Rosalind Evans
First, there was an increase in tipping, and now, additional charges are piling up.
Restaurants nationwide are increasingly implementing these surcharges, typically between 3% and 5%, to cover health insurance, inflation, credit card transactions, or even the use of tap water.
In a fashion akin to increased tipping, these extra charges substantially add to the expense of dining in or takeaways.
Restaurant industry struggles
Based on a survey by the National Restaurant Association, 15% of restaurant owners have introduced surcharges this year.
Unlike other small businesses, it is a challenge for restaurants to bear or transfer price increases. Generally, a restaurant’s pretax profit amounts to about 5% of sales, leaving a very narrow margin, according to Hudson Riehle, the National Restaurant Association’s Senior Vice President of Research.
With most costs, including those for food, labour, and rent, being higher now than pre-Covid-19 pandemic levels and showing no signs of decreasing, the restaurant industry finds itself in a unique situation.
“It’s an extraordinary situation,” said Riehle.
To remain operational, restaurant owners have devised varied strategies, Riehle added. Some have chosen to include certain fees in the typical check. Even though customers do not favour these additional charges, Riehle anticipates that this new business model “will become a mainstay.”
Customer objections
In 2021, Hamei Hamedi, the proprietor of El Patio in Berkeley, California, added a 2.4% credit card fee after hiking up the prices of some menu items.
“We operate on very narrow margins, and it’s expected of us also to bear the credit card fee,” he said.
The so-called swipe fees that credit card companies like Visa or Mastercard levy on businesses for every credit card transaction have more than doubled in the last ten years, leaving small businesses feeling cornered and forced to transfer these fees to their customers.
However, numerous customers have expressed their disapproval on social media over the surge in extra charges now added to their bills.
“Additional charges irk customers,” stated Ted Rossman, Senior Industry Analyst at Bankrate. Like tipping prompts, they’re perceived as “a concealed tax that shifts more of the cost burden onto customers.”
Yet, some customers empathize with business owners grappling with inflation and escalating healthcare costs.
“Customers may support these causes in principle, but they don’t appreciate seeing them itemized,” Rossman explained. “Customers prefer a single, inclusive price.”
The restaurant industry’s current trend of surcharges to balance operational costs may be seen as a necessary evil in the face of rising expenses. While it’s an understandable business strategy, it’s clear customers would prefer transparency and an all-inclusive price. The pressure is on for restaurants to balance managing their margins and keeping their customers satisfied. This act will define the future of dining experiences across the country.
