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Some Restaurants Emerged Post- Pandemic With A New Business Model: Adding Surcharges

AILSA CHANG, HOST:

If you're dining out again, you may have noticed a little something extra on your tab - added fees. They seem to be cropping up on all sorts of bills, not just at restaurants. As Frank Morris of member station KCUR reports, some of those charges stem from businesses struggling to find their post-pandemic footing.

FRANK MORRIS, BYLINE: Across most of the country, bars and restaurants are fully open.

(SOUNDBITE OF BAR AMBIENCE)

MORRIS: This champagne bar in Kansas City called Ca Va narrowly survived the pandemic, and manager Sarah Hogan says it emerged with a very different business model.

SARAH HOGAN: So everyone is now paid a livable, thrive-able (ph) wage, offered benefits. And to do that, we've said we're going to create this thing called a hospitality fee.

MORRIS: A hospitality fee - at Ca Va it's an extra 20% on the bill, like a tip except mandatory, and it doesn't just go to waiters and bartenders. Hogan says they put it toward raising hourly wages and providing better benefits for the entire staff. No one's left out, and customers don't get to play favorites.

HOGAN: We want to have every member of our staff - regardless of how they identify or what they look like, how they present themselves to the world - be able to have the opportunity to make fair money.

MORRIS: And she's desperate to keep her small staff intact. Sean Kennedy with the National Restaurant Association says restaurants are starving for workers.

SEAN KENNEDY: We need bodies. We need cooks. We need hostesses. We need maitre d's. We need bartenders. We need people in the back of the house. And right now there is no restaurant that is fully staffed.

MORRIS: In fact, some still remain closed because they just can't hire enough help. Kennedy says the restaurant industry is down about 1 1/2 million workers since early last year. So wages are going up at a very tricky time for the industry.

KENNEDY: Restaurants are reopening in an incredibly uncertain environment. Labor costs are higher. Food costs are higher. So restaurants are doing ingenuity. They are finding ways to cut costs as best they can. Some of them are going to have to raise prices; some of them are going to have to raise fees.

MORRIS: And those fees come in two basic classes - hospitality fees, like the one in the bar in Kansas City, and surcharges. Surcharges tend to be smaller, temporary and directly related to some new expense, and they are all over the economy right now. Delivery companies are tacking them on to help cover higher fuel costs. Some dentists, hairstylists, even plumbers, have been charging them specifically to cope with the pandemic. Problem is, a lot of people hate surcharges.

TED ROSSMAN: And they just see this line item on the bill, and they're like, what the heck is that? And it ends up really backfiring.

MORRIS: Ted Rossman, an industry analyst with creditcards.com, says 4 out of 5 customers surveyed say a surcharge makes them feel unappreciated. Take Frontier Airlines - its COVID surcharge went over like a lead balloon.

ROSSMAN: And they instituted it very quietly, and it hit the news recently, and they took it away.

MORRIS: Restaurant hospitality fees have come and gone, too. They're not popular with some servers, who argue they can often make more on tips, and they risk alienating customers. David Henkes is an industry analyst with Technomic.

DAVID HENKES: It's more common than it was, but I think in the grand scheme of things, it's still relatively rare. And I think, you know, the fact of the matter is it still flies in the face of, you know, sort of the traditional restaurant business model.

MORRIS: Of course, everyone has to cover higher costs somehow. Henkes says many are just raising their prices. He says menu price inflation is running at a 40-year high. So Americans are going to pay more to dine out and for lots of services, whether that's reflected on the menu or in a separately labeled new charge on the bill.

NPR News, I'm Frank Morris in Kansas City.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.