Austin Restaurant Finds Clever Way To Add Healthcare Surcharge To Bill

As restaurants negotiate the balancing act of raising prices to cover their workers' health insurance without alienating customers, one Austin restaurant has come up with an ingenious solution: print the healthcare surcharge on the bill, but make it optional. KVUE reports Foreign & Domestic includes the 3% health insurance surcharge as its own line item, and informs diners that they can request that surcharge be removed if they'd rather not pay it. Information about the surcharge is also listed on the menu itself.

While Foreign & Domestic isn't the first restaurant to add a health-insurance surcharge—we've observed this at restaurants in Chicago, Los Angeles, and San Francisco—making the surcharge optional looks like smart business. It theoretically appeases both sides: Critics who say the charge is unfair can ask for it to be removed, but diners who see its merits can pay the additional 3%. Automatically printing it on the bill puts the onus on the diner to ask for it to be removed; many of us would be too polite or wary of appearing tacky to ask for that. Clever, right?

Some people might agree with the surcharge on principle and would gladly pay it, but others might be more inclined to pay it—even while grumbling—to avoid the extra step of asking for it to be removed and waiting for their server to deliver a new bill: "Hiya would you mind taking this $1.78 surcharge for your life-saving insulin off my Buffalo wings lunch? Mmmkay thanks."

Foreign & Domestic co-owner Nathan Lemley tells KVUE the restaurant opted to add the surcharge as a line item rather than raise the cost of food. This seems like another savvy move, as it transparently lets diners know their meal costs more to subsidize employees' healthcare, perhaps softening the blow of a suddenly more expensive meal. At restaurants where healthcare surcharges have been in place for years, some owners say customers rarely ask for them to be removed.

"If anybody has a real issue with the surcharge—for whatever reason—and they don't want to pay it, we don't question it. We just tell them we'll take it off," Josh Loeb, a restaurateur in Santa Monica, California, told FSR Magazine in 2015. "I'd say that happens maybe once every couple of weeks in our restaurants." Despite customers' support for the surcharges, Loeb says the 3% increase has still fallen a bit short of the total cash needed to cover employee healthcare costs.