Come January 2014, businesses with 50 or more full-time employees must provide health benefits, per President Obama’s Affordable Care Act. While that’s still months away, it’s already driving serious debate among some of the biggest names in local dining. With profit margins hovering between 2 and 5 percent, they say a shift like this would flip even a successful joint’s balance sheet from black to red. “There’s no [restaurant] business out there that can just suck up the cost,” says prolific eatery opener Ethan Stowell. “The game is going to change, big time.”
Joshua Henderson, founder of the Skillet Diner empire, is leading that change. The bearded chef turned restaurateur estimates that insurance at just one of his locations will cost $8,000 to $12,000 a month, but rather than raise prices he’s considering tacking a surcharge onto all meals. The added charge—likely between 3 and 5 percent—would be noted conspicuously on menus and take effect when the law does next January 1. “We want to be very transparent,” Henderson says. “I don’t want to hide stuff like that in food prices.”
Despite only adding a handful of dollars to most tabs, this move will likely rile customers. Diners are prickly about any price increases, and chefs already struggle to educate the public on why a seemingly simple pork chop or plate of roasted beets costs what it does. That’s why Henderson started this conversation so early. The more time his customers have to get used to the idea, the less chance they’ll view it as the latest in the recent parade of dining trends (communal tables, not taking reservations) that benefit kitchen over customer.
Need more proof that restaurateurs are spooked by the possibility of alienating loyal customers? Consider Scott Staples. If the guy behind Restaurant Zoë, Quinn’s, and Uneeda Burger joins the surcharge movement (he’s not sure yet), he’ll go so far as to suggest that customers take the difference out of their tip, since those added dollars will still benefit the staff: “We’re just trying to find a way in a low-margin business to afford to take care of our employees.”
Of course not everyone is crazy about the surcharge idea—and not just because of the potential fallout. Renee Erickson recently started contributing to insurance plans for full-time employees at her two newer restaurants, the Walrus and the Carpenter and the Whale Wins, and has done so at Boat Street Cafe for four years. But she’d rather make her restaurant run more like a typical company, where the prices she charges actually cover the cost of doing business. “Boeing’s not going to add a $100,000 surcharge to every plane to cover their health care costs,” she says.
Surcharge or not, the debate has started an important conversation. Plenty of local restaurateurs, even those not subject to the new law, think it’s time to pitch in for the men and women who work 12-hour kitchen shifts and endure aching backs, oven burns, and scant vacation time for their craft. And even better, offering benefits could insert stability in a famously transient industry and draw talented cooks to places with the best insurance packages. “You attract those kind of people who want to stick around,” Erickson says. It’s worth pointing out that there’s one notable chef in town who has been rocking the higher-prices-for-health care model for years. And it doesn’t seem to have hurt Tom Douglas’s business one bit.
Published: March 2013