February 12, 2025
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Are Temporary Surcharges Better Than Higher Menu Prices?
Waffle House’s move to add a temporary 50-cent-per-egg surcharge tied to an ongoing egg shortage, instead of raising menu prices, has drawn significant media coverage. Was it the right move?
The charge, which went into effect on Feb. 3, is temporary and is the result of the “continuing egg shortage caused by HPAI (Bird Flu)” that has caused a “dramatic increase in egg prices,” the Georgia-based chain said in a statement shared with USA Today.
“Consumers and restaurants are being forced to make difficult decisions,” the statement continued. “Rather than increasing prices across the menu, this is a temporary targeted surcharge tied to the unprecedented rise in egg prices.”
It added: “While we hope these price fluctuations will be short-lived, we cannot predict how long this shortage will last.”
Waffle House, with over 2,000 locations, serves around 272 million eggs per year, according to its website.
Restaurants and grocers are facing a spike in egg prices as the avian flu outbreak decimates the nation’s commercial egg-laying chicken flock. News arrived last week that both Trader Joe’s and Costco were limiting egg purchases across its stores.
Surcharges have become more common but remain controversial. “Covid surcharges” started arriving during the peak of the pandemic to overcome related hardships faced by restaurants, while other service fees started arriving in 2022 to offset inflationary pressures. Some restaurants have added permanent service fees to supplement or replace a tipping system and offer greater pay equity for front-of-house and back-of-house workers.
Surcharges Seen Offering Transparency
As long as the reason behind the add-on fee is fully explained, surcharges are seen by some as a more transparent way to pass on specific costs directly to customers, such as increases in ingredient costs, labor expenses, or regulatory fees.
Popmenu, a digital marketing and ordering SaaS platform for restaurants, said in a blog entry, “Customers embrace surcharges when restaurants are transparent about what guests are paying for and educate their staff on how to present those fees.”
Changing the price on a menu will often add to an operator’s costs and doesn’t offer the same transparency to customers about why prices are increasing. A surcharge also can be implemented temporarily to address short-term cost increases, while adjusting menu prices often leads to prices not returning to prior levels.
“When a restaurant operator adds a surcharge to their menu in a situation like this, it’s generally because they are optimistic that it will be resolved quickly and because they want to be transparent with their customers about their rising costs,” Michelle Korsmo, CEO of the National Restaurant Association (NAR), told FOX Business.
Surcharges Accused of Being ‘Hidden’ Fees
Opting to increase menu prices avoids the need for wait staff to explain surcharges. Surcharges as well as service fees are also often seen as “hidden” fees since they’re usually a surprise to the diner when the check arrives.
California came close to passing a law last summer banning restaurants from charging service fees. A survey of 1,000 adults by the San Francisco Chronicle at the time found that over 81% think restaurant surcharges should be illegal. One critic told the Chronicle that surcharges are a “deceptive” way of making prices appear lower, while another complained they ruin the dining experience.
“Dining out should be a fun, hassle free experience,” Gary Furlong, a Pacifica resident wrote in an email to the Chronicle. “Sitting there trying to figure out all the surcharges and how to tip on all this mess makes the experience less enjoyable.”
Surcharges also offer a marketing opportunity for competitors.
In response to Waffle House’s move, Cracker Barrel earned media play for promising not to charge extra for eggs as it doubled rewards for its loyalty members.
“A surcharge on eggs? Well, there’s nothing hospitable about that,” Cracker Barrell cracked in a media statement. “At Cracker Barrel, country hospitality is as important to us as a hearty breakfast — and that means not charging extra for eggs.”
BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Paula Rosenblum
Co-founder, RSR Research
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Recent Discussions
Discussion Questions
Would Waffle House have been better off raising menu prices instead of adding a surcharge to offset surging egg prices?
Do you generally see more pros or cons in using surcharges over increasing menu prices in hyperinflationary situations?
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I think the prices on the menu should reflect what is on the final bill. Adding extra charges that a patron may or may not have noticed when ordering – or which may not even have been detailed – is just plain annoying. However, in the case of Waffle House, I think these charges are very clear when ordering, so I don’t see this as that much of an issue.
It’s the right move when the charge is (1) transparent , and (2) temporary. Too may establishments, unfortunately, resort to permanent “surcharges”, which I see as a form of fraud…in spirit, if not in fact.
We just conducted consumer research on this, and most participants said they are sometimes ok with dynamic pricing. If they’re not ok with it, it’s because they worry the retailer is taking advantage. In the case of the egg shortage, consumers will be understanding and would likely be more comfortable with a price increase knowing it’s temporary and why.
