Hard to Swallow: On Franny’s, the Obamacare Surcharge, and the Trouble with Transparency

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Yesterday, Eater revealed that perennially popular Brooklyn restaurant Franny’s would be levying a 3% surcharge on its checks to alleviate the costs of the Affordable Care Act for all Franny’s employees. The surcharge (an explanation for which now appears at the base of each menu) comes in addition to a general raise in the pizzeria’s prices; pastas are now $19, pizzas are $20. Co-owner Francine Stephens told Eater that the price-hike was made in an effort to prevent the departure of “talented cooks” by raising their salaries, lest they depart New York for more affordable cities. However, while the cost of raising salaries was simply built into increased food prices, because the cost of implementing the Affordable Care Act—mandatory for businesses with over 50 employees—has taken the form of a specific surcharge which calls out by name a piece of legislation that one can only imagine is pretty popular with what one can safely assume are the Obama-loving residents who patronize Franny’s, the restaurant is starting to get no small amount of blowback for its actions.

The commenters on Eater are pretty consistent in their condemnation of Franny’s managements actions, with the overall tone best summarized by JakGuy, who wrote “Telling your customers that they will need to pay for your employees’ healthcare, via line item? Not cool.” Over on Grub Street, a post on the topic has commenters sounding off on this new policy, with firstclasstramp writing, “F them. Hope the owners lose their business and their personal health care. Then they have to go work for employers who are as pissy as they currently are about giving them healthcare.”

And I must admit my first reaction was also one of untempered annoyance, strengthened by the memory that Stephens and husband and co-owner Andrew Feinberg had been publicly fretting over the costs of implementing the Affordable Care Act for the employees over a year ago, saying in an interview with the Village Voice: “No one knows what’s going to happen… It’s like throwing everything in the air. How will we come up with that money? Raise prices? Or tack on a surcharge?”

To now see that Franny’s would indeed be levying the surcharge on diners that had been talked about over a year ago was unsettling, like a public airing of business-owners’ grievances with the government. It felt wrong and needlessly dramatic, not dissimilar to those “tone-deaf” Airbnb ads that ran in San Francisco in which the company made “condescending suggestions” about how the city should spend its tax money. But also, the surcharge felt naïve, and a classic case of people not knowing their audience. On what level, it’s hard not to wonder, did anyone at Franny’s think that this surcharge, this reminder that the realization of progressive policies costs money, would be appealing to the assumedly liberal crowd (this is Brooklyn, after all, and Park Slope at that) which flocks to the restaurant? The thing about this surcharge is that it felt like too much information, like we were getting too much insight into just how our $20 sausage was being made.

And that, it seems, is the idea. Via email, I reached out to Stephens, who wanted to explain the situation because, she writes, “it is appearing that many are taking this surcharge as anti-Obamacare, which is so unfortunate, because it is in fact, quite the opposite.” Stephens says that because Franny’s—in addition with Stephens and Feinberg’s other two businesses, Rose’s Bar and Grill and Bklyn Larder, neither of which will have a surcharge or price increase—has more than 50 employees, they are accountable to Obamacare, a law, Stephens emphasizes, “that we fully support.”

“That said,” Stephens explains, “there is no way that we could or can absorb this cost and survive financially.” And because Franny’s has already been long-critiqued for high prices (on average, a margherita pizza at Franny’s is $3-4 more than one at similar restaurants), Stephens says that they didn’t want to make an increase without explaining things, and that she was striving for “transparency.”

She writes:

Costs rise all the time and we rarely touch prices on the menu…we did not want to drastically increase prices to the point of creating sticker shock for our guests so we are offering a bit of transparency regarding what it costs to run a business
In the wake of higher gas prices, every wholesale distributor we work with added a fuel and transportation surcharge to every delivery. They didn’t simply increase the prices of their goods because they feared turning customers away from their product. They simply stated, ‘this is what it now costs us to get you your product.’ We are acting with the same transparency. Most restaurants in San Francisco have implemented this same surcharge to pay for their employees health care.

