The Three Per Cent Solution: How a Tiny Restaurant Surcharge Can Effect Big Change
Think about the bill from your last restaurant meal. Then imagine that, along with your discretionary tip, you also paid a 3% surcharge on your food.
Now, it’s a respectable commitment to eat $100 in food, exclusive of tax, tip and drinks; that’s two $12 appetizers, two $26 entrees and a couple of $12 desserts. Given the money that you’ve already allotted to your meal, imagine how much you’d resent paying three additional dollars to materially improve the lives of the people who cook your food.
Chef David DiBari and Chef Bill Taibe are thinking: not much.
Last March, when multiple James Beard Award nominee Bill Taibe debuted Jesup Hall in Westport, CT, he instituted what he’s calling the “Kitchen Share”—a 3% surcharge on all food sales. (His other Westport restaurants, The Whelk and Kawa Ni, soon followed.) The surcharge is noted clearly on the menu; the notification makes a return at the bottom of the restaurant’s bill. That money in its entirety goes directly to kitchen workers via a point system that mimics the tip pool payouts of front-of-house staff. Per shift, the sous-chef gets two points, cooks get one point and the dishwashers each get one half point. Everyone in the kitchen gets a stake, and the gains can add $2–$3 per hour for workers whose hourly pay is in the teens.
Here’s the funny thing: Westport (like much of Westchester) is a golden suburb. Taibe admits that few in his well-heeled customer base would even notice a 3% increase on their bills. Nevertheless, Taibe wants to protect those dollars from his own access.
“In a restaurant, there’s always something that you could use a little extra money for. It’s like, one week the sink may break, a stove may break, or maybe it’s the dishwasher. That’s just how it is.” He continues, “If we raised the prices 3% and brought the money into the restaurant as sales, then I’d have undefined discretion over how to spend this money. And I didn’t want that. I wanted it to be clean. I wanted it to be transparent. I wanted us to see the line every week, account for it and—without question—distribute that to our cooks.”
It’s hard to see from the plush, stage-set design of dining rooms, but there’s been an accelerating crisis in the restaurant industry as the soaring costs of labor and real estate push small, high-quality restaurants into unsustainability. Taibe once operated two of the most expensive restaurants in Fairfield County, but his prices have remained steady while his operating costs have risen by 40%. Worse, the number of qualified cooks applying for jobs in his operations is dwindling. According to Taibe, new cooks (who may be pressured by culinary school debts) are increasingly unwilling to undertake the classic journeyman path of taking poorly paid, skill-building jobs in excellent restaurants.
“They come out of school and want to be paid $18 per hour to make mistakes,” Taibe jokes. “You know what? They should be paying me to learn with my perishable ingredients.”
The effect of these dual trends is something that should send shivers up the well-padded flanks of gourmets—it’s beginning to sound like the death knell of good restaurants. Rather than accumulate valuable skills and knowledge in poorly paying jobs, newly graduated cooks are skipping directly to the highest wage position they can score. They are operating sans chops.
The finest minds in the industry have been trying to math away these problems. Taibe himself has been struggling for years to find a way to nurture his cooks; he has also been tracking the fund-misappropriation suits that have plagued the “Hospitality Included” programs of Danny Meyer and others.
“Originally, we were thinking along the lines of a 20% surcharge like Meyer’s ‘Hospitality Included,’” says Taibe, “but then the money would actually be considered income and I’d have to pay taxes on it—which I still have to do on the 3%.” He explains, “I can afford to pay the tax on the 3%, but the tax on 20% is beyond our capability. We were looking at a 20% service charge where 17% would go to the front of the house and 3% would go to the kitchen. Finally, we were just sitting around one day, and it came out: ‘Why don’t we just do a 3% surcharge and leave the gratuity line for the server?’ This lightbulb just exploded over our heads.”
Novelty is not a quality that generally appeals to lawyers, and Taibe’s Kitchen Share idea had no apparent precedent. Taibe’s attorney (who, Taibe opines, is “much, much smarter” than he is) painstakingly vetted the plan, then they consulted an employment attorney, Taibe’s accountants and, finally, the Department of Labor. Not one could build a roadblock.
When Taibe opened Jesup Hall with the Kitchen Share in place, he warned his front-of-house workers that they might be the ones to bear the brunt of being pioneers. After all, diners might look at this service charge for kitchen workers and subtract that amount from server tips. It didn’t happen; sales were unharmed, almost no one complained and tip averages stayed the same. Taibe felt like he’d come down from the mountain.
Here’s a second funny thing about these events: After the painless success of the Kitchen Share, Taibe preached, seduced and shared his numbers with fellow Fairfield County restaurateurs in the hopes that more owners might adopt similar systems. Taibe figured that such a movement could only help to improve the lives and quality of cooks in the region. What he was met with was radio silence; a lot of dropped jaws and a few “you can’t do thats.”
Taibe reached out to Chef David DiBari of The Cookery and The Parlor in Dobbs Ferry, and, in him, he found a restaurateur willing to rethink the problem. “He’s the perfect guy. And I knew that he would be one of the people who understands it; we approach our businesses in the same fashion. We’re both cooks.” Last month, DiBari launched a 3% surcharge at The Cookery to exactly zero resistance and some high praise on sites like Open Table. He hopes fellow Westchester chefs will follow his lead.
Says DiBari, “We were looking really hard into the Danny Meyer system, but I think Bill—who is obviously a genius—really thought this out to the end. Bill was gracious enough to walk me through the whole process, and we still had questions—we sat in manager meetings saying, ‘Should we do this? How do we do this? Will it cut into the servers’ tips? Will they quit?’” Turns out, the tip averages in both Taibe’s and DiBari’s restaurants have maintained a constant 22% on the bills both before and after instituting the surcharge.
There are serious risks for DiBari in spearheading this idea in Westchester; along with the fears his staff raised in managers meetings, there is the risk of negative perceptions in diners. “Yeah, we could just quietly deal with the problem on our own, but we don’t want to have to raise prices across the board—that’s what I think will hurt our diners most. We don’t want to raise prices on drinks. I mean, that might generate a whole lot more money, but we don’t want our diners to take that hit. And we’re all struggling with the problem of staff retention. I don’t want a cook that I love and that I’ve trained and that I’ve invested in leaving me because he or she can’t afford to live in Westchester.”
Bill Taibe is hoping that more chefs look into this model. “I’ve cooked for 20-some-odd years of my life, and it’s become important to me to find a way to fix something that’s broken. I worry because I don’t know where the food industry is going.” He continues, “It’s really hard to make money in this industry when you do things in the right way: if you pay people properly, if you buy the kind of ingredients that you would be proud to serve.”
“This is what I’m thinking about lately: It’s less how to make a great tomato salad and more how to fix this industry that has taken care of me my whole life.”