Local restaurants make a ‘completely unheard of’ move

Surcharge added to customer bills helps cover employee health care
To cover health care costs, owner Sarah O’Brien (front row, second from left) has added a 4% pre-tax fee to transactions at her Little Tart Bakeshop locations and farmers market stalls, as well as her Big Softies ice cream shop. Courtesy of Madi Bolton/Little Tart Bakeshop

Credit: Madi Bolton

Credit: Madi Bolton

To cover health care costs, owner Sarah O’Brien (front row, second from left) has added a 4% pre-tax fee to transactions at her Little Tart Bakeshop locations and farmers market stalls, as well as her Big Softies ice cream shop. Courtesy of Madi Bolton/Little Tart Bakeshop

A croissant from Little Tart Bakeshop costs 16 cents more than it did six months ago. Breakfast at Buttermilk Kitchen is a tad more expensive, too. Ditto a drink at Ticonderoga Club. The cost increase is not a direct result of pandemic-induced inflation, nor is it to fund a wage increase. It’s to cover employee health care.

This summer, Little Tart owner Sarah O’Brien began adding a 4% pre-tax fee to transactions at her three bakery locations and at her farmers market stalls, as well as her Big Softie ice cream shop in Summerhill. Her husband, Paul Calvert, and his business partners at Ticonderoga Club, followed suit in October. So did Buttermilk Kitchen owner Suzanne Vizethann, who added a 5% pre-tax surcharge on all transactions at her Buckhead brunch destination, to cover not only health care but also paid time off.

“I wanted to offer more robust insurance,” said O’Brien, who has provided health insurance benefits to full-time employees for the past eight years. In 2020, she added spouse and dependent care, in addition to one week of paid sick leave.

“I couldn’t keep making benefits as robust, unless I raised prices in some way,” said O’Brien, who recently paid a $13,000 monthly premium to cover insurance for herself and the 37 other people on the plan.

To be transparent, she announced the change on social media, in addition to posting signage at the restaurant and including the fee as a line item on each customer’s bill.

“I didn’t want to bury it in a price increase. I wanted customers to understand,” O’Brien said.

She feared backlash from customers, but feedback has been overwhelmingly positive.

Calvert said he has not experienced a single incident of pushback at Ticonderoga Club, adding, “I’ve had guests thank us for it over and over again.”

Vizethann estimated that 90% of Buttermilk Kitchen’s clientele has been “super kind and positive” about the decision, although some have questioned why she doesn’t just increase prices.

“I don’t want to price myself out of the market,” she said.

In addition, she said, tacking on the service fee as a line item, instead of folding the cost into prices, allows for flexibility and helps with accounting. “If there is a guest that feels strongly about not paying for it, we simply remove it,” said Vizethann, who has removed the fee from customer bills twice since implementing the new policy in the fall. “As a separate line item, I can see exactly what is coming into that contribution.”

Buttermilk Kitchen owner Suzanne Vizethann added a 5% pre-tax surcharge on all transactions to cover health care and sick leave. The added fee appears as a line item on all customer receipts. Courtesy of Suzanne Vizethann

Credit: Suzanne Vizethann

icon to expand image

Credit: Suzanne Vizethann

Prior to the change, Vizethann was able to offer health insurance only to salaried managers. The fee enables her to offer health care to 22 hourly employees, half of whom have enrolled.

“In our industry, this is something completely unheard of with small restaurants,” she said. “It puts a spotlight on that topic. This is a way we need to start taking care of our people.”

Little Tart employee Lea Liles, whose husband also is insured now through her plan, applauds her boss’s decision. “We have medical, dental and vision. It’s been great to get all of those things,” she said. “For the doctor, all you have to pay is a co-pay. I haven’t had to pay too much out of pocket, which is awesome.”

A different kind of war

Employer-funded health care has not always been the norm in the U.S. Prior to World War II, most Americans paid for all their medical care, or had health insurance that provided coverage only for major expenses, such as hospitalizations. Other expenses were paid out of pocket, directly to providers.

During World War II, the federal government instituted wage and price controls on employers, in an effort to avoid inflation. This led companies to offer other incentives, including health benefits, to compete for workers.

After World War II, covering health care for people went big, worldwide. Britain, Canada and European countries opted for universal health care, funded by the government. The U.S. chose to rely on expanding the system of private health insurance bought by employers.

Entering the third year of a pandemic, and amid the current wave of the highly contagious omicron variant, restaurant operators find themselves in a position similar to business owners of 80 years ago, as they attempt to attract and retain employees, while also looking after their well-being.

“We can only pay our staff so much,” Calvert said. “What we can do is find ways to build in value: insurance, raises based on tenure and hitting sales goals, access to life insurance. We offer maternity leave. Next year, we hope to offer PTO (paid time off). We are trying to build a holistic value for our staff, so it becomes not only wage value, but consistency and life and health, and all that stuff.”

