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Restaurants Add Labor Surcharges to Help Pay Minimum Wage Costs



(p. B1) In lieu of steep menu price increases, many independent and regional chain restaurants in states including Arizona, California, Colorado and New York are adding surcharges of 3% to 4% to help offset rising labor costs. Industry analysts expect the practice to become widespread as more cities and states increase minimum wages.

"It's the emerging new norm," said Sharokina Shams, spokeswoman for the California Restaurant Association. She said California restaurants are adding surcharges as the state lifts the minimum wage every year until it reaches $15 an hour by 2023. It is currently at $10.50 an hour for employers with 26 or more workers.


. . .


While adding a surcharge risks turning diners away, some restaurateurs say they want customers to understand the consequences of higher wages on a business with profit margins of generally between 2% and 6%.


. . .


(p. B2) Sami Ladeki added surcharges to the menu at six Sammy's Woodfired Pizza & Grill restaurants in San Diego and eight more across California. He said it was a mistake to call the charge a state mandate, and has changed the wording. But he remains critical of rising minimum wages.

"This is not sustainable," said Mr. Ladeki, who says he makes a profit of around 1% charging $12 to $14 a pizza. "People are not going to pay $15 or $20 for a pizza."


. . .


David Cohn, who owns 15 restaurants in San Diego, including BO-beau, said his 3% surcharge wasn't a stunt.

"We want people to understand there is a cost," Mr. Cohn said. "How do we stay in business with margins shrinking and competition increasing?"



For the full story, see:

JULIE JARGON. "New on Your Dinner Tab: A Labor Surcharge." The Wall Street Journal (Fri., March 10, 2017): B1-B2.

(Note: ellipses added.)

(Note: the online version of the story has the date March 9, 2017.)






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