In case you missed it, City Council recently passed Bill No. 110341, which Councilman Jim Kenney introduced last spring to stop the common practice of restaurateurs deducting small percentages from servers’ credit card tips to help cover the transaction fees assessed by credit card companies. Hundreds of Foobooz readers expressed their support for that bill in our informal poll, which was a landslide. One guy who stands firmly planted on the other side of that argument: Marc Vetri. He called me this morning to discuss.
Just to be clear, because I think there has been some confusion out there, you don’t make servers pay the entire credit card fee, right?
Nobody does that. It would be illegal. If the bill is $100 and a customer leaves a $20 tip, we are charged basically around 2%. So we would pay the fee on the bill. And the waiter would pay the fee on the tip.
I thought that Amex was more like 4%.
That is true to some extent. When you’re smaller, like when we had only Vetri, the Amex was like 4%, but then once we started opening the other restaurants and there were more sales, the numbers got lower. Once you are grossing more than $1 million a year, you can make deals.
But it sounds like it can really add up.
Oh yeah, it can be quite a burden. When we had just Vetri, it was a ton of Amex. Monday through Thursday was all corporate. When I saw all those Amexes at 4%, I thought jeez. For a small business guy who’s got 30-40 seats and doing less than a million a year, 4% in a world where you’re making 10%, or whatever the industry average is, well, that’s a lot of money.
Sounds like you should be in the credit card business.
Yeah, it does. But that’s just the way it is, though.
So when someone comes to work for you, are they told that portions of the fees are deducted from their tips?
It isn’t like we have a big sign on the wall, but they all know. It’s common knowledge.
People are so used to paying $3 surcharges at the ATM for the convenience of withdrawing money, and using a credit card in a restaurant is certainly a convenience. I know of at least one Philadelphia restaurant that charges the customer 2% when they use a credit card. Might that be the future of all this?
Um, I don’t know. I would never do that. But if you’re honest about that and let the customer know, nobody can say they didn’t know about it. I would think that the smaller restaurants are more likely to do it.
You’ve been the most vocal about this among your peers, as evidenced by some of your Tweets.
I take a lot of heat off of it, which I don’t necessarily mind. But some of the arguments… like people that say, You’re not a small business. You’re this and you’re that. Well, who is a small businessman? I think that I am the definition of a small businessman. But nobody wants to listen and have a conversation about it. People saying I’m stealing, raping, whatever. You want to have an intelligent conversation about it, let’s have one. Know the facts and make your mind up. But if you’re going to listen to a bunch of idiots who rant and rave, than you’re an idiot.
So how much money are we talking about here? What additional money are you going to have to spend annually?
Probably about $35,000 to $45,000 per year, but with the new restaurant, more like $50,000 or $55,000. Then a guy like Starr, it’s going to be, I would bet, 8 to 10 times that.
One of your Tweets suggested that a server is likely to walk home with only an extra $4 in the pocket at the end of the night. Most of the servers I know live pretty hand-to-mouth, and $4 per shift times, let’s say 20 shifts a month, well, that’s a phone bill, a week or so of groceries.
Totally. But the reality is, a Saturday night might be $4 to $5, and on another night, $2. It does add up. But all this law is doing is shifting money from the business owner to the employee. And where should that money go? Well, nobody asked us about it. The councilman who introduced it – what’s his name? Kenney? He wouldn’t even speak to us. Nutter would hardly speak to us.
I don’t know. They don’t understand. They don’t get how it affects us. It doesn’t make any sense to me. In all fairness, why should a server who makes like $30 an hour reap all of the benefits of that? Why not give it to the kitchen who works a standard hourly rate? Or why not just leave it the way it is? Nutter did finally talk to me, but he doesn’t understand anything about the bill. It was just a bill that was brought up for some reason or another, and they’re doing it without doing any sort of due diligence whatsoever.
Some have suggested that the credit card fees are similar to the other bills you have to pay like the electric, the linens, the meat truck, that it’s just the cost of doing business.
Listen, if they get $20 on the credit card, I have a fee on that because that goes right to the payroll. When the customer hands us $20 for the server, that goes on their tip check, which is all run through the payroll company, so I’m paying taxes of like 30 percent on that. Everyone is just thinking that the $20 you leave for the server, that that’s it. But that’s not it. When tips go up in a restaurant, that actually costs the owner more money. I mean, we’re happy they went up, because that means sales went up, but when the server makes more money, we owe more money.
Do you really think this could affect the future of the restaurant industry in Philadelphia?
At the end of the day, it’s not going to be the end of the world for us. We’re in a sweet spot. But for the larger restaurant corporations and the single young restaurant chef who opens one restaurant and has to take credit cards, has 30-40 seats, has those high rates, it’s going to hurt him a lot. And he’s the guy who’s getting the loan and risking everything he has. He’s the guy who’s going to be hurt the most by it, which is a shame. When you open up a restaurant, your first 3 to 4 years of it, you’re not making anything. You’re actually make less than the server. A lot less.
Update: Tip bill based on bad information [The Philly Post]