On the heels of longstanding business By-Th’-Bucket closing its doors last week, another long-term Santa Clara restaurant has closed its doors.
According to a Facebook post, the Santa Clara Bennigan’s location at 4150 Great American Pkwy, near Levi’s Stadium, Mission College and California’s Great America closed for good on Sept. 10, the opening day of the San Francisco 49ers’ 2017-2018 season. Bennigan’s had been operating at the current site approximately 30 years and went through a complete renovation in 2014.
Although a franchised location of a larger restaurant chain, Chairman and CEO of Legendary Restaurant Brands, Paul Mangiamele, said the “heartbreaking” decision was the accumulation of a variety of costs that come from doing business in the City of Santa Clara.
“It’s a cascade of several issues and headwinds that are created by trying to do business in California, actually,” he said. “The elimination of tip credit and the increases in minimum wage and the high cost of doing business from an occupancy standpoint, from a commodity standpoint, from a labor standpoint, just makes it more and more difficult to try to eek out a proper level, a proper balance of profitability to continue on. And it’s a shame because we love being in Santa Clara.”
Tip credit, or the practice that allows an employer to pay service employees who receives tips a wage lower than the minimum, knowing they will make up the difference in gratuities, is prohibited in California—one of seven states disallowing the practice. States allowing tip credit who use the federal minimum wage rate of $7.25 an hour are able to pay their employees $2.13 an hour according to the United States Department of Labor. In California, if a tip credit were allowed, the formula used to determine the credited wage would need to equal the City minimum wage of $11.10 an hour. For example, if a server made $5 an hour in tips, the tip credited wage would be $6.10 an hour. As it currently stands, servers and bartenders in Santa Clara make $11.10 an hour plus any tips received during their shift.
Bennigan’s recently opened a California location in Sacramento—now the only establishment within the state—where the minimum wage of businesses with 40 or more employees is $10.50 an hour as of January 1, 2017 with the rate increasing to $11 in January of 2018, $11.75 in January 2019 and $12.50 in January 2020. Conversely, Santa Clara’s minimum wage is set to rise to $13 in January 2018 and $15 in January 2019, making Sacramento a much more appealing location for a small business or franchise owner.
Mangiamele cited increased labor costs as a large part of the reason the Santa Clara franchisee shuttered its doors, stating that the increase in business taxes, food costs and overall operating cost—including building maintenance—as well as increased competition from nearby quick service and casual dining restaurants, made it impossible for the franchisee to turn a profit, even in the highly trafficked area.
“[Closing was] a heartbreaking decision,” he said. “There’s a lot of history with our brand there and believe me, it was not something that wasn’t given a lot of gravitas before we had to come to that conclusion and it’s a shame. But, I will tell you this: it’s not goodbye, it’s so long for now … we are still committed to California and I would love to come back to Santa Clara.”
Mangiamele also said there are currently conversations about reopening the building with a different concept and new operators within the next two months, although it will not be associated with the Bennigan’s brand. Rumors on social media are swirling the new restaurant will be a bar and steakhouse.