The restaurant's service charge is going nowhere (2023)

Here is a familiar scene in a restaurant: Dinner is over, the plates are cleared, and the waiter discreetly places the bill on the table. But at the bottom of the check is something less familiar: service fees, topped with a little explanation.

The questions immediately swirl. Is this a clue? Does it go to the waiters? If not, should I leave more money? Is it rude if I ask my server about it?

"You shouldn't ask," says Chloe Lynn Oxley, a project manager in Washington who eats out often and, like many diners, is often confused by the cost. "It needs to be very clear what the costs of the service are and what they are for."

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One thing is certain: The taxes are designed to prop up a restaurant industry that has long lived on slim margins and now faces myriad challenges, including inflation, labor shortages and the expectation — or mandate — to raise the minimum wage. - that workers get better wages and benefits.

To deal with all this, a growing number of restaurants across the country, from fast food chains to fine dining, have added service charges of up to 22%, sometimes more, in recent years.

For restaurateurs, this service charge provides some flexibility. Tipping is strictly regulated by law and can only be given as a tip. Service fees belong to the employer, who can choose how to use them, said Brian Pollock, an employment attorney in Miami.

Despite this difference, many patrons still confuse service charges with tips, he said. "It's a fundamental misunderstanding that no one explains."

From restaurant to restaurant, the cost is imposed in so many different ways—the amount added to the check, how the restaurant spends the money, how it's all communicated to guests and staff—that many customers and employees are frustrated.

The confusion often starts with the word "service," causing some guests to associate the fee with the quality of their experience.


"Even if the service was bad, we still have to pay the service charge," said Shaniah Alexander, a flight attendant from Romulus, Michigan. She wondered why it was not included in the price of the dishes.

Many restaurant owners see the service charge with ambivalence as a necessary but imperfect solution to an industry that seems increasingly unsustainable.

"If we didn't have a service charge, we could have gone out of business in a matter of weeks," said Graham Painter, who last year added a 22% markup to Street to Kitchen, a Thai restaurant in Houston that he runs with his chef. wife, chef Benchawan Jabthong painter.

The couple got into trouble. They wanted to pay their employees more, but believed that customers would not accept higher menu prices even as food costs increased. They did not want to remain dependent on tips, which they believe is unfair and unjust since it is illegal for non-tipped employees to share money.

But even after adding a service charge, which the staff explains to every inquiring guest, the restaurant still encourages guests to tip.

"Restaurants have unrealistic prices for groceries, and in the history of restaurants, the staff are the people who have incurred these unrealistic costs," Graham Painter said. He said a service charge is the solution, and the additional guidance "brings these servers closer to a living wage."

Service charges are not new. But they became more common as the pandemic increased restaurant budgets and made people both inside and outside the industry acutely aware of the rigors of the work. Diners tipped more generously, and some restaurants imposed "COVID surcharges" and other surcharges.

Even at restaurants that have long included a service charge, such as Chicago's famed Aviary bar, some employees struggle to understand how money significantly affects their bottom line.

"Service charges aren't bad on paper," says Kamila Bikbulatova, who was a runner and server at the Aviary from 2019 to 2020. However, she said her manager never told her how the 20 percent restaurant service charge, in place since 2010, were used. She also said she never made more than $16.50 an hour, including tips.

"I don't think service fees are effective if employees don't have control over their own money," Bikbulatova said.

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An Aviary spokesman said the service fee is simply treated as revenue and can be used to pay employees and other business expenses. He said employees are made aware of the differences between gratuity and service charge models and have access to a page with frequently asked questions about fees.

When Hollis Silverman opened Duck & the Peach, a California and New England-inspired restaurant in Washington, D.C. in late 2020, she saw the fee-for-service option as an opportunity to bring transparency to her business.

The 22% the restaurant adds to each check goes directly to wages, which range from about $18 to $45 an hour, Silverman said. Guests are not expected to leave a tip, but if they do, it will be split between the hourly staff based on the time worked. (Less than 10% of guests tip, she said.)

All this is communicated to customers in different places: on the restaurant's website, in the menu and on each server. Every two weeks, employees get a detailed overview of their remuneration sources. Silverman said she also pays half the health care costs of full-time employees.

