Photo: Goog’s Pub & Grub; Source: Facebook/Harold’s Chicken on Broadway
Should restaurants charge a pandemic fee?
Bonnie Brae Tavern in Denver has joined a number of other restaurants around the U.S. adding a “COVID-19” fee to its bills. The charge is two dollars for any purchase over $10.
“We didn’t want to be extravagant with it but we hope people understand we had to do it in order to keep the doors open,” the establishment’s co-owner Michael Diresaid told Fox21News in Denver.
Bonnie Brae Tavern’s sales are down 40 to 60 percent as it has significantly reduced seating capacity to keep customers safe. New sanitation requirements such as gloves have added expenses.
Miami’s The New Wave Billiards is adding a three-percent ”COVID-19 fee” to customers’ bills to cover the costs of fiberglass partitions, new signage and cleaning supplies. The restaurant’s owner Alfredo Pineres told NBC Miami, “The sanitizers have gone from $15 to $60, $70 a gallon. It’s a burden.”
In Hollard, MI, Goog’s Pub & Grub is charging a flat fee of $1.00 per meal to cover rising food prices and the costs of disposable containers and utensils.
“Other places are just raising their price and not telling you,” the pub’s owner Brad White told Fox 17 in West Michigan. “It’s going to be a while before the food industry, the suppliers catch up.”
Articles have also surfaced describing dentist offices, hair salons and nightclubs charging COVID-19 surcharges as businesses look to offset added costs and revenue shortfalls.
The surcharges have led to some backlash on social media from customers surprised to find fees on their bill. The restaurants generally claim to have detailed the fee on their websites and in signs at the establishments.
The increased incidence of fees has led to some debate over whether establishments should add a fee for transparency purposes or just covertly raise prices, as usual. Food journalist and hospitality consultant Erica Bethe Levin, told the local CBS affiliate in Chicago, “If want our restaurants to survive, and you know we all do, they’re such a big part of our lives, then there has to be some give and take, we have to give in a little bit, too.”
- ‘We had to do it’; Denver restaurant charges COVID fee – Fox21News
- Miami Restaurant Charges Customers ‘COVID-19 Fee’ To Cover Pandemic-Related Costs – NBC Miami
- West Michigan restaurant implementing ‘COVID Charge’ – Fox 17
- Harold’s Chicken Charges 26% ‘COVID-19 Fee’ On Bills, Claiming Spike In Food Supply Prices – CBS Chicago
Discussion Questions
DISCUSSION QUESTIONS: Would you recommend restaurants charge a COVID-19 fee to offset rising sanitation, food and other costs tied to the pandemic? How transparent should business establishments be about the challenges they’re facing?
Poll
BrainTrust
Nikki Baird
VP of Strategy, Aptos
Camille P. Schuster, PhD.
President, Global Collaborations, Inc.
There is no question that restaurant costs have risen due to COVID-19 and increased food costs. It is necessary for restaurants to adjust their menu prices to reflect the current operating costs. However I don’t suggest adding the charge as a line item on the bill. The best approach is to update menu item prices accordingly.
The economics of running a restaurant have changed. Restaurant owners must make the price/cost adjustments required to maintain a viable business. I’m all for a COVID-19 fee.
I went out to eat this past weekend and saw signs clearly posted stating that pricing had gone up on all food and drink due to the increased costs of operating during the COVID-19 pandemic. I think this is pretty standard now, and so far I have not seen anyone argue over the increased costs.
I have no problem with restaurants doing this – as long as they state it clearly. This is happening in restaurants in my area already and there has been little pushback. We have to do whatever we can to help local restaurants survive.
It depends on the good will that restaurant had before COVID-19. It is generally easier for local and family owned restaurants to do so. People relate to that and want to help. But when a national chain restaurant tries something similar, we should expect a level of backlash. They will probably try to slip in with increased prices or offering less in promotions.
Just raise your dang prices: no one wants the “gotcha” tax at the end. It’s like those fees at hotels for internet usage.
