Price of Success

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sf gateSEIU got what it wanted, and meal prices are going up. SEIU was part of an effort to hike the minimum wage in Oakland, California to $12.25 an hour. Now, restaurants are hiking prices and fees to comply with the mandate.

The 36 percent uptick that lifted Oakland’s minimum wage to $12.25 an hour this week is already transforming the city’s booming restaurant scene — but not in the way that politicians, activists and restaurateurs anticipated.

The wage increase puts more money in the pockets of most restaurant workers, but to keep pace with higher costs, some restaurants have upped menu prices by as much as 20 percent. Others have tacked on a mandatory service charge to the bill and eliminated tips for servers, potentially reducing the amount they earn.

Some wonder whether the higher prices and surcharges will turn off customers and blunt Oakland’s growing reputation as a foodie haven where 300 bars, cafes and restaurants opened last year.

While supportive of raising the wage floor, some of the city’s top restaurateurs fear they will lose customers due to higher prices.

“Yeah, I’m worried about it,” said Charlie Hallowell, who raised prices 16 percent at his three trendy restaurants in Oakland, including Pizzaiolo and Boot & Shoe Service, which were on The Chronicle’s 2014 list of the Bay Area’s Top 100 restaurants.

Since Pizzaiolo opened a decade ago, Hallowell said, the profit margin has been 2.8 percent — and that’s at a hip Temescal district restaurant with a line out the door most nights. Nationally, the average profit margin was 5.1 percent at privately held restaurants in 2013, according to Sageworks, a financial information firm.

To help pay for the increase, the most expensive pizza at Pizzaiolo will now cost $24, up from $20.

“I want to raise the minimum wage. I want everybody to make more money. But I don’t know what’s going to happen. None of us do,” Hallowell said.