However, it’s quickly seeming that this type of “transparency” is something that we’re not quite ready for, and that this level of explicitness does nothing more or less than prove the maxim that ignorance is bliss. Stephens even says that “if the perception continues to be so negative, we will retract the surcharge and simply raise our prices as much as we need in order to pay this cost.” And, probably, if this is what had been done in the first place and the pizzas had quietly gone up to $21 rather than $20, there might have been a little private grumbling, but the Franny’s-loving public would have absorbed the cost and moved on.

And yet, now we know. But what is it exactly that we know? Do we know that even incredibly successful local business-owners are frustrated with plateauing or even diminishing profits in an increasingly expensive borough? Sure. Do we know that despite many of our commitments to progressive policies, their implementations necessarily have a rippling effect with negative consequences for some in our staunchly capitalist society? Yeah. Do we know that many of us are uncomfortable when confronted with stark financial realities that don’t line up with the way we want the world to be, namely a way in which those on top would gladly give up a chunk of their income for the good of others? Yes, definitely.

The truth is, the management at Franny’s hasn’t done anything wrong, really, other than revealing a little more than we want to know about why things in Brooklyn are priced the way they are. Franny’s is giving its staff health insurance, which, undoubtedly, is a lot more than can be said for other pizzerias mentioned as similar but slightly cheaper alternatives, pizzerias with smaller staffs who thus don’t qualify for Obamacare. And Franny’s is telling everyone why it is exactly that their prices are going up. Does having this information—along with its attendant, implicit critique of how expensive it is to run a business—make the food at Franny’s a little bit harder to swallow? Maybe. But maybe we should already be a little more conscious of what it is we’re putting in our mouths, particularly when one meal is already the equivalent of what some people spend on groceries each month.

So, when it comes down to it, when I consider whether or not I’ll be going to Franny’s again, I will keep the reality of the surcharge in mind. But I’ll also consider the fact that the staff at Franny’s is fairly compensated and has health insurance, and that—regardless of the questionable decision to add an Obamacare surcharge—this is no small thing. Of course, it’s not like I’ll be at Franny’s on a weekly basis anyway, because, I mean, how much money do you think I make?

Follow Kristin Iversen on twitter @kmiversen

Update: Franny’s will be abolishing the ACA surcharge and Stephens explained it in an email to Grub Street:

It is appearing that many of our guests are viewing the proposed ACA surcharge as anti-Obamacare, which is so unfortunate, because it is in fact, quite the opposite! Through this surcharge, franny’s is embracing Obamacare. Clearly our intent was misunderstood and our guests have made it clear that they would prefer to see higher prices as opposed to a surcharge. We’ve always worked in the service of our staff and guests and will amend our prices accordingly while removing the surcharge entirely.

Initially, we thought, before we start putting $22 pizza on the menu, let’s be transparent about what that money is actually going towards. However, it seems given the stated preference of our guests as well as the potential for misinterpretations into the future, we will retract the surcharge and reconfigure our menu pricing instead.

We hold it essential to who we are as a company to take care of our staff — and our guests. We are listening to you all.

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5 COMMENTS

  1. If you can’t afford to run a business and pay the necessary costs, such as employee health care, then don’t have a business. This is an example of poor business management being blamed on a government regulation. Not only is it obnoxious (possibly political) but it’s like blaming FDR for the fact that you have to pay your employees social security tax, or that you have to pay the minimum wage.

    • @LeeBee spoken like a guy who has never run a business. When you’re already playing by the rules and have already maxed out profit margin at a seemingly successful business, then the government introduces a new regulation that costs $ , where do you think $ is gonna come from?

  2. If you gave three locations, formally four i believe, and aren’t offering your over 50 employees benefits you are an indecent business operator. scale back your business if it’s too expensive to maintain. One of the reasons the government put this in place was because of workers rights being exploited in this exact manner. The hospitality industry is notorious for predatory labor practices and now it’s alL coming to roost.

  3. Given the number of pizza places in this part of Brooklyn, making a political statement about Obamacare on a menu was a pretty risky move.

  4. “The truth is…”the ACA is,in part, a tax. We have to pay taxes. The country does not work without taxes. I am a solo practitioner. My taxes have gone up because of the ACA. I have not raised my fees because of my taxes.
    Republicans complain about taxes, often don’t believe in global warming, and, Republicans sometimes don’t believe in evolution. Let’s ask Franny’s opinion about global warming & evolution.

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