Tom Douglas Restaurants adds 2% ‘Wage Equity Surcharge’ — UPDATE: ‘I was trying to level the playing field’

(Image: Serious Pie Pike)

(Image: Serious Pie Pike)

The first phase in Seattle’s new minimum wage law kicked in April 1st amid predictions for higher costs and — at least in the long term — better financial equality in the city. At least a couple of the city’s major restauranteurs are pushing back immediately on the costs front. Wednesday, Tom Douglas Restaurants, operator of $$$ and up style restaurants across the city including the newly opened Serious Pie outlet inside the Starbucks Roastery on Pike, announced it was instituting an automatic “Wage Equity Surcharge” of 2% on every bill:

If you are reading this note, you have likely been to one of our restaurants and have seen the 2% surcharge funding the Mayor’s Wage Equity Surcharge (WES). After months of our team working together to craft the best plan for us to handle the wage increase, we felt the most competitive and least intrusive is to implement a surcharge equal to the increase in wages until all restaurants in Seattle are on the same playing field.

100% of this surcharge will be distributed to our staff in either wages or benefits. If there is a surplus, we will distribute it to current hourly staff at the end of the calendar year as a bonus and adjust the surcharge for the next calendar year.

UPDATE 4:45 PM: The blog post has been removed from the site. The company spokesperson has not yet returned our messages and the company’s social media channels have not addressed the situation. A cached version of the message can be viewed here. We’ve also posted a copy here.

UPDATE 8:45 PM: In a new post, Douglas writes that’s he is dropping the surcharge:

Thanks for reading my blog. You spoke and I’ve listened. Since posting my comments on 3/31 I have had many people tell me that they would prefer a clear picture of the debate and not my political comments that were unnecessarily snarky and snippy. I agree with you and have reframed my blog post to just the facts.

At the same time we are immediately removing the 2% wage equality surcharge we instituted on 4/1 so near future labor increases will be reconciled in the menu price increases as many of you have suggested you would prefer.

UPDATE 4/3/2015 8:50 AM: In a brief phone call from Minneapolis where he is traveling, Tom Douglas tells CHS he wants people to know he has been a long time supporter of the push for $15/hour and that he went about covering the costs of the new law the wrong way.

“I was trying to level the playing field,” Douglas said. “It was stupid of me to get political about the whole thing.”

Douglas said he didn’t intend the surcharge to be a symbolic act. He said he also didn’t mean to rile customers.

“What I should have done, obviously, is poll the customers,” Douglas said.

He said he doesn’t expect the climb to $15 will destroy Seattle’s restaurant industry.

“I’m all for $15, I’ve been saying all along. Those people need it. My employees already make $11 an hour. I’m really proud of that. I just didn’t frame my thoughts very well.”

The announcement, written in first person from the perspective of owner and member of the mayor’s “VIP panel of business and labor leaders” Douglas, also includes a lengthy background on the restauranteur’s view of how the fight for $15/hour played out in Seattle:

I know all of you eat at a variety of Seattle’s restaurants not just ours. With their plan, the Mayor and City Council have decided that restaurants of our size should pay approximately 10% more per hour for servers, bartenders, host and bussers than any of my contemporaries. Just on raw talent it’s hard enough to compete with amazing Seattle restaurateurs like Ethan Stowell, Matt Dillon, Renee Erickson and Thierry Rautureau. Now I get to pay millions more in labor cost on top of it.

With this first phase of the new law, minimum wage at Seattle employers with more than 500 employees has risen to $11 — an 18% jump. Employees at smaller companies with no tips and no medical benefits also have a $11/hour floor. Small employers of tipped workers and employers that provide medical benefits may pay a $10 minimum and make up the balance with credit for the tips.

Recent attempts by restaurants, bars, and cafes to use surcharges to offset new labor laws and costs in Seattle have not gone well. In April 2013, E Olive Way’s Bleu Bistro’s Grotto dropped its 1.9% sick leave surcharge after public outcry. The Cherry Street Coffee chain also faced backlash over its surcharge at the time.

According to a KOMO TV reporter, Tom Douglas Restaurants isn’t alone among the “501+” size restaurants that have tacked on a surcharge:

UPDATE: The other restaurant has been reported to be Belltown’s Black Bottle. Unlike Tom Douglas Restaurants, Black Bottle is a much smaller operation well under the 500 employee tier.

