What is a COVID-19 Surcharge and Why is it Better For Everyone?

Is a COVID-19 Based Surcharge Legal?


Alexander Song

3 years ago | 4 min read

Across the internet, more and more customers are sharing photos of their receipts with a curious new fee being added to their bills.

Restaurants are introducing “COVID-19 surcharges” ranging from 2–5% in an attempt to mitigate the rising costs associated with operating during the pandemic.

America is producing more food than ever before. There are millions of pounds of meat and produce ready to be delivered across the nation. Unfortunately, our fragile supply chain was hit hard by the COVID-19 pandemic.

Processing plants that disassemble animals and trucking routes have all been struck severely by high infection rates of COVID-19 even leading to the death of some workers.

Meats and other protein shortages are especially severe. Globally, over 60% of beef and pork production has been shut down with no clear timeline for reopening.

Due to the sudden meat shortage, prices have reached a 47 year high. Eggs have increased in price almost 20% on average. The situation has gotten bad enough for lawsuits to be filed against Costco, Whole Foods, and Trader Joe’s for “price gouging.”

But there are other added costs to running a restaurant such as packaging since all meals must be either take-out or delivery. Manufacturing of packaging is deemed non-essential resulting in gradually increasing prices for boxes and utensils.

Is a COVID-19 Based Surcharge Legal?

Some have raised questions over the legality of the surcharge. Gregory Frank, a partner at Frank LLP Class Action Litigators confirmed these charges are legal.

“Generally, restaurants are allowed to structure their pricing however they like,” Frank said. “The important question is whether the restaurants are disclosing to consumers what they are paying before they pay it, so they can make their own informed choices.”

So far, most businesses that implemented a COVID-19 based surcharge have been transparent about the additional fee. Kiko Japanese Steakhouse & Sushi Lounge in West Plains, Missouri, is one of the restaurants receiving ire from across the country over this controversy.

They have stated they made clear signage both inside and outside their restaurant announcing the change as well as posting it on their social media. Despite their efforts, the harassment wouldn’t stop and so they had to remove the surcharge and increase menu prices instead.

Why a COVID-19 Surcharge is a Good Thing

So far only a few restaurants have implemented a surcharge directly citing COVID-19 but many restaurants have instead likely increased their menu prices to help cover increased costs.

Brad White, owner of Goog’s Pub & Grub in West Michigan said, “Other places are just raising their price and not telling you… It’s going to be a while before the food industry, the suppliers catch up. If the industry’s prices are going to stay, it’s going to affect people down the road just as much as it is now.”

Faced with a choice between a COVID-19 surcharge and raising menu prices across the board, most business experts agree that a surcharge is better. A surcharge is a clear and transparent way for consumers to know why they are paying more and also signals that the additional fee is temporary.

Every restaurant that was interviewed agreed that the COVID-19 fee is temporary and as soon as ingredient prices return to normal, the surcharge will be removed.

“For short term cost increases, like this crisis, it makes more economic sense for the restaurant to change their point of sale system to add a fee. Doing it this way can also make the customer more comfortable paying the fee knowing that it is temporary and related to the circumstance,” Frank explained.

“It also makes it more likely they will lower the prices again after the crisis as a ‘COVID-19 fee’ would certainly look suspect after the crisis.”

Bootleggers BBQ is another restaurant that implemented the surcharge and became the victim of harassment after their receipt circulated online.

“We had nothing but endless Facebook posts and phone calls that were getting quite ugly,” owner Brian Staack said. “Sadly, these calls were from people out of our area and mostly out of state, not even our customers.”

Initially, they planned to dynamically change the surcharge every week based on the market price of the ingredients but due to the negative backlash, they’ve been forced to remove the surcharge and increase prices on affected menu items instead.

“When we decided to add the 5% surcharge it was to help cover the huge cost increase in our beef.

We looked at it as a way to cover that cost, by spreading the 5% across the whole menu. A small fee across the board was better than a huge jump on related menu items.”

Surcharges also help cut down on other costs like reprinting menus. Simply adding a new line to a receipt on a digital POS system is simple and doesn’t cost a restaurant anything.

Reprinting menus can be very costly especially as an additional expense for already struggling restaurants.

“I have 26 employees that we have managed to keep at the same hours, or more, throughout this,” Staack said. “All I was trying to do was cover our added food cost and keep them working.

But people who wouldn’t take the time to listen to me on the phone, or read our explanation on Facebook, would rather make threats. My staff didn’t deserve that at all.”

While it might not seem like it at face value, COVID-19 surcharges actually benefit both the restaurant as well as the customer. Times are uncertain and in order to survive restaurants have to adapt but as long as they’re transparent about their decisions it ultimately benefits everyone.

This article was originally published by Alexander song on medium.


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Alexander Song







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