The Lobster Pound: A sad story
The announcement that the legendary Lobster Pound restaurant at Lincolnville Beach was closing forever was a shocking and sad story indeed. Suddenly, the iconic eatery is gone and the great folks who ran it for so many years, Dick and Patti McLaughlin, are no doubt heartbroken. No one said life was fair and, unfortunately, owning a business makes life even more precarious. If there is any silver lining, it is the closing of the Lobster Pound story makes a perfect case study to illustrate the difficulties facing small businesses in Maine. Here is the sad story as I understand it:
The trouble started with the state’s noble effort to clean up our environment. Accordingly, the McLaughlins paid $60,000 for a new sewage disposal system. Ouch. On top of that, their annual sewer bill was over $20,000 per year. This for a business open only six months a year.
Then there was the dramatic increase in real estate taxes for shorefront property. Based on the town’s records, the McLaughlins' 2016 tax bill was over $14,000. My educated guess is that when they started the business in 1972, their tax bill was less than a thousand dollars.
Next we have insurance. We all know health insurance rates have skyrocketed, and while Commercial General Liability coverage has been somewhat more stable, a CGL policy for this restaurant along with “fire insurance” is probably $10,000 a year. Plus, due to the seaside location, the Lobster Pound was required to carry Federal Flood Insurance. Add another $10,000 for that. Call it $20,000 per year for insurances.
Could this business or any small business afford $54,000 in overhead before the doors are even open? Maybe, but our government wasn’t done yet. In an effort to “beautify” Lincolnville Beach, the state took 26 nearby parking spaces by eminent domain. Even if only half of those spaces were utilized by Lobster Pound patrons, that’s a loss of parking for something like 50 customers a day.
In response to that body blow, the McLaughlins tried adding a brew pub to expand the season and increase cash flow. For the uninitiated, alcohol is where the big money is made. A bottle of beer that you can buy in Hannaford for a $1.50 sells for four or five bucks in your bar/restaurant. The markup on craft beer is even more profitable. And, no cooking required, no waste, and a relatively long shelf life. The problem with the brew pub plan was, in part, that Maine’s ever stricter DUI laws have cut into restaurant alcohol sales. I applaud the state’s quest to get drunk drivers off the road, but the current DUI threshold (0.08 percent blood alcohol content) is overkill (and, apparently, restaurant kill).
But the Lobster Pound still might have made it if Question 4 had not passed. I support raising the minimum wage a buck or two. But my problem with this “citizen’s initiative” was the impact on jobs that included tip income. Tipped employees should have been exempt — but that was not what Question 4 said. Losing the Tip Credit was the final straw. As Dick McLaughlin stated, raising the minimum wage for wait staff to $12 to $15 dollars, “that puts us out of business.”
Speaking of referendums, let’s not forget Question 2 also passed. This means should the McLaughlins have hung on and finally had a good year, their income in excess of $200,000 would have been subject to a “surcharge” of 3 percent. What’s the difference between a surcharge and income tax? Just semantics. Either way, the state is appropriating your hard-earned money at a rate close to 10 percent. Then the feds take another 35 percent or more. In other words, for every dollar of profit you make, you get to keep 55 cents. Yet another reminder that life is not fair!
I am sure this crusade to bankrupt the Lobster Pound wasn’t done on purpose but the outcome is the same as if it were. An iconic Maine business is closed and a dozen jobs are gone. Tax revenues generated by the sale of all that food and drink are gone (sales tax on food and alcohol sold in restaurants is 8 percent). Income taxes the McLaughlins and their employees once paid are gone. The annual $20,000 contribution to the sewer budget is gone. And a local bank is stuck with a property that will be hard to sell.
Why hard to sell? Well if today’s taxes and regulations drove Dick and Patti out of business after 44 years, it is very unlikely someone else will be dumb enough to try again. Maybe the state will buy the property and complete the beautification of Lincolnville beach. A sad story indeed.
Randy Poulton lives in Winterport with his loving wife of 30 years. He has owned and managed several small businesses. One or two even made money.