We have a message out to Tom Douglas Restaurants about the surcharge but have not yet heard back.

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76 thoughts on “Tom Douglas Restaurants adds 2% ‘Wage Equity Surcharge’ — UPDATE: ‘I was trying to level the playing field’

  1. I would have a lot more respect for Tom Douglas if they just raised their food prices by the same amount rather than grandstanding.

    • No kidding. It’s not like diners at Tom Douglas restaurants would even really notice a 2% increase in entree prices. .40 on a $20 dish. No passive aggressive whining needed.

    • Exactly. Blaming the people who make his restaurants (unaccountably) popular for the 2% is really aggravating. Could he not take a 2% decrease in his own take-home? Yes, he could.

      • There is a serious math error in your question. It’s not a question of “a 2% decrease in his own take-home”. Tom Douglas does not “take home” every dollar you pay at his restaurants. I would be surprised if he takes home 2% of the total. So the 2% surcharge is probably more than he makes.

    • Government is forcing them to do something & you role your eyes at the business explaining to their customers why their prices are being raised. Get real.

    • But Douglas has not said anything about ending tipping. Menu prices go up, or surcharges are instituted…..what difference does it make? The bottom line is that customers will be paying for the $15/hour “movement.”

  2. If he faces an increase in costs due to property taxes, I’m sure we can look forward to a “property tax surcharge” appearing also, right? And with a press release stating how “the voters approved an increase in property taxes to fund education and transportation. Just on raw talent it’s hard enough to compete with amazing Seattle restaurateurs like Ethan Stowell, Matt Dillon, Renee Erickson and Thierry Rautureau. Now I get to pay millions more in property costs on top of it.”

    Because it’s not like all the restaurateurs he references having to compete with aren’t facing the exact same increases and challenges. I suppose we can look forward to all of their press releases on the difficulties of competing with him, and how they’re being “forced” to pay their serfs enough to live in the kingdom of those they serve.

    If he can’t cut any expenses (perhaps even *gasp* that made by him personally: generated in no small part by all the servers, bartenders, host and bussers that work in his restaurants), and needs to raise his costs in order to incorporate the impact of paying a living wage – then so be it. It’s called operating a business.

    But to add an equity charge calling it out, and send a press release on it to lament paying a living wage – despite being a member of the mayor’s “VIP panel of business and labor leaders” that decided upon it – is just pathetic. Sad and pathetic.

  3. This is just deceptive pricing. Why not add a 5% fresh food surcharge, or a 20% quality wine surcharge, too? The menu price should be the total price before tax.

  4. I’m struggling to feel sorry for Tom Douglas’s restaurants in particular in all this.

    He does quite well and doesn’t cater to a very price sensitive crowd. Just raise prices. Or do like Ivars and raise wages all the way and end tipping. No need for the drama! The law is widely supported by Seattleites.

  5. I won’t claim to know much about the restaurant business, but if you are a high end restaurant and you can’t pay your workers a living wage, shouldn’t you run on a different business model? If a Tom Douglas restaurant charges $20-50 per entrée then why is it so hard to pay your staff $11/hr? I’m sure Douglas himself is making six figures, right? Why offset the cost on the customer? I hope other places don’t follow suit because it should be possible to pay staff $11/hr without driving up costs.

    • Food for fact, Tom Douglas has been paying majority of his hourly staff $11.00/hr prior to all of this Seattle Wage Increase. He has been paying all kitchen employees (cooks, prep cooks, dishwashers) and any non-tipped based employees $11/hr for close to two years now. He is now paying his servers and bussers (the tipped wage employee) $11/hr.

      • I was wrong on my wages for Tom Douglas. I guess he is paying more. Food for Thought has more correct and precise information in posts below. Sorry about that everyone.

  6. So tacky. I really try to avoid going to places that do this when I go out in SF. If in mixed political company, it can cause unpleasant discussion when the bill arrives – not what I want to get into when I’m spending $$ for a pleasant, high-quality experience with family or for business. I would much rather pay extra somewhere else and avoid the potential situation, it feels very unhospitable. I had my company holiday lunch at one of Tom Douglas’s restaurants last year. It was great and I was set to do it again this year, but I won’t be back if this practice continues.

