A Covid-19 surcharge on restaurant checks? Some New York restaurant owners are wary

Like most restaurants in Manhattan’s tourist-dependent Little Italy, Da Nico Ristorante has been hit hard by concern over the coronavirus. The neighborhood’s two-week Feast of San Gennaro, where visitors from around the world gather each September for cannoli and cacciatore, has been canceled.

“We lost our whole summer season,” said the owner, Nick Criscitelli, who has kept on most of his staff and hasn’t raised prices, despite the costs of protective masks, gloves and the retrofitting of his backyard garden for outdoor dining.

All the same, he has no plans to add the temporary surcharge — up to 10% — that city officials will soon allow restaurants to add to each bill for on-site dining.

“Our customers are all families,” and during the pandemic most are neighbors and other regulars whose finances are as challenged as his own, Criscitelli said. “So why should we charge them any extra? It’s hard for them to come out now.”

On Wednesday, the City Council voted, 46-2, to let restaurants impose a temporary “Covid-19 recovery charge” to help them through their fiscal straits. The bill, which Mayor Bill de Blasio will sign, according to a spokesman for his office, will allow restaurants the option of adding a surcharge of 10% or less to each bill (though not for takeout or delivery), as long as it is clearly noted on menus.

The charge, which comes before tax, will be allowed until 90 days after the date, yet to be determined, when indoor dining is fully restored. (Restaurants that provide indoor service when it resumes in the city on September 30 will be limited to 25% of their normal seating capacity.)

New York restaurateurs have long fought to strike down a city rule that forbids such surcharges, which are allowed at any time in other parts of the state and most of the country. In the pandemic, a city-sanctioned fee may be a way to allow restaurants to increase revenue without raising food prices, and to ascribe the charge to government.

But in interviews, many restaurant owners said they weren’t ready to add the new surcharge, especially at the full 10%.

Kalergis Dellaportas, general manager of his family’s Bel Aire Diner, in Astoria, Queens, said that if the bill had passed at the start of the pandemic, he might have been tempted. But six months in, he has already planned for the extra costs of running a restaurant, including restarting indoor service at the end of the month.

He has raised his prices by about 5% or 6%, he said, and has noticed that other places have done the same. Unless new, unforeseen costs arise, he said, “it kind of feels like price gouging.”

Philippe Massoud, chef and owner of Ilili, a Lebanese restaurant in the Flatiron district, has not yet raised menu prices, though he says he has spent nearly $16,000 on outdoor-dining infrastructure and several thousands of dollars more on masks and gloves, which have risen in price. “I’m going through them like there’s no tomorrow,” he said. Massoud is also paying two employees just to manage compliance with all the safety guidelines related to Covid-19.

So he is thinking about adding a 1% to 3% charge. He likes the idea of the surcharge, he said, because he can use the mention of it on the menu to explain the need to customers.

That’s exactly the point, said Andrew Rigie, executive director of the NYC Hospitality Alliance, which has about 2,500 members — mainly more established restaurants, hotels and bars — and lobbied for the surcharge. “This bill is only meant to be one tool restaurants can apply to try to survive right now,” he said.

While the surcharge is a temporary fix during the pandemic, the hospitality alliance and others have long demanded that the City Council allow it anytime. The current rules were put in place to combat billing shenanigans during a beef price spike more than 40 years ago, Rigie said.

“They finally did the right thing, now they need to make it permanent,” said chef Russell Jackson, a veteran of restaurants on both coasts and owner of Reverence, a tasting-menu restaurant in Harlem. He compared the new surcharge to a small one he imposed while running a restaurant in San Francisco, after that city made restaurateurs responsible for some extra health care costs.

Still, Jackson thinks 10% is too much. He said that he would try 5%, and that he had counseled one of his neighbors who runs a more casual restaurant to add 3%.

Jackson is also among a growing group of restaurateurs and activists urging the City Council to add some restrictions to the surcharge that will improve conditions for workers, such as limiting it to restaurants that pay their entire staff, including servers, at least the full city minimum wage or above, as he does.

Jackson also supports One Fair Wage, an advocacy group for restaurant workers that was the most vocal critic of the new surcharge. Saru Jayaraman, the group’s president, said it will hurt servers who are paid a lower minimum wage because they receive tips.

The surcharge will discourage tipping, she added, as some customers will mistakenly assume that some of the money automatically goes to employees.

Workers will bear the brunt of any customer pushback, she said, at the same time they’re already battling with customers over masks and social distancing rules.

Frankie Kastrati, who has been a server at Da Nico Ristorante for 24 years, worries about how customers would react to a higher bill. “With whatever is going on with this, even the people that do come, it’s hard for them. Just put yourself in that situation,” he said. “How would you feel?”

For Brian Keyser, owner of Casellula, in Hell’s Kitchen, the surcharge is no help, as he has to keep his 500-square-foot space closed until restaurants are allowed to open at full capacity. Without that, he said, he can’t even cover his operational costs.

Keyser said restaurant owners have always been afraid to raise prices, even when costs demand it. “The whole idea of a surcharge — and I am sorry to let the public behind the curtain,” he said, “is so we can charge $12 for a burger and make it look like it costs $10.”