“The 30-30-30 Model is Outdated”: How This Restaurant Prioritizes Higher Wages

Stella Dennig and Finn Stern never set out to open a restaurant. Soon after the two started dating, the couple knew they wanted to do something with food and community. But as for a brick and mortar? The economics just didn’t add up. 

“At that time, we thought, anything but a restaurant. The margins are terrible. It’s too hard. And three years later, that’s morphed into a restaurant,” says Dennig, who together with Stern opened Daytrip, a fermentation-forward restaurant and bottle shop, last October.

Prior to Daytrip, the couple spent several years testing out catering and pop-up concepts across the Bay Area where they lived. When COVID hit, they moved into creating to-go meals out of their house. The transitional time allowed Dennig and Stern to figure out what they really wanted to do, as they saved up money, built a brand, and also grew a following in the process. Eventually, in a thriving section of Oakland, they came across the space that’s now Daytrip. 

“It was an iterative process, but ultimately the consistency of having a brick and mortar felt more manageable, even though there’s so much that’s not manageable in it,” says Dennig.

When the couple committed to opening a restaurant, it came with a deeply intertwined commitment to create a more equitable environment for industry workers. Fulfilling that goal, at least within their own space, started with structuring a sustainable wage model. Daytrip opened with an equal tip pool, health care benefits, and a 20% service fee, alongside a business plan built off a 45% labor model. Currently, staff average an earnings of $30 to $35 an hour.

“Coming in, it wasn’t even a question of how we wanted to operate,” says Dennig. “It was just clear that it would not be worth doing this business if the only way we could make it successful was off of inequity and off the backs of people barely making minimum wage.”

We sat down with Dennig to learn more about how Daytrip’s operation works, the payoffs seen in staffing and retention, and how they’re balancing costs. Plus, Dennig shares why she sees equal tip pooling and higher wages as an imperative part of the industry’s future.

I’d love to first learn more about your background and what led up to Daytrip.

Finn’s our head chef and does everything food, and I do GM and kind of everything else. My path has been less traditional than your average restaurant founder. I didn’t spend decades in the industry in every position before opening Daytrip. Finn and I are 0-to-100 type people and dove in with a lot of passion and risk.

I did work in restaurants and cafes in the front of house in the first half of my 20s, and was trained as a pastry chef and worked in pastries for a couple of years. But then I deviated and went into hospitality in a different realm, as a tour leader for cycling trips all over the world. I worked in tech for a brief stint, and realized I was not values-aligned. And then I met Finn.

Finn’s most recent job was at Standard Fare in West Berkley, but he also had a bit of a nontraditional past. He did environmental lobbying, for the good guys. He studied the political economy of agriculture in school. For both of us, food and politics are deeply intertwined, and the biggest motivation of wanting a brick and mortar was to use it as a vehicle for politics. 

From the start, you guys set out to create an environment where staff really felt valued, structuring your pay system with that in mind. Can you share more about what that looks like?

The 20% service charge has led to a very consistent added gratuity to people’s paychecks. We pay between $16 and $18 [an hour] for entry level positions and $21.50 [an hour] for shift leaders. With tips on top of it, it comes out to $30 to $35 [an hour] consistently, and it’s been up to $40 something an hour depending on the role and the week. 

We also share tips equally with all roles in the house, excluding managers and owners, proportionally to hours worked over a two-week pay period.

We knew we wanted to offer some kind of healthcare when we opened, but we didn’t want to make that decision on behalf of our team, so we hired a HR consultant to put together a bunch of options. We put it to the team, and they almost unanimously voted for a stipend, which shows up like a bonus in their paycheck. We said $300 is what we would spend on a small group plan per person per month, so this is the amount that we'll spend on whatever option you choose. The benefit is that it's not just for full-time employees. It’s proportional to hours worked, so you can make up to $300 a month if you're working 30 hours a week or more.

What went into prioritizing this kind of payment structure and the focus on sustainability for staff?

It’s a product of having experience in other industries and less so having the restaurant industry point of reference. There are examples of people doing things really, really well [in this industry], and I don’t want to discount those, but unfortunately there’s a lot of toxicity as well and not a lot of equity. 

Before we opened, I did a lot to connect with restaurant owners and managers who have put work and time into creating new models. I did that largely through the organization called RAISE, otherwise known as High Road Restaurants. It's under the umbrella of One Fair Wage, which is pushing for a $15 federal minimum wage. This offshoot connects restaurant owners, managers, and workers to talk about how we can shape a future in this industry that does things more equitably and positively. They connected me with a lot of different folks, probably first and foremost Sarah Lau, formerly of Good Good Culture Club and now with La Cocina. Having those conversations before we even opened our doors helped set us up for what decisions we wanted to be thinking about going into this.

Do you feel like more operators should be opting for a shared tip structure?

100%. I had a lot of people recommend that we should do shared tips but more heavily weighted towards the front of house because [they said] you’re not going to get the talent if you don’t. They recommended a 70-30 model. We talked about it and felt rooted in doing 50-50. And the reality is that I haven’t had much front of house turnover.

The feedback I’ve consistently heard has been, “We feel proud and happier to work in a space where we know our wages aren’t being taken from back of house and other positions that don’t historically get it.” I even hear that in the hiring process. 

Do you have any advice for operators that want to introduce a shared tip model but are nervous about staff pushback?

The one thing that really worked in our favor is that we made these decisions before we opened. I have so much respect and empathy for operators trying to shift after they opened because, naturally, people get used to a certain system and one that their lifestyle is relied on, and that’s really valid.

We try to open up room for conversations where people can talk to each other. Especially in a space with a healthy culture, where the team respects each other, when you put people face to face, it'd be really hard to say, “No, I don’t think you deserve to be part of the tip pool.” Having conversations that involve others can be very powerful.