    If you need to raise your prices, raise your prices and leave it at that. I don’t think a 2% increase is pricing anyone out of eating at Tom Douglas restaurants vs competitors in the same tier. Will you also provide diners with an exact accounting of how this surcharge is only applied to cover labor costs, and not other costs in your business? What’s next, surcharges if you get a rent increase from a landlord? if your suppliers were to renegotiate payment or pricing terms? if parking rates go up?

  7. This is to show how foolish it is for the city to tell business owners how much they must pay their employees. with foolish, kneejerk ordinances. Of course it’s going to be passed on to the consumer. This is so that fact isn’t swept under the rug.

    • I don’t think anyone disputes that they expect prices to go up. Nobody’s expecting anyone to “sweep it under the rug” or absorb it. What people are taking issue to here is the petty way he’s grandstanding just to whine “I told you”. We already expect it. Just STFU about it and raise the prices.

    • of course it’s passed on to the customer; everything is passed on to the customer, no matter what it is. But to blame people who are not comfortable with seeing workers get paid so disproportionately to the Douglas’ of the food industry is amazingly short sighted.

  8. I agree this a tacky move, especially for a business of it’s caliber where a few dollars and cents do not matter to its customer base.

    I do recall business adding a fuel surcharge line when fuel prices spiked awhile back. These types of notifications aren’t uncommon but to me and in this case, they are unnecessary.

  9. I’ve always been indifferent when it comes to TD joints, but now i’m not, this move tipped the balance for me (see what I did there? “tipped”?… nice)

    I am now anti-TD

  10. I have to guess that doing this will cost him at least 2% of his customer base who are turned off by it. I know I’m now 2% less likely to choose one of his restaurants when I go out to eat…

  11. No more TD restaurants for my friends and I until this is removed.

    Bad business. I’d expect a lot better from a very wealthy restaurateur.

    On the bill, don’t pass the buck, just tell me what I owe you and what you owe the city in taxes. Period.

  12. Very poor form. Lots of expenses are included in running a restaurant, and they don’t all get called out on customer bills. I get it – you want to make a point that you have to increase prices to continue making as much money as you were before. We know that a higher minimum wage can increase prices. This comes off as “I’ll show the public the affect of their choice!”.

  13. Was it ever called ‘Wage Equity’ by the campaigners or city? Or am I right in thinking that’s a misrepresentation of the minimum wage increase?

    Also, just because there are high prices doesn’t mean that margins are high. I don’t know much about restaurant economics but with any business where you have a high number of touches in the supply chain, it likely has very thin margins. This doesn’t mean that most businesses can’t absorb but the price increase will come form somewhere whether those are increased prices, cutting back on other costs and initiatives where possible.

    It’s much easier for a private company to take a hit in profit as they aren’t subject to stockholders so it may come from there as well. The other option is to go out of business, which will be interesting to see if it comes true. In a boom time in other industries for many areas of town, I doubt this last one will come to pass. If the boom ends, be aware that initiatives like this will be quickly blamed, even without any or much data to support it.

  14. Also, what is disengenous about Tom Douglas’ statement about already facing competition from so many other restauranteurs in the city is that all of them are subject to the same law. I highly doubt that any one of these relatively small enterprises (in the scope of business enterprises) has figured out a way around this law via an innovation that puts that at a competitive advantage.

    ETHAN STOWELL INVENTED A ROBOT WAITER THAT COSTS ONLY $5 TO OPERATE! HE IS GOING TO TAKE OVER EVERY RESTAURANT IN THE CITY! IT’S THE MAYORS FAULT!

    • Actually smaller businesses, with less 500 or less employees, are not subject to this law at the same rate as larger businesses like the Tom Douglas restaurants. So it does provide unfair economic advantage to some of his competition.

      • There are lots of efficiencies that come with owning an empire that employs over 500 people. It makes sense for smaller businesses to have a little more time to plan for the change.

      • Ethan Stowell and Matt Dillon are not particularly small businesses – and they certainly enjoy the same type of efficiencies as Tom Douglas, with a number of employees less than 500. 500 is quite random in that regards. 40 hours a week * 800 full salaried employees * 52 weeks a year * 2ish$ increased per employee is approximately 4.5 million$…. As dickish as it is to add that tax line, it makes sense to increase prices. At least his joints are less of a ripoff than Dillon’s or Stowell’s.

