Death by a Thousand Fees

Service fees are now a part of eating out, even though they were previously artificially reduced.

You’ve probably noticed that a “service charge” is added to your bill at some restaurants. These fees, can be endlessly complex for both the diners paying them and employees who benefit from them. The fees are now the subject of a lawsuit filed by Los Angeles’ hotspot Jon & Vinny’s.

Many restaurateurs who started charging service fees did so to phase out tipping or because they failed in their attempts to eliminate it by raising menu prices. Some restaurateurs started charging service charges to eliminate tipping or to replace it with a more equitable system. Many, including Danny Meyer’s Union Square Hospitality Group , couldn’t make this model work because of staff leaving over lower pay for front-of-house, sticker shock from customers, or both. As Benu’s Corey Lee explained a couple of years ago, the service charge is a “bridge”: “The notion of a tip’ is so ingrained We break it down for them so that they can understand what is happening.

Many restaurant workers say that service charges are more beneficial to restaurant owners than they are for improving pay equity. A group of servers from popular Los Angeles Italian eatery Jon & Vinny’s sued in June, claiming that the 18 percent service fee was not benefiting them. The lawsuit claims that customers are confused by the 18 percent service charge, believing that it is a tip. In response to this lawsuit, the owners of Jon & Vinny’s denied the claims and told the Los Angeles Times, “Customers are given information that states that

Eater reviewed a receipt from November 2022 that stated that the 18% service fee was not a tip and that it “enabled the restaurant to pay equitable wages to our employees.” The LA Times Jon & Vinny’s updated their disclosure on receipts shortly after the lawsuit. Servers say that the new wording made little difference for diners. While the goal of pay equality, as stated on the receipt, may be noble, it is unlikely that customers stuffed with pasta and natural wines will spend much time reading the fine print at the bottom. Servers say The fundamental problem with tipping and service charges is that customers are responsible for making sure that workers are paid fairly.

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Customers need clarification on service fees, regardless of whether you agree with the servers in the lawsuit. Even if it’s not the case, diners may believe that a “service charge” is compensation for the staff member who prepares their food, serves them, and cleans up after them. How many people tip poorly? It’s not surprising to find that some diners balk at paying an extra 15 or 20% to their server on top of the 18% that might go to

It’s even worse that most states do not regulate the restaurant service fee, so it’s up to owners of restaurants how they spend that money. It’s not required in all states, but in a handful, they use the revenue from service fees to pay higher wages to any staff at the restaurant. This includes servers and kitchen staff. Some restaurants reported using these fees to boost their revenue or offset credit card processing fees. In contrast, other restaurants use the money for legitimate benefits such as health insurance.

In restaurants, customers are the ones who are responsible for making sure that workers are paid fairly.

More equitable pay is desirable in the restaurant business. Still, unregulated and opaque service fees don’t seem to have much of an established track record for achieving this goal. Service fees are often a way to make money and an extension of a culture littered with junk fees. What’s another fee? We accept many terms, conditions, and fees in our lives.

Restaurant owners need to be in a better situation. Customers will only accept price increases at a different pace than costs. It’s hard to raise prices because they have been artificially lower for so long. Restaurants will have to tell their customers what food they sell them costs. There are better ways to create customer loyalty than fees. They’re confusing and imperfect at best and cynical at worst. When margins in the restaurant business are constantly fudged, it’s hard to get people to understand just how thin they are.

Any change in the tipping structure of an industry must be made by collective action. One restaurant or a powerful group must raise prices slowly and set its pay scales. It is unlikely that restaurants in the U.S. will abolish tipping. Instead, they could set pay scales to attract and retain talent, making a profit by selling their food at a markup. We could also pass legislation requiring restaurants to be transparent about their fees with customers and employees or regulate what payments are allowed. Local governments have attempted to implement these structures but have had mixed results. Recode points out that in New York, all service charges must go to the waitstaff, while Florida restaurant owners are free to use service fees collected from customers however they choose.

Service fees will not disappear, no matter how they are charged. Most legislators don’t think about them at this time. Restaurants that already charge these fees could be more transparent about the money they are spending. Call it an “inflation charge” if the fee results from inflation. If it’s a fee to ensure pay equity for front-of-house and back-of-house workers, then call it a fee to establish that.

It’s the same result – a higher bill -but you can pay those extra dollars if you know why. Anyone who enjoys eating out should expect the staff who prepare their meals, clean their dishes, and serve them to receive a fair salary. We’ll have to continue to find ways to make the death of a thousand fee bearable until diners can adjust to a world where a bowl of pasta costs $25 at neighborhood restaurants.

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