Last year, on the first day of October, several Los Angeles restaurants started adding a 3 percent surcharge to their guests’ bills in order to fund employees’ healthcare coverage. It was a strategic shift in policy, motivated in part by the burden insurance premiums would place on already thin profit margins.
The move raised more than a few eyebrows, but a year later it’s still in effect, and three Rustic Canyon restaurants—Rustic Canyon Wine Bar and Seasonal Kitchen, Huckleberry, and Milo & Olive, all located within a three-block radius in Santa Monica, California—are reaping the results, even when the surcharges have fallen a little short of the money needed for premiums.
While there was some initial controversy over the decision, Rustic Canyon owner Josh Loeb says his patrons have been supportive. “In the beginning, there was mostly support and mostly enthusiasm from our customers,” Loeb says. “Our neighborhood restaurants in Santa Monica have a lot of regulars, so it’s probably a little easier than at a tourist-based restaurant or [one where guests visit less frequently].”
Loeb adds that initially some people expressed concern over the policy, but the frequency of that has subsided. “If anybody has a real issue with the surcharge—for whatever reason—and they don’t want to pay it, we don’t question it. We just tell them we’ll take it off,” he continues. “I’d say that happens maybe once every couple of weeks in our restaurants. We’re pretty high volume, so it’s not a huge thing.”
To provide transparency, the Rustic Canyon restaurant group offers a summary of the healthcare surcharges on its website. It shows how much money each of the restaurants collected for healthcare and how much was spent on premiums. Only Huckleberry, which produces the highest sales for the company, actually exceeded the requirements [over $9,450.94 for premiums of $22,394.35], while the other two fell short [Rustic Canyon Wine Bar under by $1,289.78 for premiums of $21,948.91, and Milo & Olive short $2,865.50 for premiums of $27,656.11]. Two new additions to the Rustic Canyon family, Cassia and Esters, plan to offer health insurance as well.
“We wanted to make it totally clear [how] the charge is allocated, kept separate, and used,” Loeb explains of its disclosure page. “If there’s a deficiency and we’re short, we just pay it, and if we have a surplus, then we keep the funds and that allows us to put it toward premiums for the coming year, when it comes time to negotiate a better plan with higher-level coverage. … Hopefully we’ll have overages everywhere and can upgrade the benefits to our staff.”