Restaurant’s healthcare surcharge draws strong responses


I had breakfast at Republique on La Brea Avenue on Tuesday, and here’s how the tab broke down:

Cafe Americano — $3.25

Quiche — $5

Tax — 0.77

Surcharge Healthy LA — 0.25

The last item is the one creating a little controversy at the new high-end restaurant in the old Campanile space. The owners are adding a 3% fee to every bill, which they say will pay for healthcare insurance for all their employees, from hostesses and bartenders to dishwashers and potato peelers.

“This is offensive,” snapped one Yelper, who called the fee “a 3% surcharge for Obamacare.”


Bill Chait, one of the owners, said most customers have been fine with the charge. But I found one breakfast diner with a bit of indigestion over the fee.

“I don’t like it, and there are several reasons,” said Cari, a writer who didn’t want to share her last name.

Cari said she doesn’t appreciate an extra tax that’s added without sufficient explanation, and she has no way of knowing whether the restaurant will use the extra money for the stated cause.

“This is a very expensive restaurant. It’s $4 for a cup of tea. A glass of wine is in the $20 range,” said Cari, who asked her server if the charge could be removed from her bill. And she told me she resented having to have such a conversation.

But Anne Gabriele, dining with her friend Elizabeth Wilson, had a different take.

“Personally, I think if this allows people to have healthcare who couldn’t have it before, it’s a good thing,” said Gabriele, an oboist in the L.A. Philharmonic. “We all have to share a burden. If you’re at a restaurant where you’re spending $5 on a cup of coffee, you can spare 3%.”

Well put. Here in Los Angeles, a living laboratory of income inequality, the City Council and the hotel industry should take a close look at what Republique is doing. Tuesday’s council pitch to raise the minimum wages at large hotels to $15-plus an hour is in for a nasty scrum, but is a compromise possible? Say, a somewhat smaller wage increase along with a healthcare surcharge?

At Republique, Chait and co-owner Walter Manzke, the chef, said they gave long consideration to the surcharge, knowing it might drive away some business. But they were motivated by two primary factors.

Under the Affordable Care Act, companies with 50 or more full-time employees will eventually have to provide health insurance. Some employers are expected to get around the requirement by using more part-timers. But Chait and Manzke said they want all 80 of their employees to be full time because it’s good for the employees and good for the restaurant in the long run.

But the bigger motivator, the owners said, was the income inequality that exists in restaurants.

“I think when people leave a tip, whether it’s a dollar or whatever, they have no idea where the money goes,” Manzke said.

In a tip pool system like the one at Republique, the tips are divvied up by waiters, busboys and others who provide table service. But Chait — owner of several restaurants — said management, and the invisible employees who make up half a restaurant’s total staff, are prohibited by state law from dipping into the tip jar.

If there’s a logical reason for that, I haven’t heard it.

Republique servers can make as much as $70,000 to $80,000 a year, which is terrific, Manzke said. But it’s roughly three times as much as other full-time staff, including cooks and food preppers. Manzke thought that providing health insurance would make lower-end jobs more desirable and reduce turnover, giving him time to move employees up the restaurant ladder.

OK, but why not simply add 3% to the cost of every menu item, or pay kitchen staff higher wages?

Raising operating costs would force higher prices, said Chait, and risk driving away customers. It could also mean higher taxes, and higher rent, too, because the rent is based on monthly revenue.

Chait said they considered charging a flat 17% service fee, following in the footsteps of famed Berkeley restaurateur Alice Waters, who provides healthcare and a 401(k) to employees. But they opted for the surcharge, despite a scandal in San Francisco, where some restaurants that levied healthcare surcharges were found to be pocketing the money rather than paying for medical coverage.

“We will absolutely pay for healthcare,” said Chait, who is offering employees three Kaiser options, two that require employee contributions and one that doesn’t. And he said he’s already looking into offering similar plans to employees of other local restaurants he owns.

I spoke to three Republique employees who were thrilled to have a medical plan in an industry that generally doesn’t provide one. Think about that for a moment — do you really want the people handling and serving your food to not have health insurance?

Chait said his restaurant could have done a better job of explaining the surcharge, which is noted at the bottom of the menu. He said staffers are being instructed to tell customers the reasoning behind the fee and to emphasize that they can leave a smaller tip, if they’re so obliged.

But Chait was a little surprised that anyone affluent enough to pay for entrees that range from $18 for butternut squash agnolotti to $75 for prime dry-aged cote de boeuf would gripe about paying a tiny fee so the person washing the tricolore salad can have a modest healthcare plan.

I think I’ll pass on the cote de boeuf. But otherwise, I’m happy to kick in an extra 25 cents for breakfast or a few bucks for dinner.