The food-service industry has among the highest rates of uninsured workers in the U.S. Using data from 2013-2014, a 2018 study published by the Centers for Disease Control and Prevention found that 35.5% of food-service workers between the ages of 18 and 64 reported having no health insurance coverage.

The key always has been affordability, Georgia Restaurant Association President Karen Bremer said. “More employers, if it was affordable, would do it. Many employers are having to look at different avenues to help support their employees.”

Calvert and his business partners had considered adding a surcharge at Ticonderoga Club prior to the pandemic. Then, when the virus struck, revenue plummeted by half. “We were afraid to launch it, because we couldn’t afford to lose any revenue at all,” Calvert said. “Once we realized that COVID was a way of life, and was not going away, we were like, ‘We’ll put this as a line item.’”

Rather than offer a health insurance plan to employees at Mission and Market in Buckhead or Tre Vele in Sandy Springs, chef-partner Ian Winslade reimburses employees up to $250 per month for medical expenses. “We’ve looked at different plans,” he said. “They are exorbitantly expensive. Health insurance is such a disastrous mess at the moment, on every level. The cost has rocketed up, and the benefits have decreased dramatically. The co-insurance piece is so high.”

Winslade said that affordable insurance plans do not favor a small business like his, which employs just 50 people, compared with a larger restaurant group that has a payroll of 100 or more workers.

Atlanta-based Fifth Group, which operates such local restaurants as Ecco, South City Kitchen and Alma Cocina, currently employs 550 people, down from 950 prior to the pandemic. It offers health care as part of its benefits package, but even this large restaurant group struggles to make insurance ends meet. “We have a lot of (insurance) companies that were not interested in bidding for us, because we weren’t big enough,” partner Robby Kukler said.

The pandemic is exacerbating the cost of insurance. “It’s challenging if you have ... high usage in a year, like COVID, where you have team members use insurance. That tends to drive the cost of insurance up,” said Tish Morris, director of human resources for Sizzling Steak Concepts, which operates four Ruth’s Chris Steak House franchises in metro Atlanta, as well as Up on the Roof in Alpharetta.

The Unsukay restaurant group, which includes Local Three in Vinings and MTH Pizza in Smyrna, offers insurance to its full-time employees (defined as anyone who works more than 28 hours a week). Chef-partner Chris Hall said that the company has seen between 30% and 50% increases in the cost of insurance each of the past five years, and has changed insurance companies twice during that time. “At some point, it’s starting to hit a nonsustainable number,” Hall said. “I can’t pass on even a surcharge the way things are increasing right now, or you’re going to have a $24 hamburger.”

Calvert said the Ticonderoga Club surcharge is “better than nothing,” but he also expressed frustration that “the system at large is broken.” He lamented a $30,000 loss in gross revenue in December, when omicron prompted him and other area restaurant operators to close temporarily. “If I ever have to close and have no revenue, I still have to pay insurance,” he said. “That is a huge challenge. Sales are down, but our insurance bill is still the same. Once you make the commitment, there’s no going back.”

Calls for help

Since announcing the surcharge at Little Tart, O’Brien has let Vizethann pick her brain about funding employee health care, and also soon will be meeting with the owner of a spa in Grant Park who is interested in taking that step.

Vizethann has fielded a couple of queries, including from a restaurant owner in Florida. She called the process “daunting and scary,” as well as arduous, pointing out that there is not a lot of downtime or administrative time in the restaurant business. “If I didn’t have Sarah (O’Brien) to sit down and outline the whole thing, I probably would have delayed it,” she said.

Signage at Buttermilk Kitchen notes a 5% fee on transactions to cover employee benefits. Courtesy of Suzanne Vizethann

Credit: handout

icon to expand image

Credit: handout

Calvert was approached by a number of food-service operators — including groups that employ hundreds of people in multiple states — who were intrigued about the health care surcharge, but they never followed up. “If one or two did this, it would be nationally impactful,” he said. “It could change hundreds of lives.”

Since its founding in 2013, the nonprofit Giving Kitchen has assisted thousands of food-service workers facing unexpected hardship. Last year, the Atlanta-based organization served nearly 1,900 clients, and doled out $1.4 million in financial assistance, more than $427,000 of which went to clients directly impacted by COVID-19. Requests for help have increased 229% compared with 2018.

Vizethann and Calvert wonder whether an organization like Giving Kitchen could play a role in helping other small businesses navigate the insurance equation.

“What if they had a person to help set this up?” Calvert said. “What if Atlanta became the first city to have their entire restaurant force covered?”

“People have asked us before if we could be a broker, but that’s not possible from a legal or logistics standpoint,” Giving Kitchen Executive Director Bryan Schroeder said. But, he added, the organization is working to create an employer toolkit, “for operators who say, ‘I need help making my restaurant a better restaurant.’”

The resource would address a range of subjects, including mental health, insurance and workplace harassment, he said. “We know the intention and heart is there. What folks need is guidance and first steps.”

Atlanta Journal-Constitution health care reporter Ariel Hart contributed to this article.

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