A couple extra bucks tacked onto a sushi order. A new 5 percent fee on barbecue takeout. Grappling with rising food prices, zero dine-in business, and the cost of purchasing personal protective equipment for workers, restaurants across the country are experimenting with adding Covid-19 surcharges.
While some customers have expressed understanding, reactions on social media have run the gamut from anger to elaborate conspiracy theories about restaurants planning to use the money for nefarious purposes.
And yet behavioral economists say asking restaurant customers to pay more is both a reasonable and smart move for a struggling service business right now. How you frame it, of course, is what determines whether it's more likely to inspire outrage or empathy. Here are tips for doing it right.
1. Opt for a surcharge over a blanket price increase.
Grocery stores can raise prices on everything in the store without a vitriolic reaction from customers for two important reasons, says George Loewenstein, professor of economics and psychology at Carnegie Mellon University. "One, [grocery shoppers] know that prices fluctuate and they expect that. And two, a market can raise the price of everything but if a shopper is looking at individual items, they probably won't notice that the average price of what they're paying has changed." With a restaurant, however, your loyal customers will notice right away.
The advantage of a surcharge is that it signals it's temporary, says Colin Camerer, a professor of behavioral economics at California Institute of Technology. And a "surcharge invites you to explain it," he says.
2. Explain why you need the extra money.
Don't expect customers to understand if you simply tack the fee onto the bottom of a receipt and call it a day. "If it's just described as a 'Covid surcharge' it sounds suspicious, like price gouging," Loewenstein says. "The important thing is to explain what the surcharge is going to."
Camerer advises offering the most concrete, genuine reason why you have to raise prices. If true, explain that with the extra cash, you'll be able to keep more of your staff and support working families. "Most will have empathy for that," he says. The more goodwill you already have with customers, he adds, the better the message will be received. Customers also may have more understanding for an independent, local restaurant than they would one that's part of a large chain.
3. Make it optional.
Uri Gneezy, professor of behavioral economics at the University of California, San Diego, advises going a step further to preserve and engender goodwill with customers: Tell them you'd appreciate their willingness to help, but then give them a way to opt out of the surcharge. "I'm happy to give to charity from time to time, but I don't like it when people demand it from me," Gneezy says.
Another option: Let customers pay however much extra they want to. Gneezy's academic research involves experiments in letting consumers choose a price for a particular good, with half the amount going to charity. "People pay more in those situations than when you force them to pay," he says.