Above and Beyond

08.02.13

A Fast-Food Joint Thrives, Even by Paying $12 an Hour

At Detroit’s Moo Cluck Moo, the healthy burgers and chicken menu come with another twist: a living wage for employees. Daniel Gross reports on their ethical bottom line.

In an article Wednesday about fast-food joints that purposely pay more than the minimum wage, I linked to an a piece about Moo Cluck Moo, a burger-chicken-shake place that started just outside Detroit in April. There, employees start at wages of $12 per hour. It’s not exactly a living wage, but it’s significantly better than the $7.40 Michigan minimum wage.

On Thursday I called one of Moo Cluck Moo’s founders and owners, Harry Moorhouse, to find out why he pays what he pays and how he makes it work. Moorhouse, who cops to being in his 60s and has worked in business development for a bunch of corporations, and his partner, Brian Parker, had a simple idea: affordable burgers and chicken sandwiches made out of quality ingredients and pitched to working-class customers. Working with their friend, chef Jimmy Schmidt, who was a columnist for Gannett newspapers, they came up with a brief, basic menu with a slight twist: natural beef, no hormones, sunflower oil for frying. And pay would start at $12 an hour. “I wasn’t tuned in to the whole living-wage movement,” Moorhouse told me. “We just felt that, for a variety of reasons, it was the right thing to do.”

Given the dire employment situation in the Detroit area, Moo Cluck Moo could easily have staffed up paying minimum wage. But the founders think that, as in many other realms, you get what you pay for when it comes to labor. “What we found is that they are much more tuned in to their jobs,” Moorhouse said of his staff of 12. “They work a lot more efficiently. They take direction pretty easily.” Given raises, he says the average wages at Moo Cluck Moo, where hamburgers start at $3 and chicken sandwiches go for $5, are about $14 per hour. “Quite frankly, these people work really hard, and a lot of them are really talented—they just haven’t gone to the University of Michigan, for a variety of reasons.”

Although they are in the business of providing fast food, Moorhouse and his partners wanted to define their restaurant in opposition to mass-produced, cheap burgers. “We’re using top-notch ingredients like Meyer lemons,” he said. (Moorhouse has a thing about “feed-lot beef.”) The same goes for labor. And the proprietors are finding they’re getting more bang for the buck by paying more. “The industry says your labor costs and food costs should both be between 32 and 36 percent of sales, and we’re right there in both categories.” It helps that rent in Dearborn Heights is quite low.

Moo Cluck Moo attracted its staff of 12 through an ad on Cragislist that elicited between 60 and 70 applicants. One of them was Jennifer Aguilar, a 30-year-old mother of four who signed on in April. “It was appealing to me because of the pay and because of the idea of the healthy eating,” says Aguilar, who works 35 to 40 hours per week. “The pay is great, but the other thing I really like is that they treat you with good respect. Nobody yells at anybody. We communicate.”

“We don’t have a corporate overhead, and our CEO isn’t making $50 million a year.”

The higher wages don’t stop turnover. So far Moo Cluck Moo has lost four of its original 12 employees. One got a job at a car dealer that paid $20 an hour, two people were let go because they didn’t fit in, and a fourth left to work with a relative in a different business. On the other hand, Moorhouse notes, “three of our employees have tattoos on their wrist of the Moo Cluck Moo logo.”

The single outpost doesn’t do breakfast, doesn’t have tables or a drive-through, and completes about 130 to 150 transactions a day. It is on track to notch sales of between $700,000 and $800,000 annually, which is somewhat less than a typical McDonald’s in the area. It’s also profitable. “We’re paying all the bills out of the cash register,” Moorhouse said. The company is looking at a location for a second unit.

Moorhouse says he believes he can turn a profit on low costs and higher wages because he has a different business model than the giants. “We don’t have a corporate overhead, and our CEO isn’t making $50 million a year,” he said. He also believes that paying better wages attracts workers who can work more effectively. “We’re much more efficient. Where we have four people on a shift, a McDonald’s might have seven or eight.”

The high pay also serves as a form of advertising. Detroit remains a union town where some people do care about supporting businesses that pay good wages. When it crafted a press release about its opening, it made sure to mention how much it paid. Pretty soon The Detroit News sent a reporter to write an article. Then AOL picked it up. “We were pretty certain that guys like you were going to follow us,” Moorhouse told me.

Nobody would hold up the single outpost of Moo Cluck Moo as a cure for the malady of low wages. The company is still working on offering benefits, for example. The mortality rate for restaurants is notoriously high, and there’s no guarantee Moo Cluck Moo will be around in a few years. Food-service jobs will never fully replace the manufacturing jobs that powered Detroit’s economy. But at least Moorhouse and Parker are trying to develop a business model that doesn’t rest on paying as little as possible to people who may not have many options in this economy. “We felt very strongly that if we operate efficiently that we could pay more,” Moorhouse said. “We thought we could pay something that we think is reasonable and in line with the value of what we’re getting.”