HomeLifestyleRestaurant service charge isn't going anywhere

Restaurant service charge isn’t going anywhere

Here’s a familiar scene in a restaurant: dinner is over, the plates have been cleared, and the server discreetly drops the bill on the table. But there’s something less familiar at the bottom of the check: a service charge, added with little explanation.

The questions swirl immediately. Is this advice? Do you go to the waiters? If not, should I leave more money? Is it impolite if I ask my server any of this?

“You shouldn’t have to ask,” said Chloe Lynn Oxley, a project manager in Washington, DC, who dines out frequently and, like many diners, is often baffled by the fees. “It should be very clear what the service charge is and what it is for.”

One thing is clear: The charges are intended to help prop up a restaurant industry that has long operated on slender profit margins and now faces a host of challenges, including inflation, labor shortage and an expectation—or mandate, in increase in minimum wages — for workers to 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 destinations, have in recent years added service charges of up to 22 percent, and sometimes more. .

For restaurateurs, these service charges offer some flexibility. Tipping is strictly regulated by law and can only be distributed to tipped workers. A service charge belongs to the employer, who can choose how to spend it, said Brian Pollock, an employment attorney in Miami.

Despite that difference, many diners still combine service charges with tips, he said. “It’s a fundamental misunderstanding that no one clears up.”

From restaurant to restaurant, charges are imposed in such a variety of ways—the amount added to the bill, how the restaurant spends it, how all of that is communicated to diners and staff—that many customers and employees are frustrated.

The confusion often starts with the word “service,” leading some diners to associate the charge with the quality of their experience.

“Even if the service was bad, we have to pay the service charge,” said Shaniah Alexander, a flight attendant who lives in Romulus, Michigan. She questioned why it is not included in the price of the dishes.

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

“If we didn’t have the service charge, we could be out of business in a couple of weeks,” said Graham Painter, who last year added a 22 percent charge on street to the kitchena Thai restaurant in Houston that he runs with his wife, chef Benchawan Jabthong Painter.

The couple found themselves in a bind. They wanted to pay their workers more, but believed that customers would not accept higher menu prices, even if food prices increase. They did not want to continue to rely on tips, which they believe are neither reliable nor equitable, as the law prohibits non-tipped workers from sharing the money.

But even after adding the service charge, which the staff explains to any guest who asks, the restaurant still encourages guests to tip.

“Restaurants have unrealistically priced food, and in the history of restaurants, the workforce is the people who have taken on those unrealistic costs,” Painter said. The service charge is one solution, he said, and additional tips “get these servers closer to that living wage.”

Service charges are not new. But they became more common as the pandemic hit restaurant budgets and made people both inside and outside the industry acutely aware of the difficulties of the job. Diners tipped more generously, and some restaurants imposedcovid surcharges” and other charges.

Even in restaurants that have long charged service fees, like the famous Chicago bar the aviarysome employees struggle to understand how money significantly affects their salaries.

“A service fee is not bad on paper,” said Kamila Bikbulatova, who was a runner and waitress at Aviary from 2019 to 2020. Since 2010, it has been used. She said that she never earned more than $16.50 an hour, including tips.

“I don’t think service fees can be successful unless employees are the ones with control over their own money,” said Ms Bikbulatova.

An Aviary spokesperson said its service charge is simply treated as revenue and can be used to pay employees and any other costs of doing business. He said staff members are informed of the differences between tipping and service charge models and have access to an FAQ page about the charge.

When Hollis Silverman opened the duck and the peacha California and New England-inspired restaurant in Washington, DC, in late 2020, saw the service charge as an opportunity to bring transparency to its business.

The 22 percent that the restaurant adds to each check goes directly toward wages, which range from $18 to $45 an hour, Silverman said. Guests are not expected to tip, but if they do, it is distributed among staff on an hourly basis based on time worked. (Less than 10 percent of diners tip, he said.)

All of this is communicated to customers at various points: on the restaurant’s website, in the menus and for each server. Employees receive a detailed breakdown of their salary sources every two weeks. Ms. Silverman said that she also pays half of the health care costs of full-time employees.