Understanding that restaurants work on slim margins at the best of times, I’m on the side of slight price increases instead of a flat COVID-19 fee. The downside of charging extra for better sanitary practices is the hint that those practices weren’t strong enough in the first place.
At this point, customers willing to patronize restaurants have a right to expect a safe environment without paying a fee for it. At the same time, nominal price increases will help mitigate the restaurants’ margin squeeze and perhaps help them maintain their payrolls.
While restaurants need to recoup some money, adding a line item will only raise questions from customers. As Bob Phibbs said, “Just raise your dang prices.”
These are certainly challenging times for restaurants. If these fees help restaurants to survive, then they are no different from fuel surcharges during high fuel prices. I like the transparency (noted rather than hidden in price increases) as well as the communications (website, signage, etc.).
With the approach of cooler weather and the diminished attractiveness of outdoor dining, foodservice operators will need all of the assistance they can get to avoid following in the footsteps of the thousands of restaurants that have permanently shuttered their businesses.
But we all know what happened with fuel surcharges after 9/11 – they never went away, and every year FedEx and UPS keep raising those fees, regardless of the price of petroleum. Just recalibrate the list prices and let consumers budget appropriately. (Gosh, perhaps even pay the staff an appropriate wage and eliminate tipping as well?)
I’m always fascinated by the psychology of these kinds of decisions. People looking at a menu may or may not register that prices have increased – and seeing the prices increase for things like meat in their grocery stores, I’m pretty sure you wouldn’t have to say anything in order to explain that costs are rising and you’re going to have to pass those along to the customer. Calling out an extra fee, with basically an asterisk at the bottom of the menu or a sign on the wall, alongside the ones about masks and social distancing, etc. – I think that is taking a risk it will be overlooked. The cost is the cost. People want to support restaurants and bars, but they’re also managing their own budgets – no one wants to be surprised at the end of the meal. And “temporary” in this case could extend well into 2021. So just raise the prices and avoid any confusion.
All of our costs have risen, and the restaurants are not alone in this. My opinion is very simple — NO and NO.
Up the prices of your entire menu to make up the increases, as adding a fee in our industry is beyond stupid. Consumers hate added fees and we aren’t a utility or the cable company — so redo the menus and if people ask about the new prices, be honest with them and most will understand. Keep the service excellent, and your food fresh, and everything will be fine.
Requiring your customers to pay for something beyond their control in these tense times may not be the best way to recover additional expenses. Bumping up your menu prices will cover the same costs and fewer people will feel it.
A compulsory fee will be counterproductive. Why not be completely transparent and kindly ask the customers after being seated if they would be willing to support by donating an amount of their free choice? I think this approach would be much smarter.
I get that and don’t have a problem with it. Except for my local pizza place which has added $2 but only does takeout – that seems a bit much, especially when the crew rarely wears masks of doesn’t clean the counter after each pickup.
Sounds like you need a new pizza place!
Oh Dick — if only it was that easy in Atlanta, a city that thinks Marco’s pizza is pretty good. 🙂
The COVID-19 pandemic has resulted in a great acceleration, and requires every single organization to shift their operating models around the changing “new normal.” Restaurants and customer service-oriented businesses are no exception.
Everyone realizes that restaurants have suffered quite a bit since the pandemic emerged. However trust and transparency matter, and a compulsory fee for extra sanitation and cleaning is not going to fly well when folks are faced with strained budgets. A more worthwhile strategy would be to stealthy increase the menu prices to offset the costs of increased sanitation.
The short answer is to change prices. A modest increase in a few key items will more than cover what would otherwise be a $2 fee added to the bottom of a check. Probably more. Done right, the customer will barely notice, if they notice at all. Furthermore this is a good opportunity to train employees to upsell to enhance the guest’s experience. An extra dessert or appetizer added to a check will go a long way to help offset cost. It’s a win/win/win. The restaurant gets a higher guest-check average. The server makes a bigger tip based on that higher guest-check average. The guest gets a better experience when they try that delicious appetizer and delectable dessert!