      • IF his employees were all full-time, 40-hours-per-week, this might be true. But many of them are part-time. It is common in the restaurant business to use part-time labor to reduce/avoid paying employee taxs and benefits.

  15. Tom Douglas has been paying a minimum wage of $15 an hour to his Kitchen Staff, and $12 an hour to his Dishwashers since August of 2013. This is higher than he would be required to pay any of these staff members right now under the current law.

    http://www.seattletimes.com/seattle-news/douglasrsquo-audacious-utopian-goal-shift-a-whole-industry/

    As people have noted here the menu prices at his restaurants is rather high, so how many of his tipped employees, who make up the majority of his payroll, do you think aren’t already making well over $15 an hour.

    This outrage may make sense when you are talking about kitchen staff at other restaurants, fast food workers who are untipped or hotel workers, but do you really thing that servers in tipped positions really need this raise?

    As Tom points out in the letter on his web site, he is required to report his servers tips to the IRS as wages and pay his portion of social security taxes on them, but this law does not credit them as wages. Furthermore, just increasing prices also conveniently increases the amount of taxes being collected by the city.

    Washington is one of only 7 states in the country that does not offer an alternative minimum wage for tipped employees that credits the employer with the tip amounts towards the minimum wage. Servers in a majority of restaurants do not need a raise, but this heavy handed law did nothing to take any of that into account and truly address those who needed the raise in a timely fashion.

  16. The 2% surcharge is just a suggestion. There is no legal way to enforce this additional fee absent notice by the business prior to ordering. That said, Mr. Douglas has wagered that the vast majority of people who go to his business will not contest the additional fee, which is probably true given how expensive it already is to eat at one of his restaurants.

  17. A very tacky and tasteless move by Tom Douglas. It seems he’d like your dining experience to be the same as the experience you get dealing with your phone company: hidden fees labeled as taxes. But do people feel good about dealing with their phone company? Phone companies get away with crap like this because there’s limited choice. Plenty of non-TD restaurants in Seattle.

  18. Why all the negativity? Yes, TD is adding a 2% surcharge. After using this to surcharge to pay his employees a living wage throughout the next year he will zero out the account and give each employee a bonus. Profit margins are not that great in the restaurant industry.

    • Not a bright move on his part. If he’d only called it “Employee Collective Profit-sharing” everyone whining here would be creaming themselves in support of it.

      • Depends. IF there were assurances the 2% was actually going TO employees and not directly into Douglas’ own pocket, yeah, there might be significant support for it. But, his apparent fear of losing revenue as a result of the backlash, which in turn seems to have prompted his subsequent backpedaling are strong indicators that wasn’t the case with this particular surcharge.

    • thanks for that. I know a lot of people will snark at that clarification, but I appreciate learning it; didn’t know before.

      • Actually…. restauranteur is listed as an alternative to restaurateur in Webster’s and Oxford dictionaries. Never
        trust Wikipedia.

      • You evidently do not know what grammar is. I pointed out wrong word use. At least admit that you used the wrong word. You thought you’d use a high falootin’ word but you didn’t know what that word was.

  19. He, like all other “business owners”, gets rich off other peoples’ work and is now throwing a petulant hissy fit about having to give an infinitesimal amount more of that stolen labor back? Please.

    • “business owners” in quotes?
      “getting rich off other peoples’ work”?
      “stolen labor”?
      Put down your crack pipe. He risked his money and put in 20 years of hard work to build the business that now employs people like you. He’s entitled to make whatever money he makes at this point. If you don’t like working at Tom’s restaurants, then don’t. If you don’t like eating at his restaurants, then don’t. He’s complying with the law and I’m pretty sure he doesn’t care what you think.

      • “He’s complying with the law and I’m pretty sure he doesn’t care what you think”

        Is that how he got successful running restaurants, having a
        “I don’t care what the customers think” attitude?

      • Right. And he single-handedly cooked every meal, waited on every table, rang up every charge, mixed and poured every beverage, washed every dish, and swept up every crumb for the entirety of those two decades. Like all small business owners, nobody else lifted a finger to help him become successful, and so he owes them nothing in return.

