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Alliance OPED on Admin Fees in Crain's NY

By NYC Hospitality Alliance

April 22, 2016

The cost to operate a restaurant in New York City is skyrocketing at an alarming rate and the regulatory environment is daunting.

These costs and regulations are forcing the restaurant industry to explore new models for menu pricing and employee compensation. Most notably, a handful of restaurants have increased menu prices while eliminating tipping. These restaurateurs are pioneers because doing away with tipping is deeply complicated by legal, financial, operational and cultural complexities. 

Adopting a no-tipping policy represents a dark abyss of unknowns. Significantly increasing menu prices can reduce consumer spending, while having no tipping can scare off workers who earn $15 to $35 (or more) an hour in tips because they fear a drop in take-home pay (and control in determining that amount). Only time will tell if the no-tipping business model proves successful and grows in popularity throughout the five boroughs.

There is, however, another option to help restaurants navigate the changing business environment short of eliminating tipping, overhauling their operations and spiking menu prices: A restaurant could add a clearly disclosed surcharge to a check, as is done by restaurants in progressive cities including San Francisco.

For example, a restaurant could state on its menu that a 5% surcharge will be added to a customer's check.

 

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