“This is the best we can do with what we have until someone wants to change the federal labor laws,” he said.

Many restaurateurs view service charges as a way to eliminate tipping, which they view as discriminatory.

Josie Ramstad said that before adding a 20 percent service charge a year ago on thai kaosamaiAt his family’s restaurant in Seattle, diners tipped an average of just 12 to 15 percent.

“People never felt compelled to tip 20 percent,” he said. “And I strongly believe it’s because a lot of the time, English isn’t the first language on your server.”

Service fees are common in Seattle, Ramstad said, but “the kind of backlash we got for implementing it was unrealistic.” People accused her of imposing the restaurant’s labor costs on diners, a complaint she found almost comical. Who else would she pay? “We are a business,” she said. “All our money comes from customers.”

Why not avoid tips and service charges and just increase menu prices? Several owners offered the same response: people don’t want to pay more for food.

There would have to be a broader shift in how Americans view dining out for customers to accept higher prices, said Evan Leichtling, owner of out of the alley, a Seattle restaurant with a 20 percent service charge. “Going out to a restaurant is a luxury,” she said. “It’s not meant to be something you do every day.”

The unwillingness to pay more is heightened at restaurants serving non-Western food, said Christina Nguyen, chef and co-owner of hello hello, a Southeast Asian restaurant in Minneapolis with a 20 percent service charge. “With our style of food, unfortunately there is a ceiling there,” she said.

Ms. Nguyen said the service charge has worked well for her employees, who earn between $18 and $42 an hour. She gave them the option to switch back to a tipping model and they voted to keep the 20 percent service charge.

However, tipping is deeply ingrained in American food culture, said Ann Hsing, director of operations for Parsley in Santa Monica, California, which has a 15 percent service charge and no tip line on receipts.

Even renowned New York restaurateur Danny Meyer couldn’t make a no-tip system work in his restaurants. In 2015, he presented a much-heralded “hospitality included” policy that eliminated tips in favor of a consistent hourly wage, while raising meal prices by 15 to 20 percent.

He left politics in 2020, citing the pandemic unpredictability and his desire not to deny workers any additional form of compensation. In five years under the policy, many of his employees I had left the company for jobs that offered tips.

Some restaurant workers said they still depended on tips despite working in a fee-for-service business.

in a Waffle House In Dayton, Ohio, where Elexia Evergreen worked on and off from 2018 until this year, the charge for 20% of takeout orders was split evenly between the employee handling the order and the company. (A Waffle House spokeswoman said the 10 percent that goes to the company is spent on to-go supplies.)

Ms. Evergreen always expected tips “because 10 percent is not enough,” she said. She earned about $16 an hour before tips, and less than a third of her customers tipped.

Octavio Collado, who was a waiter in kiki in the rivera Greek restaurant in Miami, from 2017 to 2022, was asking diners to tip cash in addition to the service charge because he said his manager wouldn’t tell him how the restaurant spent money.

A spokeswoman for Kiki on the River declined to comment on Mr. Collado’s experience, saying the restaurant was “in full compliance with Florida and federal law in regards to service charges and gratuities.”

Service charges don’t reward workers the way tips do, Collado said.

“Let’s say you’re a strong server, you’re great with people, you’re a great salesperson,” he said. “They hire their niece and nephew to work there, and they are making the same money as you with no experience.”

While some diners across the country said they liked the ability to judge service for themselves through tipping, others said they preferred a service charge because of the message it sends.

“It tells me that they really care about their employees and their well-being,” said Justin Karr, a financial analyst in Denver.

And while many restaurants have established service charges in response to the current uncertainty, most owners said they plan to maintain them for the foreseeable future.

“If the conversation comes up at the national level, or at the Seattle level, where people said, ‘We’re fed up with the complication of a service charge, we want to build it into our prices and increase prices by 20 percent and eliminate the service charge. bill service,’” said Off Alley’s Mr. Leichtling, “we would happily switch to that model.”

He hopes that change can happen. “I don’t know if he ever will,” he said.

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