What is a restaurant service charge? It depends.

Service charges have become commonplace in things like online deliveries and concert tickets, but they’re more often found in unexpected places (like restaurants). There is no official data yet on how many restaurants have introduced service charges, but industry experts say service charges are definitely on the rise and more restaurants are expected to appear in the near future.

On the surface, the service charges could be well-intentioned. They were born out of a desire to fix what has long been considered broken in the U.S. tradition of tipping servers. There is also.

Sean Jung, assistant professor of hospitality analytics at Boston University, told Recode: “It basically means that everyone in the restaurant industry is having a very hard time.”

But if done poorly, these new fees will hurt the workers they are trying to help, and they will lose the tips that make up the bulk of their wages. Because of this, restaurants can also be harmed.

Service charges also risk hurting consumers who are constantly battling high costs. Americans spent $87 billion on restaurants in September alone, an 11.4% increase over the previous year, according to Census data. Food prices in full-service restaurants rose 8.8% year-over-year in September, according to the Bureau of Labor Statistics.

This week, President Joe Biden said his administration Cracking down on hidden fees, or “junk fees,” cost Americans billions of dollars a year, he says. Earlier this month, the Federal Trade Commission took a similar position on “unnecessary, unavoidable, or sudden claims that inflate costs while adding little or no value” that are “proliferating across the economy.” I was. Not sure if the restaurant service charge is included, but it looks like it is in some cases.

Looking at Google Trends, we can see that diners are increasingly searching online for tipping or not without worrying about service charges. But since there is no clear definition, looking it up won’t help much.

Service charges typically range from 3% to 20% of the cost of a meal, and what the service charge is used for varies by state and restaurant. commission. ”

In some cases, these charges are sent to the server. This is like a mandatory tip that is taxed differently. They can raise salaries for employees behind the house, such as chefs and dishwashers, who have traditionally been left out of the tipping system. They can help cover the tipped minimum wage for employees. This is a low hourly rate at which restaurant employees are supposed to be supplemented with tips to help manage the employee’s health. They can help restaurants pay their credit card bills. They can even go to the restaurant owner himself.

Also, with seldom explanations and a jumble of state laws, it’s very difficult to determine what’s going on with that money. In New York, service charges must be paid to the service staff unless otherwise specified by the restaurant. In Florida, restaurants can spend whatever they want with fees, from credit card fees to minimum wage tips for employees. In California, the charge belongs to the restaurant itself, but many have decided to pass it on to the staff. , we recommend that you specify exactly where to send these hints. And, of course, laws are as powerful as their enforcement.

Why service charges make sense for restaurants

Usually for large parties and catered events, compulsory service charges have existed in some sense, but started to take hold in their current form about ten years ago. Since the pandemic started, surcharges have started in earnest.

One of the main reasons restaurants are introducing these fees is the need to bring in more revenue, especially as recent headwinds have hit the industry. The pandemic has forced many restaurants to close for months or, in many cases, permanently, leaving businesses and their employees without wages. Restaurants have also been forced into a profit-and-loss relationship with food delivery platforms. While services such as Grubhub and Uber Eats have proven essential in the early stages of the pandemic and remain important for attracting customers, he has vowed to fork more than 30% of his sales to his platform online. binding the restaurant to a contract that includes

These days, restaurants notoriously low-margin are dealing with soaring inflation that’s driving up prices for everything from food to labor to linen.

“Inflation has made the costs astronomical,” said Laurie Thomas, executive director of the industry group Golden Gate Restaurant Association and owner of two restaurants in San Francisco. rice field. “And we are ending his two years in hell.”

For more than a decade, Thomas has imposed a 5% service charge at her restaurant to offset the costs of local regulations that force restaurants to pay for things like health care and paid sick leave.

As an additional item on the receipt, the service charge helps restaurants deal with rising costs in a way that doesn’t discourage customers from choosing another restaurant based on the price of their entree.

“It’s a way of camouflaging the price increase,” Zagore said. “It’s a way to take what’s happening in America right now with inflation and rising prices of demand and supply, and break chicken salad into small, preferably bite-sized, edible bits that people will accept, rather than suddenly run out. $12. $16 from

Service fees have become particularly prominent in tourist destinations such as Times Square and Miami Beach. Customers are less likely to become regulars at these locations and less likely to make meaningful complaints.

