A Los Angeles restaurant has come under fire after a prominent podcaster took issue with an unfamiliar surcharge on his guest check: an extra 4% fee automatically added to the bill to help fund the workers’ health insurance.
While Alimento, the restaurant in the Silver Lake neighborhood in Los Angeles, California, was singled out for the move, eateries across the US are increasingly upcharging diners beyond the stated food prices on menus. One in six restaurants said they are adding fees or surcharges to checks to combat higher costs, according to an August survey from the National Restaurant Association.
Alimento’s owner Zach Pollack said on Instagram that the surcharge is common across the restaurant industry, noting that many Los Angeles eateries have instituted the practice since the Affordable Care Act passed in 2010, mandated that companies with 25 or more employees provide full-time employees with health insurance. He added that his restaurant offers to remove the charge at customers’ request, a fact it prints on every guest check.
Alimento did not immediately respond to CBS MoneyWatch’s request for comment.
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It has become increasingly common for restaurants to tack on extra charges, such as for bread and water, to customer bills or prompt them to leave a gratuity beyond what a patron might normally offer for service. For restaurants, which typically operate on thin profit margins, such surcharges are intended to offset rising food and labor costs, subsidize employees’ health insurance coverage and even combat climate change.
Josh Luger, co-founder of fast-casual food chain Capital Tacos, doesn’t provide table service at his restaurants, but he still asks customers to leave tips for workers. Tips are distributed among employees, all of whom perform a mix of job functions.
“What consumers generally want is a lower stated price point and the option to tip if they so choose. As long as it falls short of a requirement, I think everything is a fair game,” Luger told CBS MoneyWatch.
Common during the pandemic when restaurants were only allowed to operate at partial capacity, such fees have outlived the health crisis. And in most cases, restaurant surcharges are perfectly legal so long as they are clearly disclosed to customers before their food arrives.
“Confused for customers”?
Still, the fees can cause confusion for patrons, who are more likely to look at menu prices to gauge the cost of a meal.
“I have a problem with the whole thing,” said Brian Warrener, a professor of hospitality management at Johnson & Wales University. “These surcharges obscure the actual cost of a meal. As an operator, you don’t have to fold any of these additional expenses into the cost of a meal and it still allows you to charge customers extra.”
Not all businesses are trying to squeeze every last penny out of customers. And raising menu prices to cope with inflation while providing workers with competitive wages and benefits can also backfire. Some operators are “petrified” that raising menu prices would scare off diners, Warrener said.
“Some places raise prices to provide benefits like a salary and health insurance, and it’s confusing for consumers who are now asking, ‘Why did your prices go up so much, and why am I paying for a thing that is not my decision — to provide benefits to your employees?'” he said.
“Prior to the pandemic, we started to see operators tack on surcharges for compensation. The pandemic catalyzed it,” Warrener added.
Laws on surcharges vary from city to city. In New York City, for example, it is illegal for restaurants to add a surcharge or other fee on top of listed food or beverage prices.
By contrast, since 2019 California restaurants have been permitted to add a 1% fee to combat climate change, although customers may still opt out of the charge.