Good Earth, Bad Karma?
The restaurant group Parasole Restaurant Holdings, owner of such local favorites as Manny's, Chino Latino and Muffuletta, is famous for its occasionally racy and controversial billboards. So I couldn't help but think about what kind of cheesy messages their new critics might come up with in light of the company's latest controversy.
Parasole notified its wait staff last week that it would be taking a 2 percent cut from their tip jars whenever a customer paid with a credit or debit card. One employee leaked the change to City Pages, and Parasole learned again what gubernatorial candidate Tom Emmer discovered last year: The public really likes the people who bring them beer and food.
In the past couple of days, Parasole has been blasted on Twitter and blogs. Some customers have threatened boycotts. For most restaurant companies, that would be unique. Not so for Parasole, which has been criticized in the past for marketing slogans that include "Hotter Than a Bangkok Brothel" and "As Exotic as Food Gets Without Using Dog."
But Kip Clayton, vice president of marketing for Parasole, acknowledges this is different. Potential customers could see this as a large company passing expenses on to low-paid workers who can ill afford them.
"It tends to be a flashpoint with the media and guests," Clayton said. But it's not the whole picture, he said.
First, Clayton said, several restaurants have been passing the fees on to servers for years. He said the restaurant group paid more than $2 million in credit card fees last year, more than the cost of their health premiums. He added that the company has maintained its health care plan despite rising costs and still offers employees paid vacations and free prework meals at their restaurants. Servers average about $20 an hour, including tips, he said.
The issue is not that credit card companies have dramatically raised fees, Clayton said, but that almost every customer now pays that way. Plus, every expense, from food to health care, has continued to rise while business has softened. Fees vary by credit card, from about 2 percent to 4.5 percent.
"At some point, you can no longer pass those costs along to the customer, or there will be a backlash," said Clayton.
But to pass those fees along to servers?
"How tacky," said Nancy Goldman, president of UNITE HERE Local 17, which represents restaurant workers. "It stinks."
"It rings to me like last year's $100,000 waiter [claim of Emmer]," said Wade Luneburg, secretary treasurer of the union. "Some people think that [false claim] is why Tom Emmer lost."
Luneburg and others estimate that Parasole pulls in more than $60 million in annual sales and that clipping servers will come across to customers as crass.
Indeed, Clayton acknowledged business is up at high-end venues. Sales at Pittsburgh Blue are up 14 percent over last year, and Manny's is up 10 percent. Lower-end sales are "flat."
David Burley of Blue Plate Restaurants said his company has looked at the issue but has not adopted the practice. "I feel bad Parasole is taking the heat for this because they really take care of their employees," he said. "But the average restaurant makes 4 percent [profit]. Do the math. We're all feeling squeezed."
Jill Wilson, owner of 128 Cafe in St. Paul, said the restaurant passed credit card fees onto its servers before she bought it in 2007, but she discontinued the practice because "it's chintzy." Yet, Wilson empathizes with Parasole because even though she runs a tiny restaurant, she pays more than $1,300 a month in credit card fees.
"It sounds cheap, but I understand why someone the size of Parasole would do that," Wilson said.
Everyone agrees that federal laws allow restaurants to make servers pay their part of the fee, and a spokesman from the Minnesota Department of Labor and Industry said state law apparently allows it, as well. But at least one local expert says state law could well override federal law.
David Duddleston of the Jackson Lewis law firm had a role in shaping recent changes in tip law in Minnesota. He works on the side of restaurants. So, while he wishes Parasole's new practice would hold up, he wouldn't bet on it.
Minnesota is one of only a few states that don't allow forced tips-sharing. When state and federal laws diverge on such issues, the one that favors workers usually wins, he said. "If I had to put my money on it, because Minnesota is so protective of tips, I think Minnesota is not likely to follow federal statutes," Duddleston said.
In the meantime, Goldman said, "I know I'm going to tip in cash."