Also being really grounded in explaining why you’re doing this and why you believe this is the only path forward for this industry is powerful. Then leave a lot of grace for people who choose to go elsewhere. If you can make more money elsewhere, and you need to, that’s a valid choice. There are probably ways where employers can leave room for setting people up for success in that way. Give folks months’ notice, help support them in finding other work if they're in that boat, and ease that transition proactively.

 Beyond the 20% service charge, in what ways are you balancing business decisions that are adding costs, like hiring a HR consultant and giving a monthly $300 healthcare stipend?

It’s definitely something we’re figuring out. We came into this knowing that we wanted to put these things first, and knowing that meant we needed to have a buffer in our bank accounts. There have been many times over this past year where we lost a lot of money. But now for the first time, we’ve been busier, and we can actually sustain what we’re doing. 

Our labor was at 60% a lot of the time last year, which is not sustainable. Our business plan is built off of a 45% labor model, and right now we’re hitting 45% to 47%. It’s a learning curve. 

We didn’t know the summer in California was actually the slowest season, so we staffed up and then were bleeding money on labor. But we knew the fall would get busier, and we had enough buffer to make it through to fall, so we decided to hold onto our people. We have a really strong team, and that feels worth its weight in gold. Now we have about a year of business under our belts, so we have more data going into year two, and I think that will allow us to be more strategic about our decisions. 

It just comes down to sticking to the 45% labor model and making sure we’re adjusting through the different seasons. Before we opened, we hired a financial consultant, Micah Kaufman of Hard Knock Hospitality, who works for us nine hours a week, and he pays for himself. I think that’s one of the best decisions we made. He pulls all of our numbers, and even with the tiniest line numbers, we really know what we’re looking at. 

At one time, the standard was the 30-30-30 model – 30% spent on food costs, 30% spent on overhead, and 30% spent on labor, leaving 10% profit. You’ve bumped up labor costs to 45%, and I’m wondering what you’re finding as a result with your margins.

I think the 30-30-30 model is really outdated, and in a state like California it’s just not the reality. None of my restaurant and bar owner friends are operating off of that model. So going in, that never seemed possible. But where we cut back is definitely on overhead. Our overhead is significantly less than 30%. Sometimes it’s been as low as 10%. Our COGS are consistently at 30% to 35%. 

Finn and I took in $40,000 [per year] salaries when we started and now $60,000 [annually]. We’re active on the floor, mostly for double shifts a night, which is not sustainable. We're hoping to move in a direction where we can model the kind of sustainability that we show our team. If I'm being honest, where we feel the burden is on ourselves more than anything. We're not seeing a profit, but we are consistently paying ourselves, and we’re really just trying to look at the long-term.

We’re not a fast casual. The vibe here is also definitely not fine dining. But we’re not presuming to be an accessible restaurant to everyone. We’re learning to charge what we need [in order] to do what we need to do, and letting customers decide if it’s worth it. And that’s obviously the challenging part. The benefit is that we live in a place like Oakland where a lot of people are values-aligned, and a lot of people understand why we’re charging more. Naturally our revenue in relation to our rent is very different from the 30-30-30 model. 

You opened in fall of 2021, which we know was far from the easiest time in the industry for hiring. But given your pay structure, I’m curious what your response was like when you first started posting positions.

Overall, we’ve had really great candidates and a healthy number of applicants. I think that’s because we put our values out there. Every time we have a hiring call, I take half the call to share financials, share explicitly what tips look like week to week, and what our mean and mode weeks look like, so people have a really clear understanding of pay. We also share our financials transparently with our whole team. 

Sharing our values early and often is what has made hiring functional. In an industry where people repeatedly tell me in hiring calls that they’ve never experienced this level of transparency, there’s a relief or connection that makes people want to work here. I’ll also say I’m very picky. I make sure that we’re hiring people who share our values, and even if we have a lot of applicants, that doesn’t always jump out. So I’ve volunteered myself to work double shifts while actively trying to find the right candidate. It’s a lot of emotional and physical labor in the short-term, but in the long run benefits me directly. 

Outside of your payment model, I’d love to hear more about your mission for the culture as a whole, and what steps you’re currently taking to achieve that.

Before we opened, in our training process we had a values conversation with our team. Finn and I shared our values and opened it up to what was important to everyone. We were finally able to revisit that conversation with a two-hour paid conversation this past week. It’s a conversation we’ve decided to revisit every quarter. That’s something that feels increasingly important. This is a community and being a community takes a lot of work and emotional labor. 

On a daily basis, we’ve implemented sharing circles, which was first [started] by a former employee. We close every shift with a quick feedback round. Some nights of services are really hectic, things happen, tensions rise. That’s normal, but we also want to create a space where we can address things that happen so we can air it out, let it go, and also learn from what systemically needs to change. 

We share financials transparently, but we’d also like to be teaching people on paid time to understand how things look for us. It only benefits us for staff to know this because then they can more deeply understand why, you know, we have to cap our entry level positions at $18 an hour because otherwise we wouldn't be able to sustain managers and we want to create a healthy business. That’s just a small example.

Where do you see yourself growing in the future?

There was a point six months in where Finn and I were thinking, let's look for spaces for our next thing, maybe a fast casual, something that’s not the smallest margin, least profitable version of what we could be doing in this industry. We peeled back from that pretty quickly realizing we want to get Daytrip to a point that’s sustainable financially and in terms of the impact it has on us. Next year is the year to tighten up, and after that, we have so many ideas. We’ve thought about CPGs, taking some of the things that are already successful here, like bottling vinegars, and growing those as separate businesses.

And we’re always looking to our team to see where their interests lay. When people want to take on more responsibilities and grow with us, we’re looking at their skills and interests, and having [our future ideas] be a little based on that as well.