Denny’s Franchisee To Add 5% “Obamacare Surcharge”

The owner of dozens of Denny’s restaurants and the Hurricane Grill chain says he plans on adding a 5% “Obamacare Surcharge” to his menus in 2014 when a number of facets of the Affordable Care Act will kick in.

The restaurant owner says the surcharge is an alternative to raising his prices to cover his projected cost increases at having to provide insurance to more employees.

“If I leave the prices the same, but say on the menu that there is a 5 percent surcharge for Obamacare, customers have two choices,” he explains to HuffPo. “They can either pay it and tip 15 or 20 percent, or if they really feel so inclined, they can reduce the amount of tip they give to the server, who is the primary beneficiary of Obamacare… Although it may sound terrible that I’m doing this, it’s the only alternative. I’ve got to pass the cost on to the consumer.”

In addition to the surcharge, the restaurant owner says he will immediately be reducing hours of front-of-house workers to fewer than 30 hours/week. By doing so, he would be able to avoid the ACA’s requirement that employers with 50 or more full-time equivalent employees must pay a penalty for each full-time employee without coverage (above a 30-employee threshold).

So why the surcharge if he won’t be hit with the penalties or have to provide insurance for more workers?

From HuffPo:

[The owner] said he will take the extra step of adding a surcharge because he believes the law will eventually expand to include penalties for not covering full-time equivalent employees. If he has to pay a penalty for his average 35 full-time equivalent employes per restaurant, he said it would cost him $75,000 per location. In that case, he said raising prices wouldn’t be an option, since he’d have to raise prices about 25 percent to cover the costs of Obamacare, which would be “catastrophic” for his business.

Though the restaurant owner claims his motives are not political, he explains to HuffPo that when he talks to employees at upcoming meetings about the changes, “What we’re going to ask them to do is to speak to their elected officials, to try to convey what this means in terms of their jobs and their livelihoods.”

While there are precedents for price increases and even surcharges in the wake of costly changes, he might want to be careful about how any surcharge is worded on this menus.

Earlier this year, Spirit Airlines was sued over its “Dept. Of Transportation Unintended Consequences Fee,” which was levied in response to a new regulation allowing passengers to cancel bookings within 24 hours of making a reservation. The plaintiff in that case alleged Spirit was committing fraud with the naming of the fee, which implies that it’s a fee required by the Dept. of Transportation and not just a de facto price increase.