I like this move a lot. You raise prices and that sends a “this is permanent” signal. A surcharge states “hey we know this is painful but once things go back to previous cost levels we are eliminating this charge”.
Bear with us, in other words, we are in this together. Worst case you get “authenticity” points.
To build on Mark’s point – temporary surcharges are temporary, while I’ve yet to see raised menu prices ever come down.
Exactly, Mark. Temporary surcharges recognize the fact that the need is temporary.
If the price is men u price is raised, it will never come down, even if the underlying need recedes.
The surcharge makes perfect sense…and the resulting publicity has been golden.
Yes. It reflects shared pain vs. greed. The problem with shrinkflation or price increases is that they never go back to where they were
Charge an extra .50 an egg, at least that’s honest. It’s the made up fees are out of control.
I am in speaking in Las Vegas this week. This place is the capital of added fees. Almost every restaurant charges a CNF fee, plus a few more.
How much more are consumers willing to take? Retailers get it. They roll CNF fees into the price so customers don’t feel they are being taken advantage of. It’s not that hard.
Transparency and fairness are what consumers are looking for. Airlines started bag fees because gas was expensive, yet once gas prices came down, bag fees remained, are higher than ever and are a widely cited pain point in the customer experience. If you are raising prices or adding fees due to the egg shortage, I think consumers are fine with it because they understand why. If it continues under some other pretense, the attitudes will change.
Surcharges can also be a way to shift revenue into categories not subject to sales taxes. Each state is different, but AGs should be watching closely (oh what am I dreaming about, these are southern states)
It is risky to impose surcharges on consumers since a surprising number do not read the news or watch television, so they may be unaware of the bird flu outbreak. Consumers often exhibit a cynical demeanor and perceive the restaurant as taking advantage of them.
By clearly communicating the reasons for the surcharge, restaurants can build trust with their customers. Providing transparent information about the rising costs due to the bird flu outbreak can help alleviate concerns. Open dialogue and education can transform consumer cynicism into understanding and support.
Post communication on the entrance, on the table, on the menu, and train servers and other personnel how to answer questions.
Management should also be transparent with consumers to let them know that the surcharge will be adjusted or eliminated when the cost of eggs becomes less expensive.
I like them. They tell the customer “we didn’t want to do this. This is a temporary inconvenience for us too, and we will return to normal prices when the situation that caused this is over.” And then, the retailers have to return to menu prices.
For this type of unusual price increase or surcharge, transparency is important. However, there is also a psychological impact of the “extra charge” versus a slightly higher price. I don’t have the data on which one is better or worse. If I have to compare this to something, it’s the surprise fees we see in booking a hotel. The “resort fee” is not included in the quoted price – unless you read the small print.
The future of menu pricing could be “dynamic,” changing with the market. Even a value restaurant like Waffle House can change prices as need and still be considered a value. If the restaurant is worried that customers might become upset over ever-changing prices, be transparent about how and why they are changing. Changing prices for the right reasons is fine versus an up-charge just because something is popular and in demand – like “surge pricing” from some of the transportation companies.
Transparent. Honest. Fair. Temporary. And completely understandable. It’s a great lesson in how to deal with a market dynamic that is both highly unusual and hopefully, temporary. I eat a lot of eggs, and I’m in the grocery store 3-4 times a week. The egg section is now half empty…all the time. Prices are indeed wacko. Seeing a restaurant chain take this kind of action was one of the least surprising things I’ve seen in retail lately. Now, how long will it take to replace the tens of millions of hens that have died…??? How temporary will this turn out to be? And that’s not a reflection on Waffle House.
Restaurants and stores will earn greater customer trust and respect by posting only the surcharges anticipated as temporary. Otherwise bake all line item costs into the menu or final product price, because mixing in permanent surcharges onto bills starts to feel more about making statements or excuses.
A temporary surcharge makes sense in this case. It’s a smart way for them to pass on the increased costs transparently without locking in permanent price hikes. Plus, it keeps flexibility as the situation evolves.
The increase in egg prices is a massive problem for Waffle House. Eggs are their most popular item. They sell over $200 million eggs a year across their nearly 2,000 locations. The 50 center per egg surcharge earns them over $100 million. Put another way, without the surcharge, they’d be looking at how to cover a large loss. Hopefully the surcharge approach by the egg pros at Waffle House indicates they know this egg pricing issue is temporary.
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I think the prices on the menu should reflect what is on the final bill. Adding extra charges that a patron may or may not have noticed when ordering – or which may not even have been detailed – is just plain annoying. However, in the case of Waffle House, I think these charges are very clear when ordering, so I don’t see this as that much of an issue.
It’s the right move when the charge is (1) transparent , and (2) temporary. Too may establishments, unfortunately, resort to permanent “surcharges”, which I see as a form of fraud…in spirit, if not in fact.
