The restaurant industry hasn’t entirely bounced back to what it was pre-pandemic, with ripple effects leading to rising rents, supply chain problems, and a labor shortage that have all translated to higher prices for diners. It could mean that this year will be as tough as the past few, with a slew of more than 20 closings and counting already in January.
Rounding the corner of 2024, one thing seems clear: The price of going out to dinner — with main courses inflating to a $30 to $50 range, and the cost of a drink around $20 — isn’t going to dip anytime soon. Several factors are contributing to this.
The rise in minimum wage and continued staff shortages
It’s a victory for workers that the minimum wage has risen in the city, in New York State, and New Jersey as of January 1, with the $16 an hour wage taking effect this month and rising to $17 an hour by 2026 in the five boroughs, Long Island, and Westchester. (NY State is a bit less, while New Jersey’s minimum wage rose a dollar, to $15.13 an hour.) The tipped minimum wage has also risen a buck; if the minimum cash wage plus an employee’s tips do not equal at least the state minimum wage, then the employer has to pay the employee the difference.
“People should get paid more,” says Cedric Nicaise, co-owner of the Greenwich Village polished neighborhood spot, the Noortwyck. “It will absolutely affect our restaurant.”
Credit card swipe fee increases
Restaurants around the country have been adding fees to the tabs of those who pay with credit cards — with many states allowing the practice, provided they alert customers they’re doing so (unlike the 16 New Jersey spots nabbed for failing to disclose swipe fees).
What’s with the restaurant fees? They’re passing on the 16 percent creep from the past couple years to the customer — with more hikes on the way in April coming from banks issuing Visa and Mastercard. Of the over $500 million that credit card companies will earn from these hikes, the Wall Street Journal reported, more than half will come from swipe fees that businesses and, in turn, consumers, will pay.
The National Restaurant Association claims fees charged by banks issuing Mastercard and Visa are one of restaurants’ highest costs, behind food and labor. In the U.S., credit card fees for operators are among the highest in the world. “Under current practices, Visa and Mastercard — which control 80 percent of the market — each centrally price fix the swipe fees charged by banks that issue their credit cards rather than the banks competing to offer merchants the lowest rates,” according to the National Retail Federation. A consulting firm that works with merchants, CMSPI reported that reform that would allow for competition would save retail and consumers $15 billion a year.
To make things more complicated, there’s point of sale charges interwoven in transactions, such as Square and its fees. For an in-person charge, a credit card company might get the 2.6 percent, while 10 cents goes to Square. In another case, it’s 2.9 percent plus 30 cents for purchases made through online checkout (such as delivery orders). Whether or not the fees are passed on directly to consumers is tough to quantify, but these are some of many fees that restaurants are having to absorb.
The effects of congestion pricing
Restaurants on both sides of the bridges and tunnels will feel it when congestion pricing takes effect in May or early June, assuming the Central Business District Tolling Program navigates roadblocks as well as lawsuits raised by New Jersey. The plan that was originally approved in 2019 will raise funds for mass transit improvements: Passenger vehicles headed south of 60th Street will pay $15 a day between 5 a.m. and 9 p.m. on weekdays, and 9 a.m. to 9 p.m. on weekends. After 9 p.m., tolls will be lowered by 75 percent. It’s the first congestion pricing attempt in the country, one that’s mirroring congestion pricing in places like London.
Consumers will feel that $15 — in addition to the $16 bridge or tunnel toll — every time they’re driving or taking an Uber into most of Manhattan. Tolls get more expensive as of Sunday for the city’s bridge and tunnel traffic, up over four percent, or an additional 63 cents during peak times. The Daily News reports that the MTA proposes dropping $5 off the congestion toll for motorists who have paid a bridge or tunnel toll prior to entering the congestion pricing perimeter. Still, that’s between $25 and $30 just to enter Manhattan by car.
Congestion pricing may encourage purveyors to raise the price of goods for restaurants (and for shoppers in places anywhere from H Mart to the Greenmarket), since purveyors will have to pay the fees and have historically passed them on.
“Although we like the idea of less cars, pollution, and traffic in Midtown where we operate our restaurants for the past 15 years, we also think the timing of this is not ideal,” says Brian Owens, a partner in Crave Fishbar. “So at a time where we are still trying to get people back into the city, this mandate will do the opposite for us.”
Congestion pricing could also affect restaurant workers. “The city’s failure to provide affordable housing for its labor force makes the affordability of living in the city our biggest challenge,” says Terence Tubridy, owner of Park Avenue Tavern, the Wilson, and the Rockaway Hotel. “...and public transportation is not reliable for service industry workers, as we work late into the night and some still don’t feel safe taking subways home.”