This depends on the restaurant, its circumstances, and the customers it serves. However in all situations, restaurants should be honest and up front about the fees they are charging. In my view, the most honest approach is to just increase menu prices so that everyone knows in advance what the costs are and what the bill is likely to be. Surcharges that are added on sometimes cause resentment and a sense that businesses are nickel and diming it – like those dreaded resort fees at hotels where you get charged for “free” internet access!
Everyone wants the restaurant industry to survive and thrive. No one likes negative surprises like extra charges added to their bill. Those two things being said, yes, charge an additional fee to help cover the cost, but make sure your customers know before they walk in the door or at least when they walk in the door — even before they are seated.
The other approach is to raise your prices but also let your customers know. If possible, beforehand.
The cost of doing business has gone up, and it cuts across the entire sector. Inflation, as measured by commodity prices, is rising. There is no avoiding the margin squeeze and the need to adjust the pricing accordingly. Restaurants need to bake in the higher expenses into their pricing. Limit the line items to taxes and local regulatory fees.
I would recommend raising the menu price instead. Think about it for a minute. Will a meal cost $21 if I take it out, but $22 if I eat it in? Where does it stop? If the water bill increases will there be a water surcharge? Restaurants have always faced increasing costs and adjusted menu pricing, portion size, and even entree selection accordingly. The customers are facing challenges of their own. Would many restaurateurs discount bills for customers who have lost their jobs or who are on unemployment? If they aren’t going to respond in kind to their customers’ economic woes, why should customers return the favor?
In Hong Kong if you did take out you got a 20-25% discount off the menu prices in a couple (US-based chain) restaurants I went to. I was shocked.
Petco offers a 10 percent discount when you do curbside pickup at their stores, at least here locally. I think I’ve been inside the store one-time since March.
There is no questions that the cost of running a restaurant has increased due to COVID-19. However I don’t like surprises on my bill. Let me know before I order and I am OK with an extra charge.
Let’s turn this around a bit.
If a COVID-19 fee makes sense, why not charge it before the customer sits down and even takes a table? Just imagine you step up to the restaurant or Tony Orlando’s store and you tell the customer, if you want to eat (or shop here) we are charging you $5 to enter. Yes, it’s transparent, but how many customers will react negatively and be angry or simply walk away?
So instead, you charge them that fee when they get the bill? It feels like slight of hand to me. I hate being nickel and dimed with fees (read: shipping fees for online). Just give me the price. If an operator needs more, charge more and let me make a decision on what and how I want to spend my money.
If that restaurateur thinks they are fooling the customer by keeping their prices low,they are only hurting their own good will. I’m with Chris Buecker, “Why not be completely transparent and kindly ask the customers after being seated if they would be willing to support by donating an amount of their free choice?” Those who can will and those who can’t won’t, but they will still stay as customers.
It is understandable and reasonable for restaurants to charge a pandemic fee but this has to be clearly communicated to the customers to ensure full transparency. Customers will probably appreciate honest communication way better than sneaky price increases.
Restaurants definitely need to have a method for bringing in enough revenue to remain open and in business. Restaurants might decide to charge a fee for COVID-19, however it’s the customer who will decide whether or not the fee is acceptable. If consumers do not want to pay a fee, they will stay away from restaurants that charge one. Consumers dislike fees. Often it’s better for a business, or an industry, to raise prices.
The food prices in the grocery store are rising and they do not have COVID-19 signs. If a restaurant puts a COVID-19 surcharge on the bill I would not expect to see food prices rising. They can do one or the other but not both.
I understand the need for upping prices and I am okay with that because I want the businesses to survive. But a COVID -19 fee? Nope. Just fold it into whatever the item costs.
Just increase prices. Putting a separate line item is like showing lack of gratitude for the risk that diners are taking to go to that restaurant sometimes with the altruistic idea of helping their favorite places to stay afloat. As a personal story, I am in a Rolling Stones tribute band and a really nice music venue we played at many times created a GoFundMe page to help them stay in business. I contributed. It’s a tough time for all.
In addition to having to pay for extra sanitation supplies and rising food costs, restaurants are also operating at greatly reduced capacity. I think it’s perfectly reasonable to include a COVID fee (although I would probably call it something else).
