In recent years, surcharges and fees have become standard on restaurant checks, covering everything from credit card processing to gratuities and even “inflation.” While some see these charges as necessary for keeping restaurants afloat, others view them as unwelcome surprises that leave diners feeling duped.
The Rise of Restaurant Surcharges
As a result, customers increasingly feel the pinch and are left with a sense of being caught off guard. This growing trend has led to unease among diners, who are now more vigilant about checking their bills for any unexpected charges. According to the National Restaurant Association, 15% of restaurant owners added surcharges or fees to their checks last year due to rising costs. A report from Square noted that in the second quarter of this year, 3.7% of restaurant transactions included a service fee, a sharp increase from the beginning of 2022.
Critics argue that these fees can catch customers off guard, making them feel like they’re paying more for their meals at a time when budgets are already tight. Disgruntled diners have taken to platforms like Reddit to compile lists of restaurants in cities like Los Angeles, Chicago, and D.C. that charge hidden fees. Even satirical outlets like The Onion have weighed in, highlighting the frustration with stories like the one in May that joked about a restaurant surcharge for providing the owner’s “sugar baby with a Birkin.”
Restaurants Fight Back Against “Junk Fees” Label
The Biden administration has set its sights on eliminating junk fees, such as undisclosed service charges for concert tickets or surprise resort fees. The Federal Trade Commission (FTC) is expected to release a rule that would ban businesses from charging hidden and misleading fees this fall. Restaurants, however, hope to stay out of the fray, arguing that their surcharges are necessary to keep their businesses viable and fairly compensate employees in an industry known for its razor-thin profit margins.
“The challenge for the restaurants is that not all fees are junk fees… People know what they’re paying for when it comes to most fees that are on a restaurant bill,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association.
The Debate Over Service Fees
Not everyone agrees with Kennedy’s assessment. While federal law prohibits management from keeping workers’ tips, mandatory service charges belong to the restaurant, not the employees. This has led to concerns about wage theft, as some employers might claim the money is for workers but fail to distribute it. The National Women’s Law Center has voiced concerns that customers are less likely to tip on top of a service charge, which could negatively impact workers’ income.
The Restaurant Perspective: Transparency and Survival
Many restaurant operators argue that these fees allow them to offer better wages and benefits to their employees. For example, Galit, a Middle Eastern restaurant in Chicago, charges a 4% fee for healthcare costs and a 20% service charge to support hourly workers. These fees are clearly stated on the restaurant’s website, menu, and Resy page.
Andres Clavero, co-owner and general manager of Galit, explained that the service charge allows the restaurant to pay back-of-house staff more fairly and avoid scaring customers away with higher menu prices, which would also lead to increased sales and payroll taxes. Moreover, the service charge addresses issues related to tipping, which has been linked to sexual harassment and racial discrimination.
Some restaurants, like Kaliwa in D.C., have implemented surcharges to manage rising labor and operating costs. Others, like those in the Cambridge Street Hospitality Group, have used service fees to increase pay for cooks and dishwashers, helping more employees access healthcare benefits.
Lobbyists vs. Legislators
On the state level, restaurants have had some success in staying out of the junk fee crackdown. In California, last-minute legislation excluded restaurants and bars from a new anti-junk-fee law, allowing them to continue using surcharges to support worker pay and health benefits.
The National Restaurant Association argues that eliminating fees would lead to higher prices, customer confusion, and costly compliance, estimating that new menus alone would cost over $4,800 per restaurant.
Exceptions and the Path Forward
Even within the industry, there’s acknowledgment that not all fees are justified. Clavero, for instance, opposes the continued use of COVID-19 surcharges, which he sees as dishonest.
The National Restaurant Association advocates for the FTC to protect three fees commonly charged by restaurants: large party, delivery, and credit card processing fees. Kennedy emphasized the importance of transparency, urging operators to be transparent about fees to maintain customer trust while preserving the industry’s tight margins.
As lawmakers continue to target junk fees, restaurants are walking a tightrope, striving to balance transparency with the need to cover rising operational costs. The outcome of this battle will likely shape the future of dining out in America.