"It's the best we can do with what we have until someone wants to change federal labor laws," she said.

Many restaurateurs see the service charge as a way to eliminate tipping, which they consider discriminatory.

Josie Ramstad said that before she charged a 20% service charge at Kaosamai Thai, her family's Seattle restaurant, a year ago, customers were tipped between 12% and 15% on average.

"People have never felt obligated to tip 20 percent," she said. "And I'm convinced it's because English is often not the first language on their server."

Service charges are common in Seattle, Ramstad said, but "the kind of pushback we got for implementing this was unrealistic." People accused her of imposing restaurant labor costs on diners, an accusation she found almost comical. Who else would pay? “We are a company,” she said. "All our money comes from customers."

Why not avoid gratuities and service charges altogether and just raise the menu prices? Several owners gave the same answer: people don't want to pay more for food.

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There should be a broader shift in how Americans eat out so customers will accept higher prices, said Evan Leichtling, owner of Off Alley, a Seattle restaurant with a 20 percent service charge. "Eating out is a luxury," she says. "You don't have to do this every day."

The reluctance to pay more is growing at non-Western restaurants, says Christina Nguyen, chef and co-owner of Hai Hai, a Southeast Asian restaurant in Minneapolis with a 20% service charge. "Unfortunately, there is a ceiling with our eating style," she said.

Nguyen said service costs have decreased for her workers, who earn between $18 and $42 an hour. She allowed them to revert to the tipped model and voted to keep the service charge at 20%.

However, tipping is deeply ingrained in American food culture, says Ann Hsing, COO of Pasjoli in Santa Monica, Calif., which charges a 15% service charge and doesn't list tips on its receipts.

Even the famous New York restaurateur Danny Meyer could not introduce a tip-free system in his restaurants. In 2015, he introduced the much-lauded "inclusive hospitality" policy, eliminating tips in favor of a flat hourly wage while raising food prices by 15% to 20%.

He withdrew from this policy in 2020, citing the unpredictability of the pandemic and the desire not to deny employees an additional form of compensation. During the five years the policy was in place, many of its employees left the company and took tipped jobs.

Some restaurant workers say they still rely on tips even though they work for a service fee company.

At Waffle House in Dayton, Ohio, where Elexia Evergreen worked intermittently from 2018 to this year, a 20 percent markup on takeout orders was split equally between the fulfillment worker and the company. (A Waffle House spokesperson said the 10% that goes to the company is spent on supplies on the run.)

Evergreen has always counted on tips, "because 10% is not enough," she said. She made about $16 an hour before tips, and less than a third of her customers tipped.

Octavio Collado, who served as a waiter at Kiki on the River, a Greek restaurant in Miami, from 2017 to 2022 asked diners for tips in addition to the service charge because he said his manager wouldn't tell him how the restaurant was spending their time. money.

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A spokesman for Kiki on the River declined to comment on Collado's experience, saying the restaurant is "in full compliance with federal and Florida regulations regarding service charges and tips."

Service fees don't reward employees the way tips do, Collado said.

"Let's say you're a strong server, you're good with people, you're a good salesperson," he said. "They hire their niece and nephew there and make as much as you, with no experience."

While some visitors across the country said they liked being able to self-evaluate services through tips, others said they preferred a service charge because of the message it sends.

"This tells me they really care about their employees and their well-being," said Denver-based financial analyst Justin Karr.

And while many restaurants have added a service charge in response to the uncertain current moment, most owners have said they plan to keep it for the foreseeable future.

"If the conversation is at the national level or at the Seattle level where people are saying, 'We're tired of the complications of service charges, we're going to include it in the prices and raise the prices 20% and take the service charges off the bill,'" said Off Alley's Leichtling, "we would like to move to this model."

He hopes that changes will come. "I don't know if it will ever happen," he said.

omkring 2023 The New York Times Company


Can you decline a service charge at a restaurant? ›

A mandatory "service charge" or an "operations fee" – or whatever else an employer may call an extra fee added to a bill -- is a mandatory amount automatically included on the bill – i.e., the patron does not have the option to refuse payment of this amount.

