While some business owners threaten to cut workers’ hours to avoid paying for their health care, a West Palm Beach, Fla., restaurant owner is going even further. John Metz said he will add a 5 percent surcharge to customers’ bills to offset what he said are the increased costs of Obamacare, along with reducing his employees’ hours.
“If I leave the prices the same, but say on the menu that there is a 5 percent surcharge for Obamacare, customers have two choices. They can either pay it and tip 15 or 20 percent, or if they really feel so inclined, they can reduce the amount of tip they give to the server, who is the primary beneficiary of Obamacare,” Metz told The Huffington Post. “Although it may sound terrible that I’m doing this, it’s the only alternative. I’ve got to pass the cost on to the consumer.”
Metz is the franchisor of Hurricane Grill & Wings, which has 48 locations, five of which are corporate owned, and president and owner of RREMC Restaurants, which runs approximately 40 Denny’s and several Dairy Queen locations. He planned to use the 5 percent surcharge tactic in all his restaurants starting in January 2014, when Obamacare is fully implemented.
As the first anti-Obamacare executive to bring up the surcharge option, Metz is “going out on a limb,” Paul Fronstin, director of the health research program at the Employee Benefit Research Institute in Washington, told The Huffington Post. Still, surcharges have precedent. Fronstin pointed out that the airline industry charges fliers a 9/11 security fee.
Still, consumers have many more restaurant options than airline choices, and Fronstin speculated that Metz’s move is more about politics than prices. Fronstin said that Metz and business owners, like coal company owner Robert Murray, who are blaming their extreme actions on Obamacare or on President Barack Obama himself may in fact be motivated by their own troubled business finances or political leanings.
“When you’re blaming it on one thing and it’s due to something else, you’re basically making a political statement,” Fronstin said. “And if you do something for political reasons, it can backfire, because someone else has the opportunity to come in and take the business away.”
Metz said he will hold meetings at all his restaurants starting in December to discuss the surcharge and to tell employees “that because of Obamacare, we are going to be cutting front-of-the-house employees to under 30 hours, effective immediately.”
Metz said he hopes the post-election meetings will inspire employees rather than alienate them. “What we’re going to ask them to do is to speak to their elected officials, to try to convey what this means in terms of their jobs and their livelihoods,” Metz said.
Metz said he understands the problems that will create not just for his scheduling but for his employees. “I think it’s a terrible thing. It’s ridiculous that the maximum hours we can give people is 28 hours a week instead of 40,” Metz said. “It’s going to force my employees to go out and get a second job.”
Despite the one-two hit his employees might take with possibly fewer hours and lower tips, Metz said he is not anti-insurance. His current coverage for full-time employees costs him $5,000 to $6,000 annually, he said. “Obviously, I’d love to cover all our employees under that insurance,” he said, “But to pay $5,000 per employee would cost us $175,000 per restaurant, and unfortunately, most of our restaurants don’t make $175,000 a year. I can’t afford it.”
Currently, the law states that employers with more than 50 full-time equivalent employees will be charged a penalty for any employees over 30 full-time employees that they don’t cover. Several employers have cited that provision — including Darden Restaurants, Papa John’s, Apple-Metro and Jimmy John’s — in announcing plans to skirt the law by cutting employees’ hours to make them part time.
Metz said he will take the extra step of adding a surcharge because he believes the law will eventually expand to include penalties for not covering full-time equivalent employees. If he has to pay a penalty for his average 35 full-time equivalent employes per restaurant, he said it would cost him $75,000 per location. In that case, he said raising prices wouldn’t be an option, since he’d have to raise prices about 25 percent to cover the costs of Obamacare, which would be “catastrophic” for his business.
A November Kaiser Health Tracking Poll found that about 43 percent of the population has a favorable opinion of Obamacare, while 39 percent has an unfavorable opinion. “Instead of indirectly charging customers by raising prices, he is directly charging and making a political statement,” Fronstin said, “Potentially 43 percent of this person’s customers may find the explicit charge a turnoff, and vote with their feet and their money and choose not to eat there.”
Metz said he’s risking the backlash to spread a message. “We’re trying to get more restaurant operators rallied around the concept of adding a 5 percent surcharge to their bill to cover the costs of Obamacare as opposed to raising prices,” he said.