Two weeks after the D.C. Council pared back a twice-voter-approved plan to phase out the tipped minimum wage, Foggy Bottom businesses say the relief is minimal as they cut staff and swap premium ingredients for cheaper ones due to tariffs, inflation and rising labor costs.

The initiative — which passed with 74 percent of the vote in a 2022 referendum — would have seen the tipped minimum wage reach parity with the regular D.C. minimum wage of $17.95 by July 2027, but on Aug. 1, the Council voted to partially repeal the initiative and maintain tipped minimum at $10 through 2026. The D.C. restaurant lobby tepidly supported the council’s decision, and while Foggy Bottom restaurateurs said the change is welcome, economic complications like President Donald Trump’s tariffs and price increases have kept pressure on already-thin profit margins. 

The Council paused wage increases under the initiative in June, rejecting a provision in Mayor Muriel Bowser’s yearly budget proposal to repeal the initiative entirely. The amendment will slow tipped wage increases from once every year to once every two years and caps the increases at 75 percent of the regular minimum wage, reaching its peak in 2034 instead of 2027.

Since its inception, the initiative has sparked debate between tipped worker organizers and restaurant owners about whether the benefits of a higher minimum wage for service workers outweigh the heightened labor costs that restaurant owners say could force their businesses to shutter or lay off staff. The amendment requires the District’s Chief Financial Officer to study and report the impacts of tipped wage reform, which At-Large and Ward 6 Councilmembers Christina Henderson and Charles Allen said would be used to guide the councils in the future. 

Jeremy Pollok, owner of Foggy Bottom’s Tonic at Quigley’s, said rising labor costs and inflation forced him to choose between certain premium ingredients and making a profit. He said he removed steak from the menu after the price of the meat soared so high that customers would not pay what the restaurant needed to charge to break even.

“For what I would have to charge to make a profit on it, no one was going to buy it. So in that case, we just took it off the menu,” Pollok said.

Pollok also swapped out avocados for other ingredients after their price spiked, a change he attributed more to tariffs than to rising labor costs.

“We took avocados off the menu because the price of avocados because you get those from Mexico, had gone up quite a bit, “ Pollok said. “And again, that’s more to do with the tariffs than with Initiative 82. Initiative 82 is just another factor that restaurants are dealing with.”

Trump embraced tariffs on the campaign trail and began implementing them weeks into his second term. Since taking office, he has placed tariffs of historic levels on several countries, including a baseline 10 percent tariff on all foreign imports — a move the president quickly paused for 90 days. On Aug. 7, Trump raised the U.S. average import tax rate to over 17 percent, the highest level since the Great Depression. Food imports that restaurants rely on now face tariffs ranging from 10 percent to over 50 percent depending on the country of origin.

The price of steak outpaced most other grocery items last month, jumping 12 percent from this time last year. Trump backed down in April from a 25 percent tariff on avocados from Mexico, where the United States buys most of its avocados, but avocados from other countries like Peru and the Dominican Republic still face tariffs.

Pollok said since I-82 took effect, he has cut staff and integrated more technology to support operating with a smaller staff.

“We have a much smaller staff now,” Pollock said. “We also brought in a bunch of technology to support having less labor, and then we also had to adjust pricing and all sorts of other little things that we could do to survive.”

Pollok said the D.C. Council’s tweak to I-82 offers restaurants breathing room by slowing down wage increases, and he hopes it will allow other establishments in more dire financial situations to remain open.

“Hopefully a lot of restaurants that have been struggling more than Tonic will not close and will stay open,” he said. “You feel for those people who, not only the owners, but all the people who work there who end up losing their jobs.”

The Restaurant Association of Metropolitan Washington began its latest push to kill the initiative in March, two months before Mayor Muriel Bowser included its repeal in her annual budget. The D.C. Council rejected that proposal, approving the partial repeal compromise instead.

Restaurant owners in Foggy Bottom said in January 2024, two years after the initiative passed, they were adding service fees and cutting staff to compensate for increased operating costs and retain existing staff with competitive wages. Foggy Bottom business owners said in April federal layoffs causing decreased foot traffic combined with I-82’s increased labor costs and tariffs were pushing prices higher and requiring lower levels of staffing. 

Allen and Henderson, who led the I-82 rollback compromise, said the deal was meant to allow wages to continue to increase while avoiding incurring unmanageable labor costs, but owners say tariffs and a deteriorating D.C. area economy pose a larger threat to business.

Gabriel Pio, the general manager at Bodega Taqueria y Tequila on I Street, said even though the D.C. Council’s decision gives small businesses time to prepare for increases, he ultimately expects increased labor costs to reduce profit margins over time, complicating financial planning and staffing.

“Your cost of operation definitely has a lot to do with labor,” Pio said. “And, moving from paying someone $10 and $12 an hour to $17, $18, it really adds up.”

Pio said he supports the initiative to raise the tipped minimum wage because restaurants should pay fair wages rather than relying on patrons to do so through tips. He also said the resulting increase in labor costs can significantly impact restaurant budgets, raise menu prices and lock some people out of the business.

“People might have to take more elements into consideration when opening a restaurant from a financial standpoint because they can’t bank on the labor being as cheap,” Pio said. “They need to plan more, and you have to have more resources to open it.”

David Hernandez, the assistant manager of Immigrant Food at the White House on Pennsylvania Avenue, said one of the restaurant’s suppliers unexpectedly shut down after the cost to import jumped fivefold due to tariffs. 

Still, he said he supports the minimum wage initiative because many workers depend on it to make ends meet. He said most service workers, including students and those supporting families, rely on a guaranteed hourly wage to cover basic expenses and that the initiative helps ensure fair compensation for their work. 

“I will say that it’s pretty good that there is a minimum wage, but the problem with the tariffs, tax and all that stuff that is just like way too high for all that,” Hernandez said. “All the people outside — customers — have to pay that difference.”

Hernandez said tariffs and taxes are driving prices up, forcing small and family-owned businesses to raise their prices or risk closing. He said the combination of rising costs makes it harder for businesses to absorb wage increases because they are dealing with multiple financial pressures at once.