Should I tip if there is service charge? ›

Yes, You Should Still Tip 20% on Top of a Restaurant's Service Charge. From dine-in fees to service charges, here's everything to know about the extra fees showing up on restaurant checks these days.

How do you tell customers about service charges? ›

Example 1:

Our costs have increased, but we want to continue providing great service. To help offset these costs, the items you purchase come with a small service fee.

What is a 15% service charge? ›

It's the gratuity. It is dispersed amongst all the employees. I sometimes tip on top of it depending on the service. For example, I left housekeeping additional tip because I felt they did an excellent job.

How do I decline a service that is too expensive? ›

How to Politely Decline a Sales Offer
  1. Thank the Person.
  2. Deliver the News Directly.
  3. Explain Your Reasoning.
  4. Suggest Other Ways of Partnership (If Appropriate)
  5. Keep the Professional Tone of Voice.
  6. Don't Explain Rejection with Price.
  7. End Your Email Appropriately.
  8. Rejection with a Willingness to Receive Other Service Offers.
Dec 14, 2018

How can I dispute a restaurant charge? ›

File a report on a disputed purchase within 60 days of the statement date on which the charge appeared. Before you officially report your issue, the law requires you to try to work out the disagreement directly with the merchant. See if the merchant is willing to provide you with a refund or some sort of store credit.

Is it bad to not tip if service was bad? ›

Even if the service is poor, it's recommended you leave at least 10 percent. * Check your tab carefully because some places add a gratuity to the bill. You may or may not want to supplement that. For the wait staff at sit-down restaurants, the tip should be 15 percent to 20 percent of the pretax bill.

Is it rude to tip before service? ›

She says tipping a restaurant worker for good service is still polite. But the payment systems that try to extract a tip from you before your food arrives aren't asking for a tip. Anything charged before you get the food is a service fee.

Why is there a service charge? ›

A service charge is collected to pay for services related to the primary product or service being purchased. Service charges are different from tips, which are paid at the discretion of the customer after receiving a service.

What is the difference between a tip and a service charge? ›

California Employment Law: What's the Difference Between a Service Charge and a Gratuity? In the service industry (such as at a restaurant), a service charge is a mandatory extra charge that is added to a bill, while a gratuity (also known as a tip) is a voluntary amount that a customer may choose to add to a bill.

What is the best way to explain a service charge? ›

A service charge is a separate fee that customers pay which is related to the price charged for the actual goods or services being purchased. In most cases, the service charge is added to the amount due at the time of the transaction.

What is an example sentence for service charge? ›

1. Most restaurants add a 10 per cent service charge. 2. The payment will be refunded to you minus a small service charge.

What percentage should a service fee be? ›

Determine what percentage of the bill is charged as a service charge. This typically ranges from 18-23%.

What does open food mean on a restaurant bill? ›

open food means food not contained in a container if such materials and so closed as to exude all risk of contamination; Sample 1. open food means food not wrapped in a container or not so closed as to exclude the risk of contamination; Sample 1.

How to politely tell someone you can t afford their services? ›

Keep it simple and positive. Just say something along the lines of, “I'm so sorry to miss out on the fun, but X isn't in my budget right now. But I'm so happy for you, and I'd love to celebrate in another way!”

How do you respond when a customer says too expensive? ›

10 Effective Responses to “It's too Expensive”
  1. Ask for context. ...
  2. Reiterate value. ...
  3. Tell a story. ...
  4. Find out why the prospect thinks it's too expensive. ...
  5. Ask what it would cost the prospect to do nothing. ...
  6. Temporarily set the price aside. ...
  7. Ask what a fair price would be. ...
  8. Compare price to ROI.
Oct 27, 2022

How do you say I can't afford it politely? ›

Different ways to say you don't have enough money for professional relationships:
  1. I'm feeling the pinch at the moment.
  2. I'm not sure my bank account will cope with it.
  3. My finances are tight.
  4. I'm on a tight budget.
  5. I'm not sure I can afford it.
  6. I'm in the red.
Mar 16, 2022

What to do if a restaurant refuses to refund you? ›

You can notify the consumer protection division of your local district attorney's office of any violations, or file a complaint with our office using our online complaint form.

Can a restaurant make a customer pay for a mistake? ›

Under federal law, restaurant owners can charge employees for mistakes. However, state laws might have certain restrictions of alterations to the rules making these laws up.

