A resolution asking Dine Brands Global Inc. to study how it could change the way it calculates the minimum wage had the backing of nuns, pension funds and economic advocates, but shareholders voted it down.
The resolution, voted on May 12 at the annual meeting of the Glendale-based parent company of Applebee’s Neighborhood Grill and Bar and IHOP, asked it “to prepare and make publicly available analysis of the feasibility of increasing tipped workers starting wages to a full minimum wage, per state and federal levels, with tips on top,” according to representatives.
Backers of the resolution included Sisters of Charity of the Blessed Virgin Mary and the nonprofit Interfaith Center on Corporate Responsibility. It had the endorsement of One Fair Wage, a national nonprofit that advocates on behalf of restaurant workers earning a tipped subminimum wage, as well as the New York State Pension Fund and the New York City Pension Fund.
At the Dine Brands meeting, the resolution was voted down by shareholders by a wide margin: nearly 12 million against the resolution versus nearly 1.7 million for it.
Brian Viccaro, an analyst with Raymond James & Associates, cited as a risk factor “elevated food or labor cost inflation which could pressure franchisee profitability” in a May 12 report. But he rated Dine Brands as “outperform.”
“Adding incremental revenues while utilizing the current real estate footprint and labor pool will help drive efficiencies and hopefully boost revenues and profits,” said Matthew Smith, a former fund manager, in an analysis on Seeking Alpha.
Dine Brands did not return calls for comment.
The federal minimum wage is $7.25 an hour, although individual states – including California – have raised the rates.
Many states allow employers to take a “tip credit,” meaning they include gratuities in minimum wage calculations. That allows an employer to credit a portion of an employee’s tips toward the employer’s obligation to meet the minimum wage. In these states, the tipped subminimum wage can be as low as $2.13 an hour.
Dine Brands added that if the tip credit is eliminated, it could start a chain reaction that would damage business.
“Some industry groups believe that more restaurants could move to an hourly wage-only system, terminate tipping, reduce employee hours, operate with fewer employees and raise prices to cover the increased cost of labor,” the company said. “Ultimately, paying tipped workers minimum wage could result in such employees earning less overall as well as higher prices for customers at affected restaurants.”
Saru Jayaraman, president of One Fair Wage, said that regardless of the outcome, the Dine Brands resolution is significant.
“For us, it’s a victory that it went to vote at all,” Jayaraman said.