Local restaurant charges a 3% 'employee benefits surcharge' but will customers go for it?

What are the costs of producing this beautiful plate of organic vegetables? More than meets the eye.

What are the costs of producing this beautiful plate of organic vegetables? More than meets the eye. Facebook

It's an idea that’s gaining traction on the West Coast, say Ray and Juell Roberts, owners of the Peoples Organic chain of natural foods restaurants. (The couple are also known as Prince’s personal chefs for several years before his death.)

After spending some time traveling and dining in San Francisco, the couple noticed restaurants "all over the place" charging a 4% “employee benefits” surcharge on the check, in addition to the standard dining charges and taxes. Even the airport restaurants were doing it.

So Roberts said they decided to give it a shot. “We wanted to be transparent about why prices were going up.”

Diners everywhere are most likely going to see prices go up in the coming months. This is in part a response to the upcoming minimum wage changes (a $15 minimum wage vote is going on November’s ballot) as well as changes to the Affordable Care Act, which requires businesses employing more than 100 people to provide health benefits to full-time employees.

Restaurant owners have been wringing their hands for months now in anticipation of the changes. Many are worried about keeping their doors open in an industry with notoriously sky-high labor costs.

Rather than simply jacking up prices, some restaurants are choosing to tack on a surcharge -- and letting diners know why. As far as we know, Peoples Organic is the first to do so locally, but a recent Los Angeles Times article indicates this is a larger national trend.

But how will customers respond? Juell Roberts says thus far, very favorably, save for one, who complained to her first, and then came to City Pages.

“Is this a legal practice?” asked Greg Mattson after recently dining at Peoples. “Is this a new practice for all restaurants? Are we obligated to pay this as customers, without being warned of this charge when entering the establishment? I am also wondering why they do not include in the price of food things like electric, water, heat, etc.?”

The short answer, is that of course they do. Electric, water, heat, labor, tables and chairs, napkins, silverware, glassware, the floor under your feet are all factored into the price of a plate of restaurant food. That’s why dining out is so expensive and why nobody compares a plate of beans at home to a plate of beans at a restaurant. And eating out is bound to get more expensive, not less so.

Juell says that Mattson is the only customer that she knows of who has responded unfavorably. As far as transparency goes, she points out the new surcharge is clearly stated on the menus, on printed boards, at the registers, as well as on the final bill, so that diners should not be blindsided by the charge. (Mattson says he was seated on the patio and was unable to see any said signage until he received his bill.)

According to a letter he sent to Peoples, Mattson says he’s “embarrassed” by the charge and the fact that he had to ask his server what it was about, turning an otherwise enjoyable dinner into “ruin” and “disgust.”

“What's next,” he writes. “A line item for electric, water, etc? Where does it end?”

Well, why not? Perhaps it is time for guests to see exactly where their dining dollars are going when they pay $15 for a burger. How much is that water bill, anyway?

For her part, Juell says that the practice is indeed legal. She adds that keeping a separate line item makes it easier for the company's financial department to keep track of exactly how much money goes directly into the health benefits program for her employees.

If there is any “extra money” at the end of the month, employees will see it distributed directly into their paychecks, which she says is currently happening at their Eden Prairie location.

While the staff is very happy with the idea, Juell is still distressed by the negative feed back, even if it is just one unhappy customer.

"With the tight margins already in this business, we thought this transparency would be a positive note and people would respect the care taken for our employees instead of just ignoring the fact that most of our employees don't have health care," says Ray.

So what’s a potentially disgusted guest to do? Simply subtract that 3% out of the gratuity, or Peoples will gladly take it off the bill.

"We want to take care of our customers and our employees," Ray concludes. "What's the balance?"

We haven't seen this practice anywhere else locally. But, if you’re an avid diner, be prepared to start cracking those pocketbooks wider, whether you’re privy to specific line items, or not.

Peoples Organic has locations in Uptown Minneapolis, Downtown Minneapolis, Edina, Eden Prairie, Fargo, and Minnetonka.