Restaurants Should Not Be Allowed to Add Surcharges to Checks

Following the exhortations of friends, bartenders, and relatives, I decided to purchase a bed frame not too long ago — a box spring on the floor apparently doesn’t cut it. So I went online to West Elm and picked out a Forest Stewardship Council-certified wood chassis with a pecan finish and a linen weave headboard. It looked as obnoxious as it sounds. The list price was $1,099. But that’s not the price I paid.

West Elm levied a $75 white glove fee for unpacking and assembly, in addition to a shipping fee at 10 percent of the bed’s price. Both were mandatory for online-only items. That means the grand total came to $1,334 after tax. And then I had to tip the delivery guys. It made me wonder: Could anyone without a calculator accurately estimate the real cost of the frame based on the initial price?

Now imagine if you had to deal with this nonsense on a restaurant bill. The lowball tactics of internet furniture sales, where a dog’s breakfast of fees almost exclusively serves to keep prices low until seconds before you hit “buy,” are more or less what a collection of New York restaurants want to put on guest checks.

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Recently, more than 200 members of the New York Hospitality Alliance, a group that lobbies on behalf of restaurants, sent a letter to mayor Bill de Blasio “imploring” him to give culinary establishments the option of adding a clearly disclosed surcharge. That fee would range from 3 to 5 percent to offset rising labor and real estate costs.

The letter, which said the restaurant industry is “suffering,” included the following institutions as signatories: [squints eyes] Nobu, the local branch of what might be the world’s most successful luxury restaurant chain, as well as [squints harder, puts on spectacles] Tao Downtown, one of the country’s highest-grossing independent restaurants, and [calls surgeon, makes appointment for Lasik surgery] Eleven Madison Park, a venue that’s popular enough to have guests prepay $1,000 to book a reservation.

To be fair, there are surely restaurants on the list that are having a tougher go of it, and the local hospitality industry is, without question, facing higher costs of doing business. The full minimum wage in the city will hit $15 for many restaurants by the year’s end, while the tipped wage earned by many waiters and bartenders will rise to $10, double what it was a few years ago. The timing of the Hospitality Alliance’s letter is fitting in that hearings are currently underway throughout the state on the subject of whether New York will fully eliminate the lower tipped wage.

Restaurants in Los Angeles, San Francisco, and other cities regularly — and unfairly —cope with higher wages and health care costs by issuing small surcharges on diner checks. Those surcharges are not permissible in New York City, as the Department of Consumer affairs makes clear on its website, so any venue that wants to end tipping or defray other regulatory costs has to do it the same way the rest of the world does it: by raising prices.

Andrew Rigie, head of the Hospitality Alliance, explained in 2016 why New York rolls sans surcharges:

A rule was established in 1976 by the city’s Department of Consumer Affairs after some restaurants added a variable and at times undisclosed surcharge to menu items in response to a temporary spike in beef prices. The agency was trying to address confusion among consumers. But decades later, its rule is incorrectly being read to prohibit nearly all surcharges, even those that are clearly disclosed and that the original rule was not intended for and did not consider.

It’s tempting to buy into Rigie’s logic, but intent should not matter as much as the practical effect of how this rule is being read now, which is in a way that protects consumers. (That is the point of the Consumer Protection Bureau.) Responding to higher labor costs by raising prices is a restaurant’s way of saying: We’re making the cost of dinner easier to understand. Tacking on a smaller surcharge to offset wage costs is a restaurant’s way of saying: We’re going to continue to trick you into thinking you’ll be spending less.

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If adding a few percentage points to dinner doesn’t seem like that big of a deal — five percent works out to six bucks on a $120 bill — remember that restaurant bills are already contain at least one more “extra” than at a typical retail establishment.

Of course there’s the standard sales tax, levied on most transactions in the city, followed by the optional gratuity line, which is unique to bars and restaurants. Add on the extra surcharge and you’ll be at three discrete supplemental charges at your local cafe. A taste of this ridiculousness is already fully apparent to anyone who has ordered delivery from Caviar, which levies a service fee, permits delivery fees, and adds an optional line for courier bonus.

There’s something particularly disingenuous about mandating a restaurant surcharge while keeping the tip as the only optional fee in a restaurant transaction, considering that the tip constitutes the bulk of a waiter’s compensation. Republique, a Los Angeles Restaurant that levies one of these charges, once even suggested in a Facebook comment that consumers are welcome to subtract a healthcare surcharge from what they normally tip.

And so the story goes that the New York restaurant industry likely won’t be able to rely on these surcharges anytime soon, because de Blasio shows no signs of letting this poorly conceived surcharge proposal come to fruition. The mayor, during a weekly television interview with NY1, said he didn’t believe it was a “necessary or helpful thing,” adding that he’s “not sure this industry is struggling.”

That response didn’t sit too well with the Hospitality Alliance (go figure!). The group had already cited, in its initial letter, reduced hours for employees, layoffs, and closures in “unprecedented numbers” at full-service restaurants. It later added that annual employment growth in the industry had dropped to 2 percent, down from an average from 6.5 percent in previous years.

Let me paint a slightly more realistic picture: New York restaurant employment is near a 10-year high, having gained more than 100,000 jobs since the end of the recession. Is growth down on a percentage basis? Of course it is, and that’s expected for an economy with very little unemployment.

Here’s a bit more context: Food and drinking establishment jobs grew at around 3 percent for most of 2017, versus a slower all-industry jobs growth of 1.86 percent for the rest of the city, and 1.7 percent for the rest of the country. So I’d agree with de Blasio in saying that yeah, New York food and beverage establishments are doing okay.

Yes, it’s likely that wages and real estate pressures are making operators rethink how many waiters they put on the floor. And it’s troubling when city spaces that used to be full-service restaurants are now fast-casual spots.

The solution, however, does not lie in a surcharge system that would make pricing even more confusing for the consumer and that would put waiters at risk for lower tips. Some might remember that Franny’s — unaware that the practice was not permissible — tried to levy an Obamacare surcharge in 2015. The policy lasted about a day following a not insignificant blowback. A line on a receipt that effectively criticizes the government for raising staff pay or for requiring healthcare is not a smart piece of public relations, especially for an industry with such a notable track record of stealing wages from its own workers.

New York diners and hospitality workers deserve better.