“And Nick helps make the dough…only now he makes a lot more of it.”
With those words, spoken by President Barack Obama during last week’s
State of the Union (SOTU) address, Nick Chute became the Twin Cities’ most famous pizza maker. Moreover, Chute enjoyed those moments of fame while seated with
Punch Pizza co-owner John Sorrano behind the First Lady during the joint session of Congress.
Why did President Obama showcase Chute, and his bosses Sorrano and John Puckett, during the State of the Union? Because in a notoriously low-margin industry, Punch’s owners have taken a bold risk, raising the company’s “wage floor” to $10 per hour.
The President devoted several minutes of last week’s address to “honoring the dignity of work,” as he put it, noting that the current federal minimum wage of $7.25 per hour is about 20 percent lower than the wage floor during Ronald Reagan’s presidency.
In a
recent press release, Punch’s owners characterized their decision to raise workers’ wages as a simple business calculation. “As we continue to grow Punch,” Sorrano stated in the release, “we recognize that only the most dedicated employees will position us to compete and maintain the highest quality food and the best service in the market.”
Puckett also underscores the importance of investing in the things that matter most to a business, regardless of how those investments might affect margins in the short-term. Punch has been around for 18 years, he notes, “and we aim to get 10 percent better each year. We’ve invested in real prosciutto, authentic marble for our customer areas…and now we’re investing in our people.”
Previously, the company started most entry-level employees at $8 per hour, so a bump to $10 represents a 25 percent hike across the board. Puckett isn’t sure how long it will take for this “investment” to pay off, but he does know how much it’ll cost: $3 million over the next decade, assuming Punch stays at its current size—which it won’t.
Although there aren’t any plans to franchise the business or mount an aggressive expansion, Punch’s co-owners plan to open one new store per year for the foreseeable future. With nearly 300 current employees across eight stores, that translates to roughly 30 new hires per year.
As a private company, Punch isn’t required to make detailed financial disclosures, but the wage raise “will result in a significant hit to our profit in the short to medium term,” says Puckett. “Ultimately, we’d rather be higher-quality and less profitable than lower-quality and more profitable.”
By making work worthwhile for entry-level employees, Punch’s co-owners hope to make their managers’ jobs easier. Well-compensated cooks and servers are more likely to prioritize work over other obligations, the thinking goes, increasing the chances that bosses can put schedules together without too much arm-twisting.
And employees who earn a living wage tend to stick around for longer, learning valuable skills that improve the customer experience and create a deeper talent pool from which to draw management candidates. Over time, the whole enterprise runs more smoothly and boosts its reputation among diners, who may even feel comfortable paying a little more for Punch’s irresistible Neapolitan pies.
It’s too early to tell whether other business leaders in traditionally low-wage sectors will follow Punch’s example. While political handicappers are cautiously optimistic about the possibility of a federal minimum wage hike—Obama’s goal is $10.10 per hour—not every SOTU attendee was as thrilled as Chute. Any legislation would have to make it past Republican House Speaker John Boehner, who has always been cool to the idea.
Sources: Punch Pizza release, John Puckett
Writer: Brian Martucci