As states begin to enact minimum wages as high as $15 per hour, many restaurants are struggling to make up for the dent that these increased labor costs are putting in their bottom line.
One Washington, DC-area restaurant is under fire for adopting a rather novel strategy in correcting its minimum-wage-affected balance sheet—by transferring the cost to the customer, to the tune of 3 percent of the cost of their meal.
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According to DC-area blog PoPville, a receipt from an Oceanaire location in Northwest DC came with a surprise cost. “Due to the rising costs of doing business in this location, including costs associated with higher minimum wage rates, a 3 percent surcharge has been added to your total bill,” the receipt read.
READ MORE: Carl’s Jr. Fined $1.45 Million Over Alleged Minimum-Wage Violations
And while the restaurant could have theoretically hidden these costs in the price of food or alcohol, it opted to attribute the price hike to higher minimum wages in particular, kind of like the restaurant equivalent of a Universal Service Fund Fee on a cell phone bill.
Oceanaire is owned by Landry’s, a food, amusement park, hotel, and casino powerhouse, which owns a dizzying array of restaurant chains including Bubba Gump Shrimp Co., and, more recently, Joe’s Crab Shack, totaling more than 500 restaurants across America.
Tilman Fertitta—chairman, CEO, and sole shareholder of Landry’s—is also a billionaire and the host of CNBC’s Billion Dollar Buyer. As a result, when news of the surcharge initially garnered media attention, it led to headlines such as America’s ‘Richest Restaurateur’ Tried Adding a 3 Percent Minimum-Wage Fee” and “A billionaire-owned restaurant charged a ‘minimum wage’ fee. Outrage ensued.”
However, Fertitta says that he was not only unaware of the surcharge, but that he’s doing everything he can to correct the misstep across all Oceanaire and Landry’s properties.
READ MORE: Which Restaurants Will Suffer the Most Under a Higher Minimum Wage?
“With more than 500 properties, I rely upon the decisions of others to help run my day to day operations for Landry’s,” Fertitta told MUNCHIES in a statement. “Unfortunately, I was not made aware of the surcharge that was put in place at my Oceanaire restaurants and the management team has been reprimanded. I ask that all customers who still have their receipt, please return to their nearest location and we will happily refund the surcharge amount. This additional cost has been removed from all Landry’s restaurants effective immediately.”
MUNCHIES called the Oceanaire DC location to verify Fertitta’s version and we were told to speak to their corporate office, which subsequently confirmed that the surcharge and accompanying note were, in fact, put into effect without Fertitta’s knowledge or approval.
As far back as 2014, Fertitta warned consumers that increased minimum wage and food inflation were making price hikes inevitable, even at fast casual restaurants like Bubba Gump, estimating in 2014 that a one-dollar increase in minimum wage in California—from $8 to $9 per hour—would cost his operations an additional $3 million per year. (Minimum wage is currently $10.50 per hour in the state.)
The same year, he also argued in a later interview that minimum wage is a “training wage” and that “you can’t support yourself on minimum wage,” though he also acknowledged that raising an entrée price by as little as $2 would drive customers away.
Washington, DC, where the minimum wage surcharge was implemented, has already raised its minimum wage from $10.50 to $12.50 this year and plans to further increase it to $15 by 2020.
