Service Charges

In Eat, February 2021 by Max Trujillo1 Comment

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Dear Restaurant Guru,
We love eating out, and we’ve continued to do it safely to support local restaurants. But I’ve noticed that some restaurants have added a service charge to the bill, and I have mixed feelings about this. I know restaurants are struggling, but so are we—my husband and I aren’t making half the money we made last year. Even still, we are trying to support our favorite places, but it’s getting more expensive—and I just read that some restaurants want to keep the service charges when things are fully open again. Why should I have to pay it once they are back to 100% capacity?

Not a penny pincher

Dear Not a Penny Pincher,
I hear your concern because this is an issue that needs to be addressed. First off, thank you—from all of us in the industry—for your support. Second, let’s clarify the service charge: It’s usually an extra 10% over the typical gratuity, raising your entire bill about 30%. Lastly, let it be known that these service charges are not for the cost of food, rather, for the cost of the dining experience. Perhaps the price of going out to a restaurant is far more expensive than we once thought?

2020 brought along myriad woes for the restaurant industry (complete closures, damages to buildings, the exposure of multiple sexual harassment offenses, and the complete restructuring of the business model in a post-pandemic world).

Running a restaurant has always been a tough way to earn a buck. To give perspective, industries like banking, software and even the liquor business are 2 to 3 times more profitable. With current limitations to the number of guests a restaurant can safely serve, the industry is, well… you can insert
your favorite curse word here: __.

I have worked in the industry for over 25 years as a GM, server, bartender, line cook and definitely a dishwasher. I’ve done all the jobs. Heck, I even co-created the North Carolina Food & Beverage Podcast (shameless plug), which has provided me a conversation with nearly everybody that makes up this beautiful-but-broken industry. All these jobs are essential to make the business run. But not all of them get compensated enough. The purpose of a proper service charge is to help even out the pay structure for all of these positions.

“I hope that service charges will become the norm as we go forward. But the only real way for it to catch on is if more restaurants implement this concept.”

It comes down to paying our restaurant workers a fair wage, and there simply is not enough revenue generated by food and drink alone. Perhaps we can consider a service charge an entertainment expense or luxury tax? Whatever you want to call it, there is a third part of the equation that’s being underfunded, and that’s for the people that make it happen. I hope that service charges will become the norm as we go forward. But the only real way for it to catch on is if more restaurants implement this concept. Otherwise, those who are trying to pay their staff responsibly will be perceived as expensive—as opposed to the standard.

If you want to avoid this, get takeout and leave a 10 to 15% tip. But if you’re planning something special or simply want a night out, be prepared for the time of your life. But also, be prepared to pay for it.

— Max Trujillo
Host of the NC F&B Podcast

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  1. Most restaurants call automatic gratuity a service charge. So, in more situations that is just another name for a tip. (There’s a legal distinction, but that’s not something the customer should worry about).

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