    • Big Boss that is a cruel statement and extremely unfair to a person who has given his non-tipped employees a wage increase before this $15NOW initiative was even presented. He has a number of employees working for with him since the beginning of his company. I don’t think employees stick around that long if they feel “he is getting rich of other peoples work”

    • Yeah, like you eat there anyway. And I’m sure that 2% will more than cover the 15-20% tip you wouldn’t be leaving.

  20. So, his lowest paid workers get an 18% wage increase and it only costs the end consumer a 2% rise in prices. I’d say his whingy grandstanding is only showing this to be a well-designed law that the market can bear.

    • its 2% this year. it will increase respectively in the following 3 years as the min wage increase in tier.

      not agreeing or disagreeing with what you said but want to clarify.

  21. I don’t eat at his restaurants so it’s purely academic to me but I think this sort of thing should be regulated. If you are going to add extra irregular charges to the bill you should be required to put up a sign near the door and also clearly state that on the menu so the diner is well aware the charge will be on the bill. It’s similar to that slimy practice some hotels adopted of adding ridiculous hidden charges that appear on your bill when you check out. BTW, that is a stupid business practice because fool me once and I’ll never use that business again.

  22. I think a lot of people are missing the point. Instead of raising prices and forcing the consumer to pay this increase in labor with no prior information. The option is in your hands, knowing that the server is being paid a higher wage than two days ago, and knowing how much of your bill will be allocated towards said wage, you now have the option to tip less… Essentially saving you money and paying the staff the same. Everybody wins.

    • Restaurants are going to be doing all kinds of different price increases. When the city or state does not account for tips as income (but the IRS does) they will raise prices. When it gets to $15, look for a 20% increase and they will probably eliminate tipping. The Ivars model coming soon to your neighborhood. Probably not the best for servers, but better overall for the restaurants. It will also get the government off their back. They will be paying the new “minimum wage” and all those supporting should be happy. Then it will be time for all those that supported the substantial increase in labor costs also to support the substantial increases in pricing.

      • Restaurant workers should be paid a living wage, and tipping should be eliminated. Tip amounts are totally arbitrary and do not correspond with better service. As a customer of a business, I should not be responsible for figuring out how much to pay its employees.

  23. Well, Tom, hope you realize that you’ve turned a lot of people off from continuing to be your customers because of your stupid whining. Get over it, put on your big boy pants and move on.

  24. All I have to say is that I am so pleased I work for a Schwartz Brothers restaurant here in Seattle. CLASS ACT THROUGH AND THROUGH serving amazing seafood and steaks for amazing guests. Way better class than any TD slop house and won’t grand-stand like TD is doing. Tom = A**HOLE!

    • your restaurant group is surely a class act but you represent them poorly. I would suggest not name calling folks in the future, it’s poor form and shows that you cannot communicate intelligently. And remember, Keep it Classy just like the restaurant you work for.

  25. Don’t tip? Tip less? Not all servers squander their tips on partying or the purchase of trendy attire or new skateboards. Up until a couple of years ago I was a full time restaurant employee . I used my tips to pay my nearly $1,000 monthly health insurance premium out of pocket. The rest went towards frivolous luxuries such as food and rent. Don’t tip? Tip less? Really?

  26. To Iopere: Okay. Don’t tip. IF a server can find 40hrs a week employment that’s $2,400 per month or roughly $2,000 after taxes. A crummy one bedroom in a neighborhood without bars on your windows is now $1,500. This leaves 500 for food, clothing(used), and God forbid you need a $2,000 root canal/crown.
    You’re not talking to an uneducated 20 something with 3 roommates.
    I’m a man of “a certain age” who owned his own coop, a multiple million $ business and has lived through 2 financial crashes. Afterward losing almost everything I was reduced to serving in my 40’s. Perhaps reduced is the wrong word. Elevated is more appropriate. With one tenth of my former income I was ten times happier. My point is I have seen life from both vantage points. Be careful what you preach for you too can tumble down the ladder. If in fact you’re even on one. Have a little compassion. Do the math. And if you don’t want to leave a tip do us all a favor. Eat every meal home. Don’t even go out for a cup of coffee

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