A surcharge is included on guest checks to oﬀset increasing operational costs triggered by recently-enacted federal, state, and local laws. We believe this course of action is necessary to ensure a sustainable and fair working environment for all of our team members, and we appreciate your trust and support as we remain steadfastly committed to providing you outstanding beer, great food, exceptional service, and genuine hospitality.
WHY A SURCHARGE?
In 2015, healthcare and labor costs began significantly increasing. In coming years, minimum wage will continue to rise, and by 2022 the state-deﬁned minimum wage will be 50% higher than it was in 2015, and even higher in some cities. Since tipped employees are the only minimum wage employees our Brewpubs have on staff, they have been the primary beneﬁciaries of the minimum wage increases. With a surcharge that benefits our operations budget, we’ll be able to not only comply with minimum wage and health insurance laws but also raise pay for all our non-tipped staff, who we believe deserve the additional pay for the services they perform.
WHY DON’T YOU JUST PAY YOUR PEOPLE MORE BY MAKING LESS PROFIT?
The increases in minimum wage, healthcare, and other labor-related costs put us between a rock and a hard place. We operate our business with small proﬁt margins and the unusual spike in wages, beneﬁts, and other operational costs threatens our Brewpub operations. In fact, the cost increases are threatening the entire restaurant industry in California. Restaurants tend to only average 4-7 cents proﬁt on the dollar after all expenses are paid – and that was before operational costs started to climb.
WHY DIDN’T YOU JUST RAISE THE PRICE OF YOUR MENU ITEMS?
We believe transparency is the right thing to do. These increased operational costs affect the company directly and indirectly through our vendors’ and local suppliers’ increased prices for raw ingredients, supplies, and services. They financially impact our Brewpubs differently because costs fluctuate by region, supply and demand, and local ordinances, and the disparity in some cases makes favorite menu items cost prohibitive. Inflating menu prices across the board affects each guest differently based on their ordering choices. And, we don’t want anyone to feel hindered to order what they truly desire. The surcharge distributes the increased operational costs equitably, allowing us to continue providing you with the highest quality beer, food, and service while helping us take care of our team members.
WHAT WILL OTHER COMPANIES DO ABOUT THESE RISING COSTS?
Our industry will continue to see a lot of changes in the next few years. There’s no perfect way to deal with these cost increase pressures. Some will choose to cut servers, cut portions and quality, or put ordering tablets on the tables. Others will reduce their level of service by having you wait in line and order from a counter or kiosk. Karl Strauss has no desire to diminish our quality, change our service model or reduce our interactions with our guests. We know that our guests come to KARL for great beer, outstanding food and best in class service. Our amazing team provides you with the level of service we are known for and we will not compromise our friendly service and hospitality by cutting corners. For an independent party’s point of view on this topic check out this article published by San Diego Magazine
Our purpose is to make people happy one Karl Strauss beer at a time. Your continued patronage and support allow us to do so. We sincerely thank you for your understanding.
Should you not be satisfied with this explanation and care to reach out to us directly, please send an email to Karl@karlstrauss.com.
Still curious and want more details? We are happy to provide them…. Read on.
FACTS REGARDING INCREASES IN MINIMUM WAGE AND HEALTH INSURANCE IN CALIFORNIA
In 2015, Congress passed the Affordable Care Act requiring “large employers” to offer adequate and affordable health insurance to their employees and their children. We proudly comply with the ACA to support our team members’ health, but the reality is it increases our operational costs. Likewise, in 2015, the minimum wage began increasing at an accelerated rate in California, and select municipalities are taking an even more aggressive approach in both the rate and timing of these increases. For instance, in 2019 the minimum wage in Los Angeles is 42.5% higher than it was in 2015. In coming years, minimum wage will continue to rise above current levels, and by 2022 the state deﬁned minimum wage will be 50% above what it was in 2015, and even higher in some cities. These are just two examples of the level of cost acceleration in our labor intensive industry that requires us to do something in order to remain in business.
FACTS REGARDING CALIFORNIA LABOR LAWS AND APPELLATE COURT RULINGS
For those of you interested in more details: The California Labor Code excludes tips as income, even though we must pay payroll taxes on those tips. Furthermore, in February 2016, a 9th Circuit Court of Appeals ruling prohibited kitchen employees from sharing in those tips. This led to a large and growing income gap between tipped and non-tipped employees, as much as a 300% difference in effective hourly wages. That landscape recently changed in March 2018 with the Consolidated Appropriations Act, which allows some tip sharing with limitation. Since tipped employees are the only minimum wage employees our Brewpubs have on staff, they have been the primary beneﬁciaries of the minimum wage increases. With a surcharge that benefits our operations budget, we’ll be able to not only comply with minimum wage and health insurance laws but also raise pay for all our non-tipped staff, who we believe deserve the additional pay for the services they perform.