Many service businesses, like salons, are charging extra fees for each appointment to offset PPE costs. However, any business doing this needs to be extremely transparent and upfront. Clearly state the charges and reasoning behind them on your website, any booking or reservation pages, reservation confirmations, signage as customers walk in, and on the menus. There should be no surprises when customers receive a check. Many people want to support local businesses, so as long as they know what they are paying for and why.
This is a cost of doing business today, no different from labor costs, equipment depreciation or rent. Just because it’s new doesn’t make it different. Calling it out as a line item would suggest that they’re making some statement and that they’re going to get rid of it when things are more normal.
It’s better I believe to adjust prices, like they’ve always done with other cost considerations. I think most customers realize that their costs are going up. When you remind them of this with a line item, you open yourself up for needless criticism.
I’m pretty sure supply and demand still applies here. As much as I’m a fan of honesty and transparency, it just seems wrong to add a fee or charge to a bill. I expect that would suppress demand. And while supply–space and time in a restaurant plus the food–is limited, this reveals the question of value. Is it all worth it?
Every restaurant owner should consider it. From what I’m hearing, restaurants are only able to drive 1/2 as much revenue but, due to restrictions, it still takes just as many people/costs just as much as a full house.
As a society respectful of business, we should be willing to pay a small amount extra to help business owners support themselves. And it won’t need to be a lot — since anything additional is pure profit.
That said, any restaurant charging a surcharge needs to be quite clear about it — no surprises.
There comes a point where the cost is prohibitive as entree prices have steadily been increasing. Your entree is $17, then you have tax of $1.50, tip of $3.50, now a “COVID Fee” of $2 and you are at $24 and that isn’t even with a beverage.
Maybe the restaurants need to take this opportunity to cut portions down a little.
We are all feeling the pain and squeeze of COVID-19, one way or another. Still, it’s dishonest for restaurants (or any business owners) to be anything less than 100% transparent — up front — about fees or surcharges added to customers bills, regardless of the reason. Posting a message on your website when majority of your customers have in-person visits is a cop-out. If you can’t look your customers in the eye and tell them that there are added fees, and why, before you take their order or book a service, then you don’t deserve your customers.
Most people understand the impact this pandemic is having on small businesses. When customers show up to support their local shops, they are trying to help. But, the last thing customers want is to feel taken advantage of. If business owners are honest about fees and fully transparent — up front — most customers would understand. However, there is something that feels disingenuous about passing this burden on to customers — especially the few that make the effort to support your business at this time. That’s when being served a surprise fee along with your bill can really bite.
I absolutely do not recommend restaurants charge a “COVID-19 fee.” This will only turn more customers away. Restaurants are making other changes like reducing their menus, doing more take out so cutting staff that way, etc.
Many of the restaurants that do take out, simply charge the amount of the food purchased. Normally, when eating “in” a tip is left for the service the wait staff provides. It seems reasonable to add a small “service charge” in lieu of a tip, certainly when provisions are not made for adding a tip.
We regularly hear about “transparency” — it’s wonderful, it’s necessary in a digital age, etc. We also hear the phrase “TMI”. Where do they intersect? Right here.
Costs are costs. Customers don’t need — or want — to hear an explanation for every decision that goes into pricing. Whether prices should actually be raised is a separate question that depends upon each establishment, and I can’t really offer guidance (other than to remind that no particular level of profit is guaranteed).
My initial gut reaction to the concept of COVID surcharges in restaurants was, “Sure, let customers know what they are paying for with complete transparency.”
On reflection, however, I see how putting this into practice creates a distracting and negative communications cycle for every transaction. Who wants to commence a meal with a conversation about extra fees?
So, I conclude that I must side with the folks here who recommend building the new customer care expenses into the food prices. Twenty-five cents per item could be enough. But I’d add a wrinkle: Let customers know why the prices have increased. A little message on the menu and the web site could do the trick, to wit:
“We want you to know that we are passing along some of the customer care costs that we have incurred recently with slightly higher prices. This protects your well-being when you visit or order from us, while enabling us to keep our staff safely employed and our doors open.”