New York City Will Allow Restaurant Covid Surcharges, Defrauding Customers And Employees

New York City’s council passed a law allowing restaurants to add up to a 10% ‘Covid surcharge’ for eat-in dining. Mayor Bill de Blasio is expected to sign it. It is stupid.

  • Restaurants can already raise their prices. This allows them to publish prices, but charge customers 10% more than those published prices.

  • Surcharges are a deceptive way to raise prices, but the law requires the surcharge to be published on restaurant menus. So it’s really just about deceiving people for whom math is hard.

  • And raising prices during a recession, and when many people are concerned about in-restaurant dining as it is, only serves to keep people away.

When I tweeted about this, one response that generated a couple of ‘likes’ was that customers should pay the surcharge “to support local business and their workers.” But that misses the point.

  1. Restaurants can charge higher prices, which customers can pay. Or customers can voluntarily leave big tips. No legislation is required for this.

    Kalergis Dellaportas, the general manager of his family’s Bel Aire Diner, in Astoria, Queens, said that if the bill had passed at the start of the pandemic, he might have been tempted. But six months in, he has already planned for the extra costs of running a restaurant, including restarting indoor service at the end of the month.

    He has raised his prices by about 5 or 6 percent, he said, and has noticed that other places have done the same.

  2. Higher prices may not maximize the welfare of restaurant owners or their employees if demand falls.

  3. Why is the moral obligation only in one direction? As one New York City restaurant owner puts it,

    “Our customers are all families,” and during the pandemic most are neighbors and other regulars whose finances are as challenged as his own, Mr. Criscitelli said. “So why should we charge them any extra? It’s hard for them to come out now.”

Is this worth the fraud that one restaurant owner admits to?

Mr. Keyser said restaurant owners have always been afraid to raise prices, even when costs demand it. “The whole idea of a surcharge — and I am sorry to let the public behind the curtain,” he said, “is so we can charge $12 for a burger and make it look like it costs $10.”

If the surcharge wasn’t taxed that would be a benefit, similar to how airline fees aren’t subject to the federal 7.5% excise tax on domestic airfare (which was suspended by the CARES Act). In other words, that restaurants would benefit from fees the way airlines do, as a tax dodge. However it turns out that the allowable surcharge “comes before tax” so isn’t as helpful as a truly beneficent city council might have made it.

Restaurant lobbyists in the city have wanted surcharges for years, long before the pandemic. And they want it to be permanent, not limited to coronavirus or the duration of the pandemic as the new law provides.

Workers though are concerned that the surcharge will discourage tipping. Of course it will. People are willing to spend a certain amount for a night out, and for a given restaurant meal. That total cost is inclusive of the tip. If the restaurant adds 10% onto its bill, that’s money the guest won’t add to the discretionary tip line.

If there’s a real benefit to surcharges it’s likely shifting income from employees to restaurant owners. Put another way, it’s a way of reducing otherwise-sticky wages at a time of high unemployment.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. So what you’re saying is:
    1. It’s mainly deceptive because people can’t do math.
    2. The owners of the thousands of restaurants in NY on the verge of shutting down do not deserve to be helped. If customers are living paycheck to paycheck such that a surcharge makes a difference, perhaps they shouldn’t be eating out.
    Yes workers may get less in tips but would they rather the whole restaurant shut down?

  2. Let the surcharge remain, but make sure it is plainly shown as a surcharge for COVID19, so it can be removed at some later date, as appropriate. Restaurant prices here in the SF Bay Area have already risen, so maybe we’ll be looking next at a surcharge. Until the full impact of the current recession/depression hits home.

  3. @Pete – if a higher price is good for the restaurant, raise the price don’t lie about it. It’s done as a surcharge to be intentionally deceptive, and to effectively keep worker tips. A business owner who does these things should not stay in business.

  4. DeBlasio is a tool. This is ridiculous just for the reasons Gary states plus it sends the wrong message. Yes, you should eat out, it isn’t abnormal!

  5. You’re really an idiot.

    I know a few places that used to charge for take-out orders…because the (city-mandated, compostable) containers they had to use cost 5 or 10 cents a meal. No keyboard-warrior morons threw a tantrum and cried that they were being “defrauded.”

    We’re in the middle of a global pandemic AND a depression. Find something else to whine about. Get a grip on reality. Stop being a spoiled, entitled little child. Idiot.

  6. Is there anywhere other than the US that has this insane opposition to displaying all-in prices. Everything is designed around deceiving the customer. Its exhausting trying to keep ahead of it. The meal out in NYC will now be the menu price + local tax + tip + surcharge. And then on top of that you have those with mandatory tip added in the hope that you will not notice and tip 2x

  7. Gary hit the nail right on the head. When I read an article this morning, I immediately thought this surcharge this is stupid. I’m already feeling the increased prices from take out orders in NYC but I continue to patron my favorite restaurants because I like their food and there is nothing deceptive about the prices on their menus. That might change if any of them implement this surcharge. I hope all of them are smarter than the mayor.

  8. Where does the surcharge, resort fees credit card surcharges etc end
    I’m with Gary on this one.Raise the prices if you have too
    However it’s going to have an impact on servers tips and a psychological affect on guest retention/return
    I stopped going to an upscale restaurant as they were doing a covid surcharge and to go orders there was a handling & packaging fee 50 cents for napkins

  9. @ Gary — “A business owner who does these things should not stay in business.” Amen. This is the same argument I make when business owners complain about income taxes. If you aren’t making enough to pay a reasonable amount taxes to fund the very government that makes the existence of your business possible, then you shouldn’t be running that business. In other words, if you are lousy at your job in the first place, you should stop blaming others and get a new line of work.

