The Atlanta Business Chronicle has published Bob Wagner's article about the reluctant recovery of Atlanta Restaurants from the recession. He has also been interviewed by WGST radio this am.

Atlanta’s Independent Restaurants and the Reluctant Recovery
By Robert Wagner, CPA

Yes, Atlanta restaurant sales continue to improve. Mother’s Day helped with ‘families who brunch,’ and waits for “Dads and Grads” dinners were long. In fact, aggregate sales for May 2010 at surveyed restaurants increased 3.7% over sales for May 2009 - a slight improvement over our February restaurant survey. February 2010 total restaurant sales increased just 1.3% over sales the prior February.

How are individual restaurants doing?

The number of restaurants in our survey showing sales increases edged out those showing sales declines. Of the 62 restaurants surveyed, 34 experienced increased sales over May 2009. Twenty-eight restaurants showed sales decreases from the prior May. So that’s 55% showing a sales rise, with 45% reporting a sales decline.

We also examined year-to-date 2010 sales compared to 2009. And here the results are about the same. Of the 62 restaurants surveyed, 50% had year-to-date 2010 sales greater than 2009 sales and 50% showed 2010 year-to-date sales declines.

Conclusion

Much like the rest of the area’s economy, our Atlanta restaurant industry is still waiting for a robust economic recovery. While May aggregate restaurant sales increased slightly, only a little over half of the restaurants we surveyed saw a sales increase in May. And that’s compared to very weak sales for May 2009! The Great Recession may be over but many Atlanta restaurant operators feel trapped in a reluctant recovery. With highly-regarded restaurants such as Repast and Joel closing their doors, many independent restaurants are still looking for a post-recession “bounce” to show up at their cash registers.
The Sample: The 62 independently-operated, non-franchise restaurants were drawn from the metro Atlanta market. The sample includes restaurants in the fast casual, casual and fine-dining segments.
Robert Wagner, CPA is president of NetFinancials, Inc. which provides a full range of tax and accounting outsourced services for restaurant companies. Email: bob.wagner@netfinancials.com. www.netfinancials.com

Exploration

This weekend my husband, 6 month old baby and I traveled to Nashville to visit some friends who recently relocated there. The brief trip brought to mind the need to explore and experience things for the first time. All too often we fall into a routine and settle for the status quo.
I found myself envying my daughter who is experiencing everything for the first time. From the goats on the farm we visited to the pug and German Sheppard we stayed with to the carrots you see here.

Each activity was received with such excitement! I was also jealous of our friends who are diving into the Nashville food and beverage scene to find their favorite restaurant and watering hole. (If you are ever in Nashville check out Monell’s for family style home cooked breakfast and The Patterson house for a throwback to Prohibition ambiance and delicious, innovative cocktails!)

While on vacation I love to explore what the locals do and where they eat yet at home I find myself eating at the same quality restaurants and going to the same Atlanta attractions week after week and year after year. Then I realized there is nothing stopping me from living like a tourist in my own town! It’s time to check out festivals and revisit museums, to look for new restaurants off the beaten path and go explore the OTP scene.

Please send me your suggestions of local hideaways and new adventures to explore.

To Hire or not?

To HIRE or not?
by Robert Wagner, CPA

On March 18, 2010 the Hiring Incentives to Restore Employment (HIRE) Act became law. The act has some really juicy tax benefits for employers that hire folks who have been unemployed for a while.

Payroll Tax Exemption

For an employer that hires a “qualified” employee the employer gets an exemption from paying social security tax on the new employee’s wages. The social security tax is calculated at 6.2% of wages paid. So for each $1,000 in wages paid to a qualified employee, the employer saves $62.

In order to take advantage of this tax break, make sure your payroll company knows you have hired a qualified employee. To do that, your new employee should complete new IRS Form W-11; available at the IRS Web site – http://www.irs.gov/pub/irs-pdf/fw11.pdf. Send the completed Form W-11 to your payroll company and then double-check your payroll reports to be sure that you are getting the HIRE tax exemption.

New Hire Tax Credit

In addition, the employer can claim a generous income tax credit on their 2011 income tax returns for each HIRE employee retained more than a year. The credit can be as much as $1,000 per retained HIRE employee.

Special Considerations for Restaurants

Restaurant operators should certainly consider taking advantage of the HIRE act for all new kitchen and front-of-the-house employees. It gets a little tricky when taking the HIRE tax exemption for new servers. Normally payroll taxes on server wages qualify for the FICA tip credit. Taking the HIRE tax exemption will mean that the FICA tip credit at the end of 2010 will be lower than normal. So while the HIRE tax exemption is a good thing even for servers, the restaurant operator may end up owing income taxes for 2010 because his FICA tip credit is lower than was expected. There is a similar issue with employees that qualify for the Work Opportunity Tax Credit (WOTC).

In addition, the HIRE tax credit available in 2011 may be limited on the restaurateur’s income tax return. That’s because the credit is subject to the Alternative Minimum Tax. If the operator cannot use the HIRE tax credit, at least the credit can be carried forward to another tax year.

Qualified Employee

The HIRE act tax reduction benefit is available only for a qualified employee – that is, an employee that began employment after February 3, 2010 and before January 1, 2011, who has been unemployed (or underemployed) during the 60-day period ending on the date he/she is employed. The qualified employee must certify that they have not been employed for more than 40 hours during the 60-day period ending on the date they start employment. Employees use Form W-11 to certify their unemployed status. Supply the Form 11-W to your payroll company. It does not need to be sent to the IRS. Note that the HIRE benefit is NOT available for an employee that is hired to replace an existing employee UNLESS the existing worker terminated voluntarily or for cause. Family members of the employer do not qualify for HIRE.

Bottom Line

The HIRE is a terrific tax benefit for restaurant operators. There is very little downside to taking HIRE to reduce payroll taxes for kitchen and management staff. In this economy, operators can use all the help they can get.

For restaurants with servers, care should be exercised in taking HIRE for servers since the reduction in payroll taxes will certainly reduce the amount of FICA tip credits available for 2010 and 2011.

For FAQs see http://www.irs.gov/businesses/small/article/0,,id=220745,00.html