March 9, 2017

TANSTAAFL: New on Your Dinner Tab: a Labor Surcharge.

In lieu of steep menu price increases, many independent and regional chain restaurants in states including Arizona, California, Colorado and New York are adding surcharges of 3% to 4% to help offset rising labor costs. Industry analysts expect the practice to become widespread as more cities and states increase minimum wages.

“It’s the emerging new norm,” said Sharokina Shams, spokeswoman for the California Restaurant Association. She said California restaurants are adding surcharges as the state lifts the minimum wage every year until it reaches $15 an hour by 2023. It is currently at $10.50 an hour for employers with 26 or more workers.

Many restaurant owners say they have added surcharges because jacking up menu prices can turn off customers who are sensitive to how much a sandwich or bowl of soup should cost. When prices do rise, “consumers often trade down in the types of menu items they order, choosing a sandwich instead of an entree, or they leave off beverages or dessert,” said Bonnie Riggs, restaurant analyst for NPD Group Inc.

In other words, diners who can least afford it are getting stuck with a bigger bill anyway — but they can’t see that until the end of the meal, when the check arrives.

Because fairness or something.

UPDATE: In the comments, UncleFedele writes, “In the state in which I owned a restaurant, if the existence of a surcharge wasn’t prominently printed on the menu it could not be charged. If I encountered ‘surprise’ surcharge, either it would be removed from the bill, or the bill would not be paid. I’d love to let the restaurant owner take me to small claims court on that.”

Good to know — thanks for the correction. We don’t (yet) have this kind of nonsense in my neck of the woods, so I haven’t had any experience with it.