What to do if a restaurant overcharges you on tip? ›

You can contact the restaurant and explain your mistake, and ask for a correction. Depending on the amount you tipped and how friendly the restaurant manager is, this can have mixed results. Make sure to call as soon as possible. The longer you wait, the harder it will be to get a refund.

Why you shouldn't leave a tip? ›

Tipping is not as bad as it seems — it is worse. Tipping culture indirectly fosters poverty and discrimination at the expense of employees who are not necessarily rewarded according to the service they provided.

Is bad service 10% tip? ›

Robert Johnson, founder of Sawinery, suggests that you could adopt a rule of thumb to leave “15% to 20% for good service, 10% for acceptable service and somewhere between 5% and 10% for poor service.”

Is any tip better than no tip? ›

15% is appropriate for average service ; 20% if your server is above average. You should feel free to tip above 20% if you received excellent service. If you received poor service, it is better to talk to the manager than skip on the tip. Leaving no tip does not correct the problem of poor service.

Who should you not tip? ›

While service workers appreciate—and often rely on—tips, not everyone should get a monetary bonus. In addition to USPS drivers, many government workers aren't able to accept tips. You don't need to tip teachers, health care providers, or professionals like lawyers and accountants.

Why is 15 tipping considered rude? ›

You Tip 15% Maximum for Good Service and $0 for Bad Service

Though 15% is within the recommended tipping range for service, it's the absolute least you should tip. There has long been an idea that the amount of the tip should correlate to the service, so good service earns a tip, and bad service doesn't get one.

What happens if you don't tip? ›

Legally it's voluntary but if you slink out of a restaurant without leaving a gratuity of between 15 and 25 per cent, you're likely to be chased by a waiter demanding to know why. To help you avoid tipping anxiety (and disgruntled waitstaff), we explain how to tip in the United States.

What is the service charge budget? ›

What is the service charge budget? A service charge budget is a forecast of the anticipated expenditure for the coming year. The budgeting process usually takes place several months before each accounting year begins therefore the landlord will not have the certified accounts for the current year.

What is a deferred service charge? ›

What Is a Deferred Charge? A deferred charge is a long-term prepaid expense that is carried as an asset on a balance sheet until used/consumed. Thereafter, it is classified as an expense within the current accounting period.

What is a customer fee? ›

Customer Fee means the service fee charged to Co-branded Customers for each Transaction. Customer Fee means any fee charged by Third-Party Food Delivery Service to a customer submitting an Online Order.

Is service charge the same as a tip in NYC? ›

Both the service charge and gratuity are entirely turned over to the servers. The 15% gratuity is not subject to sales tax. However, the 8% service charge is subject to sales tax because it was not designated as a gratuity.

Is service charge different from tip for a wedding? ›

However, a service fee is NOT the same as gratuity. A service charge covers the wages of laborers for the event as restaurant pricing covers a waiter's wages. Any gratuity is typically additional, and you should ask what the expectations are.

How do I tip in Mexico? ›

In Mexico, a good rule of thumb for tips is to leave 10-15% of the bill. 50 pesos would be a standard tip for a bill that was around 500 pesos. For example, if you go out for dinner and get drinks, you should expect to spend around 400 MXN. That would mean your tip would be between 40-60 MXN.

How do you explain why you charge more? ›

10 Reasons to Charge More
  1. You Probably Are Not Charging Enough. ...
  2. Consumers Call You Because They Cannot Fix It Themselves. ...
  3. Consumers Unwilling to Pay Your Prices Are Not Your Customers. ...
  4. You Can Pay Better. ...
  5. You Can Buy Better Stuff. ...
  6. You Can Advertise More. ...
  7. You Can Deliver Better Service. ...
  8. You Can Look Better.
Nov 13, 2020

How do you use charge in a short sentence? ›

They appeared at court yesterday to deny charges of murder. They have the evidence to charge him. Police have charged Mr Bell with murder. He charged the minister with lying about the economy.

What is a simple sentence for service? ›

"We offer excellent service to all customers." "The company can guarantee service within one hour." "We need to improve our services before our business loses customers." "We got terrible service from that hotel."

