A story broke last week that Parasole Corporation, owners of Manny's Steakhouse and Chino Latino which are among ten other restaurant concepts currently in their portfolio, has begun charging its service staff the 2% credit card processing fee that must be paid on all charged gratuities. Apparently, someone within the organization leaked that change in policy to City Pages who went online with the news. The story gained further traction when James Norton took note of it in his online blog Heavy Table. Neither piece was particularly friendly in its coverage of the story toward Parasole's management and toward their decision to exercise their legal right to pass the cost of the transactions onto their staff. In turn, many of those commenting online screamed foul play with some even going so far as to declare the practice illegal. Make no mistake about it, while many might question the ethics of doing so and insist that the 2% transaction fee is part of Parasole's cost of doing business, I can assure you as a restaurant owner that the practice is perfectly legal.
At Heartland, we do not charge our servers the transaction fee. We pick up the cost of that for them. We have discussed the possibility of passing that fee onto them, but we have not at this time felt the need to do so. Nonetheless, we reserve our right under the law to change that policy should circumstances ever necessitate such a change.
Let me explain what I mean by that.
Over the years, we have attempted to find a health insurance plan that would be affordable and provide excellent coverage for our staff. Given the size of our company and the number of people who would sign up for it, such plans do not exist. It is better and more economical for our staff to purchase their own health insurance should they decide to do so. It provides them with greater choices and more flexibility in customizing a plan to suit their individual needs. Instead, we pay what we consider to be living wages. Consequently, dishwashers make $13 per hour.
We also feed our staff every day. Given the number of them who dine at work, I have estimated that it costs us $30,000 per year to do so. Based upon our annual food sales, that $30,000 is responsible for 5.3% of our cost of goods.
Most years, the average server in our restaurant has a higher income than I do. Some years, my wife and I do very well, even far better than our servers; but that is the exception rather than the rule. Most restaurant owners I know are not living large. For the most part, they live modest, middle class lives. Our kitchen staff does not fare as well as our service staff, which is not uncommon. Consequently, whenever we cook off site in Mears Park for one of the many events put on by St. Paul each year, the proceeds from those events go into a pool that will be used for yearend bonuses for those employees. We pick up the cost for all materials, labor and licensing fees for those events.
Currently, we pay between $70,000 and $80,000 per year in credit card processing fees. We receive nothing in return for that except for the convenience that we provide our guests. What if we were able to appropriate all or part of that money to provide better wages and more benefits for our staff? Wouldn't it be going to much better use than helping contribute to the exorbitant profits that the financial sector is experiencing?
When we relocated our restaurant just over a year ago, we increased our labor force from twelve people to over fifty. We effectively created forty new jobs in one of the worst economies on record. Not only that, but we purchased real estate in a neglected historic property which we have continued to renovate at great expense.
At some point in the near future, the new healthcare overhaul will in some way impact our business. No one can really tell me how or to what extent that will be because no one, including our insurance agents, can decipher the new law. What I can tell you is that if the federal government mandates how we are to compensate our employees that money will have to come from somewhere. It isn't magically going to appear at the end of some rainbow. There is no pot of gold that will pay for health insurance for our staff. Consequently, we will be faced with some hard choices. Do we lay people off to help pay for the cost of providing the insurance? Do we not meet other financial obligations in order to pay for those costs? Do we stop renovating the building? Do we reduce other insurance coverage to our facility and to our business in order to redistribute funds elsewhere? Do we begin charging our service staff the 2% fee that it costs to process their gratuities? Do our end of year kitchen bonuses go away? Nothing can be off the table if our business is to survive and if we are to be able to continue to gainfully employ our staff.
Make no mistake about the fact that I support healthcare overhaul legislation, and that I believe that good health is a fundamental human right. However, from what I have seen reported, I am having a hard time understanding how our elected officials achieved any really significant progress in that regard. Why not just mandate that insurance providers cannot be for profit publicly traded entities? How do we expect that they will operate ethically when they are beholden to shareholders and to the marketplace? Instead, it appears that the people will continue to bear the brunt of healthcare costs with an enormous burden being placed on small business owners who might not be able to afford the costs without reducing wages. A good friend of mine told me that his surgeon daughter was offered a job in Northern California that pays $675,000 per year with $20,000 in additional credit for relocation expenses. Does that sound crazy to anyone else but me? Who pays that salary? I can pretty much guarantee that at the end of the day it's not the insurance providers. Have we made any significant efforts as a nation to understand this and to bring this under control? I think not.
Instead of people attacking a company for exercising its legal rights to recover part of the outlandish processing fees that are applied every time a credit card is used in a restaurant, perhaps they should redirect that animosity toward the companies that are applying the fees. Better yet, why don't they just begin paying cash? At the very least, they should leave a cash tip. In that way, they can be assured that their servers receive the full compensation they have intended for them.
It is very troubling to me when I see small businesses attacked in the press and elsewhere for attempting to do whatever they can within the law to level the playing field and remain viable in difficult economic times. It is especially troubling when people are gathering all over the country to protest the increasing gulf between the haves and the have nots while others are calling for a boycott of a business that already provides considerable benefits including healthcare coverage to its employees. We are not part of the 1%. We, too, are part of the 99%. I think it is best that before jumping to outrageous conclusions, that people redirect their animosity toward those who most deserve it.