Pros and Cons of Charging Surcharge on Public Holidays

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Pros and Cons of Charging Surcharge on Public Holidays

It’s a controversial topic every time a public holiday rolls around. Should cafes and restaurants charge a holiday surcharge? Many customers think not and complaints are often levelled at businesses who implement a public holiday surcharge.

However, charging a surcharge on Sundays and public holidays is common practice in the food industry. Owners point out that the surcharge goes towards the additional operating costs that come with opening on a public holiday, including higher staff wages.

The question now is, since you’ve decided to open, should you charge your customers a surcharge for serving them on a public holiday? Is there an alternative way to handle the additional costs of opening on a public holiday?

Why charge a public holiday surcharge?

For many businesses, charging the holiday surcharge is a simple way for them to afford the penalty wages they have to pay their staff for coming in on public holidays. Holiday surcharge is also a form of cost-reduction that allows you to pass on the extra expense of opening on a public holiday for your customers. Because of their location, some restaurants may experience slower business on public holidays compared to regular working days. In this case, the added revenue from surcharges allows you to break even and justify servicing customers on a public holiday.

Legally, restaurants and cafes are allowed to charge a surcharge on Sundays and public holidays, as long as they clearly inform their customers of their intent. We’ve all seen the printed or handwritten sign on the front window or at the cash register. There’s no need to come up with a separate menu for a public holiday, but some businesses add a clearly-displayed note to the menu, such as “a surcharge of [percentage] applies on [the specified day or days]”. Some establishments simply add another column on the menu for the price during public holidays.

Why you should waive the surcharge

Customer opinion is one of the biggest drawbacks to charging public holiday surcharge. Just because some customers understand why many restaurants have to charge extra on public holidays doesn’t mean they don’t lament the existence of the surcharge. In fact, some customers are more inclined to complain when establishments close down on public holidays because they have nowhere to go. However, you’re likely to attract more customers if they know that your menu prices stay the same regardless what day of the week it happens to be.

There’s also the issue of competition, especially if you operate in a food precinct or close-by to other restaurants and cafes. There are many restaurants that are now opting to forego charging surcharge, or alternatively, are building it into their ongoing pricing.

Is there an alternative to a surcharge?

Operating costs are higher on public holidays because of the penalty rates you have to pay your staff. You can read more about penalty rates HERE. These costs need to be recuperated.

If you’re thinking of forgoing the holiday surcharge, a good compromise is to open only on certain public holidays when you think your restaurant will still be busy. For example, some businesses are more inclined to open on Easter rather than Australia Day because there’s usually enough customers coming in to cover the cost of opening on that day.

The other option is to build the staff penalty rates into your everyday pricing by planning a yearly pricing strategy. By spreading the cost across the entire year, customers are far less likely to feel inconvenienced or cheated for visiting on a public holiday.

Review your revenue

In many cases, a review of how your restaurant or cafe is tracking can help you decide the best way to approach public holiday operating costs. If you’ve been open for a while, then looking back at the numbers from previous public holidays, including the revenue, can give you a good starting point.

If looking at your books leaves you feeling a bit lost, don’t stress, you’re not alone! Get a handle on your COA (Chart of Accounts) so you can understand the basic financial reports showing the status of your business.

Or, have a chat with us about understanding your numbers better so you can make the best business decision about public holiday surcharges.

Mise en place!

By | 2019-05-29T04:37:34+00:00 January 21st, 2019|Categories: Business Management, Food Business Owners|0 Comments