living wage rate for Asheville. And so we create a commitment to individuals to ensure that they are earning that amount. It's rounded with some tips and things like that included, but they have to make at least that. The other thing I have to say that we added into that modeling was before when we had our front of house that was getting paid sub-minimum wage and then they were getting so much money in tips all to one small group of people, that we kept coming up with ways to not give them benefits. Because this was our mindset before.

I mean, this is where the thing comes up. It creates this...These two parts front and back against one another, and they can't work together, they can't be one team, they can't have the same benefits. I mean, we were not offering paid time off and only offering it to the back of the kitchen, you know what I mean? In order to offset the pay disparity. And that is just also nuts. That never felt right to us either. And so we were like, no, everybody needs the opportunity to get paid time off and everybody needs sick pay and everybody needs to be able to contribute to a 401K. And all of these things are based on their full salary, which includes their tips. You know what I mean? And changing the pay structure has allowed us to do that. It allows us to treat everyone in our restaurant as employees that are all valuable.

I mean, menu prices and portions and, I mean, we did have to really look at that. We really have to guard...Because the other thing that's happened is because we now offer more benefits to more people, we've seen that labor percentage for our restaurant creep up. I mean, it is hard for us to get under 35% on that, it's 40% in the winter. And where we have to do that is we look at food cost.

So it's like, this is important to us. How can we maybe in the food cost and in our beverage offerings and things like that make up a little bit so that we can offer both eliminating sub-minimum wage pay and also having more benefits across the board? And we're reevaluating it all the time. And I would say to people, one thing that's been important is we haven't done everything all at once. I mean, granted, we did have to do the pay thing all at once. But in our benefit world, we've been adding those things back on since the pandemic, we added those back on little by little, and have finally gotten back to where we were."

Her team is also working to add benefits like health care and retirement savings to the overall compensation profile.

"I mean, they have access to all different kinds of insurance like health insurance, which we contribute to. We do a high deductible health insurance plan, but we couple it with a direct primary care membership, which we cover half the cost of. Direct primary care is amazing. It's a certain flat rate per month and you get 24/7 access to your physician. We are finding that this is changing the health lives of myself and all of our employees to have this.

It gets it out of the insurance. It gets your normal day-to-day care out of the world of insurance. And then you have this insurance for catastrophic-type situations, which is important. So, we do those two things combined, which is really great. And then we also have dental insurance and vision and short-term disability that's offered and the paid time off and the sick time as well. And beginning accruing those immediately and having sick time right when you start, those kinds of things that have been really important as well as the 401k.

Katie and her team also went back to the drawing board on how paid time off is structured, making it fair for new hires while rewarding those who stick around for the long term.

"The other thing that we did that was really important with this tip sharing model was when people first start with us, their PTO rate of pay is based on the living wage rate in the area, just in their first year. But then after they've hit a one-year anniversary with us, their PTO rate of pay is paid out at the average pay that they received from the previous year, inclusive of their tips. Because the story that we're trying to say is that this is the...Eventually we would like to do away with the tips. This is the income, this is what you're looking at. This is all coming together and this is what you're receiving. And therefore your time off is worth that."

A big part of the stride to transparency is making the team a part of the evolution of the restaurant. Another way they reinforce this is by posting the tip pool breakdown for everyone to see.

"I mean, we also post weekly, daily the tip pool and how it gets split among everybody. So, you see everybody's tip pool and who got what and who worked how many hours. And that's really important. It's this idea that they know that they can look through and see all the names. And they see all the names of all the people who worked that day, and then they also see that it totaled out to the total tips that came in. And they can see consistency in that too, in the ebbs and flows of the season. So, it becomes predictable, but also it feels clearer and more understood."

Another big piece of that transparency, using 7shift's tip pooling tools instead of manual methods.

It's all about the fact that a software program is auto-calculating it based on their punches. Then us in an Excel spreadsheet. It makes all the difference in the world in people's trust.

And with all of these changes comes a ton of growth.

"I'm super excited about our second restaurant, La Bodega, which came out of the pandemic. I mean, it was something that started because we wanted a retail shop during the pandemic where people could buy wine and quarts of gazpacho and things to go. And now it has blossomed into in the mornings it's a cafe where you can get Spanish pastries and coffee and empanadas, and then upstairs it serves incredible lunch and dinner and wine bar, full restaurant upstairs, along with shelves and shelves of retail wine and Spanish specialty products. And it's just one of my favorite places. So, please, if you're in Asheville, come check out La Bodega by Cúrate and also our original restaurant, Cúrate."

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D. J. Costantino
D. J. Costantino

Hi! I'm D.J., 7shifts' resident Content Writer. I come from a family of chefs and have a background in food journalism. I'm always looking for ways to help make the restaurant industry better!