New fees on menu as diners return
Restaurants face labor shortage, rising food costs
Diners who frequent Refuge in San Mateo, a popular pastrami restaurant that opened in late June, might have noticed a new charge on their checks: a 2% “wellness” fee.
At the bottom of the restaurant’s menu is a notice that the fee will be added to all checks to “compensate (for) high labor cost in the Bay.”
Refuge is among restaurants across the Bay Area — and the country — that are tacking on new fees as they come out of the pandemic. They say the fees are needed to pay more to attract workers during an ongoing labor shortage, afford skyrocketing food costs and to generally make restaurant jobs more sustainable.
Although replacing tipping with automatic service charges is already gaining momentum, some of these new fees are in addition to an expectation to tip. Pinstripes, a restaurant and bowling alley near Refuge at Hillsdale Shopping Center in San Mateo, is also charging a 3% wellness fee to “offset the stringent safety standards and practices” put in place during the pandemic, said Don Hoffman, chief marketing officer. At San Francisco’s Che Fico Alimentari, the aim of a new 10% “diningin” charge, owners say, is to provide a living wage for the staff.
Laurie Thomas, executive director of the Golden Gate Restaurant Association, said she’s heard of more local restaurants adding surcharges or service fees to help cover increased costs.
“I think everyone is trying to figure out what works in order to keep the lights on and in order to be able to pay employees more,” she said.
Refuge coowner Matt Levin said the new “wellness” fee was spurred by the fact that he, like most local restaurateurs, is struggling to find workers. He’s paying 15% to 20% more than
he did prepandemic to those he can hire — many of whom are working two or three jobs and commuting from as far away as Modesto. Refuge also offers 401(k) plans and paid time off, and it’s putting together a health insurance package.
Many restaurants are raising wages to stay operational. Chipotle recently increased prices by about 4% to cover the cost of higher wages. According to a recent survey by jobhunting website Joblist, 39% of former hospitality workers said they would return to those jobs for higher pay, and 23% want more benefits. In the Bay Area, the high cost of living continues to be a significant factor for workers, Levin said.
“If someone’s going to work here, if we’re going to lure them to work on the Peninsula, we’re going to have to pay for it,” he said. “Going out to eat right now, it is a premium experience to go to a sitdown restaurant with human beings serving you.”
Levin decided to implement the fee first in San Mateo, which at $15.62 per hour has the highest minimum wage among the three cities where he operates. But he plans to also roll it out at his locations in Menlo Park and San Carlos.
“We have to do something because there’s hardly any (profit) left over, honestly,” he said. “It’s a constant juggling act.”
The cost of food is also going up, including basics such as dairy, meat and vegetable oil. Global food prices have increased every month for the last year, according to Reuters. In the past two months, the cost of pastrami has gone up by more than $1 per pound, Levin said. To compensate would mean increasing the price of Refuge’s sandwiches, which cost $19.95, by about $4. It’s raised prices by about 5 to 10 cents here and there, Levin said, but has largely absorbed the added costs.
Owners say raising menu prices rather than adding a fee risks alienating customers and losing them to other restaurants. Some restaurateurs who experimented with raising menu prices say they received complaints from clientele.
Melissa Axelrod, owner of Mockingbird in Oakland, is debating adding a 20% service charge when she reopens her restaurant this fall. Before the coronavirus, Mockingbird charged a 2% health care fee, which meant she could cover half of the monthly health insurance premium and dental insurance for employees who opted in. In 2019, this translated to spending about $145 to $250 per employee per month, she said.
Now, she’s considering reinstating a similar fee or initiating a serviceincluded model that would raise menu prices. Neither feels optimal.
“It’s not ideal to put all these fees on the bill. I feel like the sticker shock of including it all in the price, with everything going up now, also doesn’t work,” she said. “It doesn’t seem like there’s a good way to actually cover these costs.”
When Mama reopened in Oakland in June, the restaurant got rid of tips and switched to a 20% service charge and raised prices slightly. The prix fixe menu now costs $34.95 per person, up from $29.95 when Mama opened in 2019. But that still didn’t sufficiently cover costs, according to coowner Stevie
Stacionis. The owners also instituted an additional 5% “health mandate” fee to help cover full benefits and paid time off for fulltime employees. Health, vision and dental insurance costs the restaurant about $400 per employee each month.
The name of Mama’s new fee is in part a rebuff of the city of Oakland, which unlike San Francisco does not have a health mandate, which requires any business with more than 20 employees to set aside money for its workers’ health care.
“In an area like the Bay, given the cost of living and the cost of rent, it’s damn near impossible for a wellintentioned restaurant, like I hope we are, to cover our costs at all and take appropriate care of our teams,” Stacionis said.
The pandemic accelerated conversations among Mama’s owners around fair pay and support for staff. The new fee, Stacionis said, is an experiment in asking customers to help make jobs there more viable.
So far, most customers have been curious but understanding about the new fees, both Levin and Stacionis said.
“We’re trying to be transparent about what it takes to have places like ours survive and have the people (who) work in places like ours survive,” Stacionis said.