What is a simple sentence for fees? ›

"We pay a small fee every month." "She charges a flat fee for house calls." "I didn't have to pay the full fee." "He charged me a reduced fee for his error."

What is the main problem with the fee-for-service? ›

Fee-for-service hurts patients and drives up costs.

Due to fee-for-service, some patients get too much care, some do not get enough, and others get the wrong care.

What is 2.95 service fee? ›

The 2.95% is the processing fee. Additionally, the merchant service provider may also charge a flat fee and commission matching the structure of the interchange fee listed above. The type of merchant, processing volume, and other factors will determine the rate and percentage for these charges.

Who pays when eating out? ›

The host should pay, never the guest

However, one of the most overlooked items of etiquette actually happens once the meal is over and it's time to settle the bill.

Why do restaurants let you eat before paying? ›

Simply put, it's to try to get you to order more - appetizers, dessert, additional drinks, etc. The more they delay your paying, the more likely you are to add things to your purchase.

Why do restaurants charge a split plate charge? ›

“Splitting an entrée means the guest average per ticket goes down and venues do not make their margins on that table as expected,” Flores-Gonzales says. “The split fee is one way to offset the labor of serving two guests who only pay for one full meal.”

What is the difference between a service charge and a gratuity? ›

California Employment Law: What's the Difference Between a Service Charge and a Gratuity? In the service industry (such as at a restaurant), a service charge is a mandatory extra charge that is added to a bill, while a gratuity (also known as a tip) is a voluntary amount that a customer may choose to add to a bill.

What is the difference between a tip and a gratuity? ›

A gratuity is an informal tip that an employee receives from a customer or another worker. At the same time, a tip is something you give to a service provider to show your appreciation for their work.

What does without the service mean in a restaurant? ›

Many restaurants do apply a service charge, which is optional, to the bill (typically 10-15%) that is used to supplement the server's wages (effectively replacing a tip). So someone who says "Without the service. Thank you." is short-changing the serving staff.

What is a common gratuity charge? ›

Auto gratuity is when a restaurant automatically adds a gratuity charge to the bill of a party. Usually, this gratuity is equal to 18% of the bill and is only applied to parties of six or eight or more. Generally, a restaurant will print this policy on its menu to alert patrons before they receive their bill.

Is it illegal to charge gratuity in Texas? ›

The added charge usually ranges from 15-20%. Under Texas and federal employment law, these mandatory gratuities belong to the restaurant; the restaurant is not required to give any portion of that mandatory charge to the employees. (Some other states treat them differently.)

Is it rude to leave a 15% tip? ›

Even if the service is poor, it's recommended you leave at least 10 percent. * Check your tab carefully because some places add a gratuity to the bill. You may or may not want to supplement that. For the wait staff at sit-down restaurants, the tip should be 15 percent to 20 percent of the pretax bill.

Is 20% tip rude? ›

20% is the REAL standard for tips

Industry insider: common consensus says 15-20% is considered a normal tip, but honestly any amount less than 20% is considered a bad tip. If I (or the other servers I worked with) got less, we wondered what we did wrong.

Is it rude to not tip if gratuity is included? ›

If 18% gratuity is included in the bill, that's the tip, it's for the server, and you don't have to tip any more. If you want to tip more, you can, but it's not necessary. If tip has been included you don't have to tip more unless you want to.

What does 85 mean in a restaurant? ›

A rating over 90 (“Good”) meant that inspectors had usually seen only low-risk violations; 86–90 (“Adequate”) meant several violations; 71–85 (“Needs Improvement”) meant several high-risk violations; and less than 71 (“Poor”) was the worst category.

What is it called when you eat at a restaurant and leave without paying? ›

Dining and dashing is when a customer orders and consumes a meal from a restaurant or bar with no intent to pay their bill. They dine, and then dash out the door. This is a form of restaurant theft: where the customer slips out the door before payment is processed and intentionally evades the cost of their meal.

Why do chefs say all day? ›

All Day. In chef slang, the expression all day is used to indicate the total number of orders needed. As tickets come in, a chef will shout out the orders followed by all day. If there are three orders of fries on one ticket and four orders of fries on another ticket, there are seven orders of fries all day.


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