Restaurant adding labor fee to customers’ bills to combat rising costs

MARQUETTE, Mich. (WLUC/Gray News) - A Michigan restaurant says it is adding an additional fee to customers’ checks to help with the rising cost of doing business.

Patrons at the Iron Bay Restaurant in the Marquette area will see a 4 percent labor fee on their next check.

The restaurant is calling it a “transparency fee.”

General manager and owner Andrew Hilary said the fee will help the restaurant combat rising costs.

“The entire 4 percent is going to labor fees. The goal is to increase our wages, partially to get ahead of what will happen, which is eliminate tipped wage,” Hilary said.

According to Hilary, he wants to ensure tipped employees receive a livable wage, as many new servers start at only $5 an hour, lower than the standard $10.33 minimum wage in the state because tips are included.

“Our goal is to always give someone a dollar raise if they stayed for a year, and once they are here for a year and a half or two years, we try and bump that significantly as a ‘thanks for staying so long’ raise,” Hilary said.

The general manager said labor costs made up 55% of the restaurant’s operating budget in March, which is exceptionally high.

Hilary said the labor costs are only going to increase as more staff members are added for the summer.

Staffing will dramatically increase from about 35 staff to 55 for summer operations.

Hilary said questions and concerns about the new fee began pouring in after a community member posted to social media about the new fee over the weekend.

Among the most common questions: Why didn’t the restaurant just increase menu prices?

According to Hilary, it came down to wanting to save customers as much as possible.

“There are a couple of issues with just raising the menu price. If you are tipping based on percentages, that percentage is higher because I put more money on the menu,” Hilary said.

He added, “The other piece is tax. We all pay a 6 percent tax when we go to a restaurant. So, if I increase the menu for that purpose, you are also getting taxed on that.”

Hilary said a fee like this is not uncommon in restaurants, but it may be new for customers in the area.

New signs explaining the fee and what it will be used for have been placed around the restaurant.

Hilary said the average bill may see less than a $1 change.

“I realize this is new and different than what a lot of people are doing,” Hilary said. “Change is hard, and it may be challenging for a lot of people.”

Hilary said staff has appreciated the change so far, while reviews from customers have remained mixed.