“Why don’t you charge a service charge?” Professor Jung of Boston University said of the rationale for restaurateurs in tourist destinations. “They won’t come back anyway.”

Fee issues

For service fees to work, customers must either be oblivious to the fees or fully understand and agree with what is going on with their money. It’s not clear that any of these are happening regularly.

and when the customer conduct Be aware of service charges. This can affect the tip your employees receive. If employees rely on tipping and those service charges are not paid to them, it becomes a big problem. Even if the fee goes back to the waitstaff, the worker doesn’t get it all because it is taxed as wages.

“People are only willing to pay, say, 15 to 25 percent of what they eat and consider that a tip for service,” says Jung. “Including a service charge definitely reduces the tip.”

Naturally, the practice of adding surcharges is particularly upsetting to workers accustomed to earning a lot of tips.

Lina, who works as a waitstaff at a fine dining restaurant in Miami, told Recode she’s changed jobs a few times this year, but she hasn’t been able to escape the seemingly ubiquitous 20% service charge. I’m talking She said Rina asked her not to use her last name to avoid getting into trouble at her job. I mean, even though she pays a service charge as much as a tip instead of taking home $50 an hour as she used to do in similar restaurants, she is earning $25 per hour.

“Customers think they’re tipping you, but they’re actually paying a credit card fee,” said Lina, who believes the restaurant also receives a substantial amount. Added. She said the restaurant was very opaque about exactly where the money went, calling it a “service charge” without explanation.

Lina also says that people don’t usually tip on top of service charges, making it difficult to perform a job that is very physically and emotionally taxing.

“It’s very rare and takes a lot of effort,” she said one morning this week after a late night shift. “So now I have no voice.”

But San Francisco restaurateur Thomas says she’s very clear about where her restaurant’s service charge goes. She says she is tipping as usual. In fact, Thomas argues that service charges raise the overall price of the bill, so tipping is higher than it used to be.

In addition to how restaurant employees and owners feel about it, customers have their own opinions, and they vary widely.

According to Erika Polmar, executive director of the Independent Restaurant Council (IRC), a coalition of more than 150,000 bars and restaurants, how customers perceive a service charge depends on what the charge is for, how the charge is implemented, It depends on where the charges are incurred. Restaurants around that country formed during the pandemic to advocate for relief from the federal government.

“We had an IRC member in Michigan who was adding a service charge for a while, and her guests came in and said, ‘What the hell is this? I’m going to tip you what you want. “Don’t tell me if it’s okay,” Polmer said. [customers] “Oh, thank God. Please tell me how to do this and what to give so that it will be right.”

Chips in America are always broken

Service charges are also frequently displayed due to the ongoing movement to correct tipping in the US. Many restaurants have adopted a service charge instead of a tip, passing it on to employees as a higher wage as a way of keeping customers from wasting the optional tip.

Jacqueline Ross, a postdoctoral fellow at the University of Bristol who is writing a thesis on tipping in the United States, said, “The restaurant industry thrives only in relation to not paying all its employees enough. , is inherently flawed.”

At the federal level, servers earn a minimum wage with tips of $2.13 an hour. Tips are ostensibly intended as a reward for good service, but often when it comes to a “significant wage subsidy” that allows a worker to reach her $7.25 minimum wage, which is the actual minimum wage. Ross writes.

Of course, stranger generosity, or stinginess, is uneven at best. So what these workers actually make can vary wildly depending on the person’s inherent prejudices and whether they’re having a bad day.

Some waitstaff at certain restaurants can earn very high wages, while others barely. Restaurant owners are supposed to pay the full amount if the tip is below minimum wage, but this is not always the case.

Having worked in restaurants for nearly 20 years, Ross understands both the pros and cons of tipping, and says the issue is incredibly complex. Still, she believes American restaurants could do better if service fees were paid directly to, and only, restaurant workers.

Such a system could result in lower top bills for high-paying servers, but also less minimum bills for low-paying servers. also means

The longer you keep paying for service, the more likely it is that it will become a permanent fixture. Hopefully that will also mean more similarities, or at least more clarity, state by state, or restaurant by restaurant.

In the worst-case scenario, Colombia’s Zagor envisions a future where restaurants are like the dreaded airline industry. said.

In a better scenario, restaurants would be smarter about service charges and, importantly, more transparent about where they go. experience may be better.