BUSINESS
10/07/2014 12:49 pm ET Updated Dec 06, 2017

Adding An 'Obamacare Surcharge' To Restaurant Bills Is A Terrible Idea

Eateries are once again testing to see if diners have acquired a taste for paying a little extra to fund restaurant workers’ health care coverage.

A new report in the Los Angeles Times documents more than a dozen pricey restaurants in the L.A. area that are tacking an “Obamacare surcharge” on to customers’ bills in hopes of offsetting the cost of covering employees’ health insurance. The companies are required to provide coverage under a long-delayed mandate in the Affordable Care Act.

There are two main reasons this tactic makes little sense.

1. The Obamacare mandate for small businesses hasn't even gone into effect yet.

The rule, part of which won’t go into effect until 2016, compels businesses employing between 50 and 99 full-time workers to offer affordable health plans. But with already-slim profit margins in the food service industry, restaurateurs say they simply want to push some of the cost onto diners.

Originally slated to come into force in January, the Obama administration gave employers extra time to budget health care into employee benefits. Small businesses must pay penalties if they don't start insuring by 2016. Companies employing 100 or more full-time workers must comply with the rule by next year.

2. Obamacare surcharges don't go over well with customers.

Two years ago, Denny’s franchisee John Metz, who owns about 30 restaurants in Florida, ignited the fury of both customers and his corporate partners when he added a surcharge to customers’ receipts. Denny’s CEO John Miller reprimanded Metz and publicly distanced the company from what was interpreted at the time as a political statement opposing Obamacare.

Then, earlier this year, a sports bar in Florida made a similar move. Gator’s Dockside, a chain with eight franchise-owned locations throughout the central part of the Sunshine State, outraged customers when they found the truncated term “ACA surchar” added just beneath sales tax on their receipts.

aca surcharge

“Plenty of places sell wings and burgers and don’t try to make political statements,” customer Larry Ross wrote on the company’s Facebook page. “I’ll be taking my business to one of those restaurants from now on.”

Again, the corporate parent distanced itself from the decisions of a rogue franchisee.

Last year, city officials in San Francisco began investigating more than 90 restaurants that allegedly pocketed fees added on to cover health care costs.

Surcharges for health insurance aren’t the only additional fees restaurants have been criticized for charging. In August, a café in suburban Minneapolis captured national headlines when it added a 35-cent “minimum wage fee” to bills a week after Minnesota raised its minimum wage by 75 cents to $8.

Following a furious backlash, Oasis Café owner Craig Beemer issued a statement saying that his “family is conservative in our views,” but that he didn’t mean to make “some grand political statement.” Still, he maintained the fee.

The novelty of the health care legislation may be to blame for restaurant owners' insistence on publicly itemizing the new cost of doing business. It would be unusual for an eatery to tack on surcharges for the import tax on the Swiss cheese used in a sandwich or the costs of keeping the kitchen clean for the health department.

So far, backlash has been mild in Los Angeles, according to the LA Times. But vitriol has surfaced in some online reviews.

“Outrageous that AOC expects diners to subsidize their employees health benefits -- we already do that -- by paying the high prices for their food!” one Yelp reviewer wrote of AOC, a wine and tapas bar profiled in the LA Times' story. “The audacity, I was completely offended.”

aoa

Tables at AOC, seen in this shot from its website, may remain empty if customer outrage spreads.

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