  10. I would definitely include this covid surcharge into my tip amount. Let’s say I would be leaving a 18% tip during normal times, I would reduce it to 8% now.

  11. Conflicted. Because the argument against it is familiar. But, you lost me when Deblasio says he supports it. We’re done after that. LOL

  12. This doesn’t bother me.

    Restaurant pricing is already messed up with the whole tipping model as it is. I’d like to see tipping go the way of the do-do bird, and pay particular attention to the stories about restaurants who try that. Most of them couldn’t get it to stick, because even slight increases in the menu price were really messing with their ability to attract price sensitive customers, even though it’s the same stupid price.

    Restaurant economic models are already screwed up. While this won’t do anything to fix that, it’s no worse than anything else floating around.

    I’m pining for Japan right now, where the price you see is the price you pay.

  13. You missed the point. This is to raise tax money for the city of NY. It allows restaurants to charge 20% more – which will increase tax payments by 20%

  14. I know more than one person that this would just nudge them into not going to the restaurant at all, or cutting visits. People are finding doing more home-made meals is just not that big of a deal anyway. Get people too used to home-made meals and restaurant business may be permanently down.

  15. Skaner says:
    September 18, 2020 at 8:09 pm
    I would definitely include this covid surcharge into my tip amount. Let’s say I would be leaving a 18% tip during normal times, I would reduce it to 8% now.

    And I’m leaving less than 8%, because they’re adding the surcharge pre-tax – I don’t tip on tax. Too bad for the server. You get to vote in these places, I don’t, and you get what you deserve.

  16. Textbook deregulation: allow businesses screw over consumers and employees. Exactly what the current administration wants.

    We need more *good* regulation, not indiscriminately less regulation!

  17. DeBlasio’s wife has a city funded staff of 20 and a $2 million budget.

    Of course he needs more tax revenues. He can only make so much from death certificates from nursing homes. Maybe a 10% Surcharge on those too?

  18. This is another stupid government rule that does nothing to help anyone or businesses. Businesses could already put in a surcharge, cover charge or raise prices. The solution to the crisis is to stop hyping the flu and let businesses open up at their own risk and let customers enter at their own risk. Let people decide how they want to live their lives in a situation where a virus causes no or mild symptoms for 99% who get it.

    People have taken to outside dining pretty well in the outer boroughs that have outside seating in the street. We’ll see about the temperature. Restaurants are a unique business that often close down with regularity even before COVID. I feel bad for the long established ones that were doing just fine before.

    @Patty

    We don’t need more regulations about what people can and can not consensually and voluntary do with each other, including businesses.

  19. Restaurants have ALREADY raised prices. As in every single restaurant I go to or order from, here in Brooklyn.

    Many have instituted those bogus 10% “service charges,” which makes no sense for small parties of diners. That’s like hotel “resort charges” — just padding the bottom line. And then they have that audacity to ask for more tips.

    Thus, the COVID surcharge is completely unnecessary and is simply a subtle way for the city to raise taxes.

    My heart goes out to servers, but I have a self-instituted 25% limit for all extra charges sans taxes. Add a 10% COVID surcharge, and the waiter doesn’t get more than 15% from me, and that’s only if I’m completely satisfied with the service. I have a feeling that servers are going to be royally screwed here, unless they demand a more fair redistribution of this surcharge.

    I personally will go out of my way not to patronize the restaurants that use this surcharge.

  20. Another scamcharge to identify places to avoid. Don’t let them get away with it. There are other places to eat.

  21. Most of the respondents here don’t have a clue as to what they are talking about.

    We went to a restaurant last night on the Upper West Side. They asked me if it was ok to add the charge and I said “no problem”. They only added the surcharge to the food, not the bottle of wine.

    Unfortunately, a lot of your readers Gary are spoiled children with plenty of money and, like their cult leader (DT), refuse to accept the fact that people and businesses are suffering. Especially restaurants.

    So, while I agree that pricing should ALWAYS be up front, honest and reflect the price actually charged, this is an exceptional time and requires exceptions to the rule.

  22. Once again, I can’t tell the difference between Fox News or OAN and your blog. Your faux-libertarian (closet conservative) views are really annoying in a time of a global pandemic. If people are too f’ing cheap to tip at least 20% and help restaurants, they shouldn’t be dining out.

  23. @George Williams – gee, that would really help restaurants. Tip 20%, great, but when restaurants add a 10% surcharge to the bill that becomes far less likely to happen. Most readers complain that I’m too far left, by the way!

  24. so Bill de B wants u to give servers a 20% tip then a 10 % surcharge then the 10 % sales tax on food and the surcharge and maybe the tip!! Looks like more restaurants will close and more servers out of work… It is as bad as some liberal cities surcharge on meals to pay for servers healthcare vs their Union taking care o it and them!!!!

  25. Philosophically, I would rather pay more to a vendor who is upfront & honest about the charge, rather than a lower total price with one who is deceptive/evasive in total charges.

  26. @The Masked (and gloved) Poster: Some San Francisco restaurants already have 5% CV19 surcharge (I.e. Cotogna on Pacific Ave).

  27. Saw this with a Back of House surcharge on the bill at a restaurant added at a place in Boston. Told them NO WAY and reduced my tip by the same amount. My barber added $1.00 Covid charge. I told them bye that I will be going elsewhere. Customers do not need to be nickeled and dimed. Adjust your prices to cover your costs or CLOSE.

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