We just conducted consumer research on this, and most participants said they are sometimes ok with dynamic pricing. If they’re not ok with it, it’s because they worry the retailer is taking advantage. In the case of the egg shortage, consumers will be understanding and would likely be more comfortable with a price increase knowing it’s temporary and why.
I like this move a lot. You raise prices and that sends a “this is permanent” signal. A surcharge states “hey we know this is painful but once things go back to previous cost levels we are eliminating this charge”.
Bear with us, in other words, we are in this together. Worst case you get “authenticity” points.
To build on Mark’s point – temporary surcharges are temporary, while I’ve yet to see raised menu prices ever come down.
Exactly, Mark. Temporary surcharges recognize the fact that the need is temporary.
If the price is men u price is raised, it will never come down, even if the underlying need recedes.
The surcharge makes perfect sense…and the resulting publicity has been golden.
Yes. It reflects shared pain vs. greed. The problem with shrinkflation or price increases is that they never go back to where they were
Charge an extra .50 an egg, at least that’s honest. It’s the made up fees are out of control.
I am in speaking in Las Vegas this week. This place is the capital of added fees. Almost every restaurant charges a CNF fee, plus a few more.
How much more are consumers willing to take? Retailers get it. They roll CNF fees into the price so customers don’t feel they are being taken advantage of. It’s not that hard.
Transparency and fairness are what consumers are looking for. Airlines started bag fees because gas was expensive, yet once gas prices came down, bag fees remained, are higher than ever and are a widely cited pain point in the customer experience. If you are raising prices or adding fees due to the egg shortage, I think consumers are fine with it because they understand why. If it continues under some other pretense, the attitudes will change.
Surcharges can also be a way to shift revenue into categories not subject to sales taxes. Each state is different, but AGs should be watching closely (oh what am I dreaming about, these are southern states)
It is risky to impose surcharges on consumers since a surprising number do not read the news or watch television, so they may be unaware of the bird flu outbreak. Consumers often exhibit a cynical demeanor and perceive the restaurant as taking advantage of them.
By clearly communicating the reasons for the surcharge, restaurants can build trust with their customers. Providing transparent information about the rising costs due to the bird flu outbreak can help alleviate concerns. Open dialogue and education can transform consumer cynicism into understanding and support.
Post communication on the entrance, on the table, on the menu, and train servers and other personnel how to answer questions.
Management should also be transparent with consumers to let them know that the surcharge will be adjusted or eliminated when the cost of eggs becomes less expensive.
I like them. They tell the customer “we didn’t want to do this. This is a temporary inconvenience for us too, and we will return to normal prices when the situation that caused this is over.” And then, the retailers have to return to menu prices.
For this type of unusual price increase or surcharge, transparency is important. However, there is also a psychological impact of the “extra charge” versus a slightly higher price. I don’t have the data on which one is better or worse. If I have to compare this to something, it’s the surprise fees we see in booking a hotel. The “resort fee” is not included in the quoted price – unless you read the small print.
The future of menu pricing could be “dynamic,” changing with the market. Even a value restaurant like Waffle House can change prices as need and still be considered a value. If the restaurant is worried that customers might become upset over ever-changing prices, be transparent about how and why they are changing. Changing prices for the right reasons is fine versus an up-charge just because something is popular and in demand – like “surge pricing” from some of the transportation companies.
Transparent. Honest. Fair. Temporary. And completely understandable. It’s a great lesson in how to deal with a market dynamic that is both highly unusual and hopefully, temporary. I eat a lot of eggs, and I’m in the grocery store 3-4 times a week. The egg section is now half empty…all the time. Prices are indeed wacko. Seeing a restaurant chain take this kind of action was one of the least surprising things I’ve seen in retail lately. Now, how long will it take to replace the tens of millions of hens that have died…??? How temporary will this turn out to be? And that’s not a reflection on Waffle House.
Restaurants and stores will earn greater customer trust and respect by posting only the surcharges anticipated as temporary. Otherwise bake all line item costs into the menu or final product price, because mixing in permanent surcharges onto bills starts to feel more about making statements or excuses.
A temporary surcharge makes sense in this case. It’s a smart way for them to pass on the increased costs transparently without locking in permanent price hikes. Plus, it keeps flexibility as the situation evolves.
The increase in egg prices is a massive problem for Waffle House. Eggs are their most popular item. They sell over $200 million eggs a year across their nearly 2,000 locations. The 50 center per egg surcharge earns them over $100 million. Put another way, without the surcharge, they’d be looking at how to cover a large loss. Hopefully the surcharge approach by the egg pros at Waffle House indicates they know this egg pricing issue is temporary.