As minimum wages rise in states across the U.S., consumers are picking up the cost.
But instead of hiking menu prices, restaurants in a number of states are turning the additional wage costs into surcharges, according to the Wall Street Journal. In Arizona, California, Colorado, and New York, they can range from 3% to 4%.
Restaurants are choosing to add the surcharges because they say raising prices makes consumers want to trade down—ordering a sandwich instead of an entree, or skipping desert, the Journal reports. And for a business with razor-thin margins, that can make a huge difference.
“It’s the emerging new norm,” Sharokina Shams, spokeswoman for the California Restaurant Association, told the Journal. She said California restaurants will add a surcharge to adjust to the state’s minimum wage policy, which is expected to rise annually until it reaches $15 an hour by 2023.
