To Fee, or Not to Fee…

Are living wage and sanitation surcharges the way of the future?

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Fees can add up, leaving customers feeling nickel and dimed. / suthisakaewkajng ©123RF.com

It’s not a new conundrum. The tipping model creates a gross FOH/BOH wage disparity (and thus a class and race disparity); expenses expand at a far faster rate than we can raise menu prices; and the myriad paradoxes simply can’t be explained to guests who come for a meal, as opposed to a Power Point plea about why we’re trying to nix tipping or adding X percent for this and Y percent for that. The public’s perception, as we know all too well, is equal parts, “Why don’t you just charge what you need so you can pay your people what you have to?” and “Why is my hamburger $22?” And now, on top of the price of real food, real people, and overpriced overhead, we get to mix in the costs of hand sanitizer, branded face masks, and air-filtration systems. Oh, and by the way, your dining room just got 50 percent smaller. Happy winter, entrepreneurs.

If there’s a time for change, the time is now. But with no precedent and no best practices fleshed out, the way to change—surcharges, fees, price increases, tip pooling, and other labor models—is up for debate. Some operators feel strongly about the living wage fee and its benefits to their employees. Others are adamant about protecting the guest experience and oppose further burdening pocketbooks. Still, as razor-thin profit margins get even thinner, something has to give. 

Bobby Rayburn, general manager and partner at Duo Restaurant in Denver, first applied a “kitchen livable wage surcharge” in 2017, and he’s never looked back. “We were trying to figure out how to combat the gross discrepancy in a business where profit margins are relatively low,” he says. “We felt strongly enough about taking care of our kitchen workers so we gave it a shot.” The result was an increase of about 45 cents per guest, which adds an additional $2 an hour to back-of-house wages. The key to implementing any fee is to be as transparent as possible. Duo posts the surcharge on both its website and menus and makes sure servers are well versed. Rayburn says his staff has only seen two incidents of pushback. In those cases, he happily waived the fee.

The public’s perception, as we know all too well, is equal parts, “Why don’t you just charge what you need so you can pay your people what you have to?” and “Why is my hamburger $22?”

Phillips Armstrong with Destination Hospitality restaurant group, which owns Aurum and Table79 Foodbar in Steamboat Springs as well as Aurum in Breckenridge, has also grappled with the compensation question. Starting August 1, 2019, Armstrong implemented a company-wide living wage surcharge. He decided against raising menu prices because that in itself doesn’t address the problem. “If I raise prices, I’m just perpetuating the disparity between front of house and back of house because the guest is going to tip more,” Armstrong says. The company found that a little goes a long way: By charging an additional three percent on top of the bill, they were able to add $3 an hour to back-of-house wages. Armstrong confirms that after initial blowback during the first month, most customers now simply ask what the surcharge is for and are happy to pay it.

Carmine’s on Penn in Denver took a more aggressive approach. After recently switching to a no-tipping model, the restaurant adds a 20 percent service charge to all carryout and dine-in orders. With this surcharge, says owner Brad Ritter, staff wages tripled. After “doing a lot of math,” Ritter settled on 20 percent as it made the most difference to them while also seeming palatable to customers. Ritter noted only one incident in which a table was upset because they felt the charge was not properly communicated before the meal. Carmine’s now includes information about the fee on its website and menus. The surcharge has been well received, with many guests asking if they can leave a little more for their servers. The fee was specifically instituted to help staff through these lean times.

Despite positive reception, other restaurateurs, including Andy Niemeyer, managing partner of Cart-Driver in Denver, have yet to make the switch. “This is an exceedingly difficult situation for everyone, financially and otherwise, including our guest,” he says. “We don’t feel comfortable adding any additional fees to their bill.” However, Niemeyer concedes that the decision is fluid. In the meantime, Cart-Driver’s two locations engage in a tip-sharing system, ensuring that workers are paid more equally.

Harder to find and quantify are the COVID-related fees. Where Bonnie Brae Tavern has been publicly taken to task for tacking on $2 to checks over $10, operators say keeping their doors open is more of a balancing act than ever. Liz Villagomez, manager of La Cocinita in northwest Denver, briefly considered implementing a similar charge—the reason being that the restaurant was under strain from a low-check average and increased staffing needs.

Sydney Lynn, director of client advisory services at Restaurant Solutions Inc., isn’t surprised that the sanitation fee is controversial. “Customers don’t like all these extra service charges. They feel nickel and dimed,” she says, explaining that it’s generally better to work that cost into menu prices. Chris Schmidt at Craftsman in Edwards and Bird Craft in Frisco, agrees. Although he has resisted adding surcharges, he thinks increasing the price of food and beverages is a better course of action. Put more simply, “I don’t like a customer seeing that line item.”

What kind of fees (and what amount) have your customers been willing to tolerate? Email your experiences (and thoughts, opinions, and questions—anything, really) to askus@diningout.com

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