Over a year after the passage of a bill that will continue to raise tipped workers’ minimum wages, Foggy Bottom and West End restaurants have implemented service fees and cut staff to account for new operating costs.
At least six restaurants in the neighborhood have begun charging service fees of 5 percent or lower since the D.C. Council voted to implement Initiative 82 in May 2023, after voters approved the measure the previous November. The initiative consists of gradual increases in the tipped minimum wage, beginning with an increase from $6 per hour to $8 per hour in July, which Foggy Bottom and West End restaurant owners said has stretched their staffs and budgets.
Tonic at Quigley’s, Bindaas, Circa and Surfside all implemented service fees of 3 to 4 percent. Chef Geoff’s, which has a location in West End, charges a 5 percent “Initiative 82 fee,” while Founding Farmers began charging a 5 percent “wellness charge” during the pandemic.
The tipped minimum wage increased to $8 per hour in July and will increase again to $10 per hour in July 2024, gradually increasing each year until it matches the minimum wage — currently $17.05 per hour — in 2027.
Jeremy Pollok, the owner of Tonic at Quigley’s, said he began charging a 3 percent service fee after the last wage increase in July, but servers can remove the fee upon a customer’s request. He said managing the restaurant’s finances in a way that keeps customers satisfied and staff appropriately paid is like a “balancing act.”
“If you have too much staff on, maybe the service is great but then your staff doesn’t make all that much money,” Pollok said. “And if you don’t have enough staff on, yeah maybe you’re cutting down on your costs, but then the customer is unhappy.”
Pollok said he had to cut some of his employees’ hours and reduce his overall staff from an average of 80 to 90 employees before the initiative’s passage to between 70 and 80 now. Pollok said hosts may now start work 30 minutes before the restaurant opens, when previously they would have arrived an hour in advance.
“Someone’s hours might have been cut over here, but they might be increased over here,” Pollok said. “So it just overall means less staff.”
Pollok said some Tonic employees quit to find work in Maryland or Virginia after the initiative passed, where they could work more hours or make more in tips. A lawmaker in Montgomery County, Maryland, withdrew his bill Tuesday that would have eliminated tipped wages by 2028 to instead coordinate with a campaign to eliminate tipped wages statewide.
“At the end of the day, it’s a math problem,” Pollok said. “With those increases, it’s got to come from somewhere.”
He said maintaining low food prices to ensure GW students can afford to eat at Tonic represents another part of the balancing act. Pollok said his menu has “GW Specials,” like $1 wings for the first two months of the semester or a hamburger with a side and a drink for $10.
“We’re constantly comparing ourselves to other restaurants in the neighborhood, and I think we are very competitively priced compared to other similar restaurants in the area,” Pollok said.
Nakia Browner, the national co-organizing director for One Fair Wage, the national organization aiming to eliminate the tipped minimum wage, said D.C. workers have reported that their tips have remained consistent since Initiative 82 passed, despite negative messaging.
Some bar and restaurant owners opposed the bill when it went up for a vote in November 2022, saying it would reduce tipped workers’ overall pay after tips because people would be inclined to tip less or stop tipping entirely, and the tipping model allows restaurants to keep labor costs low. The D.C. Council repealed a similar bill that would have eliminated tipped minimum wage in 2018, marking disagreement with voters who approved the initiative. But when the bill appeared on the November 2022 D.C. ballot, Initiative 82 passed with 73.94 percent approval.
Browner said the organization expects the profits from service fees to go directly to workers.
“It does have the desire as anticipated for people in the real life,” Browner said.
Geoff Tracy, the owner of two Chef Geoff’s locations and Lia’s in Chevy Chase, Maryland, implemented a 5 percent “Initiative 82 fee” when the first July wage increase went into effect, with language on menus telling customers to adjust tips accordingly. Tracy said the goal of the fee was to keep servers’ and bartenders’ wages consistent with what they were before the initiative passed, at between $35 and $40 per hour after tips.
“It’s a very complicated payroll thing,” Tracy said.
Tracy said the incremental wage increases of $2 per hour add up to 30 to 35 percent increases in wages for workers each July. He said the cost of providing tipped workers with the D.C. minimum wage would add up to $400,000 for each of his restaurants.
“It’s been a headache,” Tracy said.
Tracy said he provided his managers and chefs with a budget that only accounts for the next six months, instead of a typical yearlong one, because the July 2024 wage increase will substantially change calculations in operating costs. He said he will need to reassess the 5 percent service fee in the lead-up to the July increase.
“It’s a chunk of money, and so it’s going to have to come out of somewhere,” Tracy said.
Knead Hospitality + Design, the group behind Mi Vida, Succotash and other D.C. restaurants, dropped its 3.5 percent service fees Tuesday after Travelers United sued, alleging the fees were deceptive. Clyde’s Restaurant Group, which oversees three D.C. restaurants, also dropped its 3.75 percent fee in November after a similar lawsuit from Travelers United.
Tracy said his servers briefly pooled tips during the pandemic, but once customers began returning to restaurants, his servers asked to keep individual tips, which they still practice. He said servers often feel motivated to perform well during busy shifts to make more tips.
“Restaurant business was hard before I-82,” Tracy said. “I’m not saying I-82 is the only reason the restaurant business is hard. I’m not.”
Froggy Bottom Pub on K Street has not yet implemented a service fee in response to Initiative 82. Owner Hien Bui said she is waiting to see how other restaurants respond to the Initiative before deciding whether to add a service fee.
“We still figure out what we are going to do. But if everybody does that, we will do it,” Bui said.
