New York is set to become the latest city to let restaurants add a COVID-19 fee to your bill

People dine outside Peter Luger Steakhouse in Williamsburg as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on September 10, 2020 in New York City. The fourth phase allows outdoor arts and entertainment, sporting events without fans and media production.Noam Galai/Getty Images
  • New York City's city council approved a bill that allows restaurants to charge up to 10% on diners' bills.
  • Already, restaurants in cities like San Diego and Denver are adding this charge to bills.
  • The COVID-19 pandemic has roiled the restaurant and bar industry, with over 26,000 restaurants across the nation closing since March, according to Yelp data.

New York's city council approved a measure on Wednesday that allows restaurants to tack on a "COVID-19 Recovery Charge" of up to 10% on diners' bills. The COVID-19 pandemic has roiled the restaurant industry, with over 9,000 closing in New York since March, according to Yelp, and the surcharge aims to help dining establishments stay afloat.

The next step is for Mayor Bill de Blasio to sign it into law, which he's indicated he plans to do.

For the last few decades, New York has had a ban on restaurant surcharges, according to The Wall Street Journal. This new measure would break that precedent, allowing restaurants to charge a fee until 90 days after they are allowed to fill dining rooms again. The measure doesn't apply to large chains with more than 15 locations or take-out orders, and restaurants must clearly notify customers of the charge.Advertisement

The move follows an announcement from New York Gov. Andrew Cuomo, who said that restaurants will be able to resume indoor dining at 25% capacity starting September 30. But industry insiders and experts say that the move isn't enough to save the struggling restaurant industry, Business Insider previously reported, as they operate on thin margins that require full or nearly full dining rooms.

New York City isn't the first metropolis where restaurants are turning to COVID-19 dining surcharges to stay afloat. Restaurants from San Diego, California to Springfield, Missouri have opted to add a surcharge. Restaurants have cited rising meat prices, outdoor seating, personal protective equipment for employees, single-use paper menus, and more as examples of increased costs since the outbreak. Meanwhile, restrictions on indoor seating have undercut revenues.

Across the nation, over 26,000 restaurants have closed since March, according to July data from Yelp, and 60% of those closures were permanent. Over 9,000 over those closures happened in New York City.
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But while surcharges may help restaurants with their bottom lines, establishments that choose to add the fee often have to deal with customer complaints. In June, Pittsburgh's The Doublewide Grill added a $2 surcharge per meal after seeing costs rise due to an increase in single-use-products like paper menus, coupled with decreased revenue from operating at limited dining capacity, The Tribune-Review reported. The backlash on Facebook was intense, and the restaurant decided to can the fee.

"Restaurants in New York City have been getting crushed by massively increasing costs over the last five years and their options for increasing revenue have been narrowing," said New York City council member Joe Borelli, who sponsored the bill. "This new policy is coming as a result of the impact of Covid-19 on our city but I have every intention of making this change permanent."
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