More and more restaurants are adding service charges to bills
The controversial service charges that restaurants charge in addition to bills are not going away anytime soon.
Restaurant transactions with service charges have more than doubled in the past two years, now at 3.7 percent, according to a report released this week by Square, a popular point-of-sale system used in restaurants and cafes.
That’s significantly less than the National Restaurant Association’s estimate that 15% of all restaurants will have charged these fees by 2023.
“Restaurant margins are tighter than ever before and sellers have had to find ways to offset higher costs,” Ming-Tai Huh, head of restaurants at Square, said in the report.
The Sun-Times reported last year that more restaurants were adding fees to bills rather than increasing menu prices.
A report from Square shows that service charges in restaurants are rising.
Restaurant owners said they needed the fees to cover rising food and labor costs and credit card transaction fees without scaring away customers with higher menu prices. Some restaurant owners said they used the fees in place of tips, which they want the industry to move away from.
However, critics say that service fees are a sneaky way to drive up bills, and many customers don’t notice the charges until they take a closer look at their bills.
Last year, angry customers on the website Reddit created a “surcharge offenders list” to track which Chicago restaurants charge these fees. Most Chicago restaurants on the list charge about 3%, but some charge 20% instead of tips.
Service charges are different from tips, which are legally required to be paid in full to employees. Restaurant owners can legally do whatever they want with service charges, although some tout the fees as a supplement to health insurance or other employee expenses.
A receipt shows Moe’s Cantina’s 3% markup. A sign near the restaurant’s front door (right) alerts customers to the service charge.
David Struett/Sun-Times file
Some restaurants charge a service charge as standard, but state that customers can ask the restaurant to remove it, potentially putting customers in an uncomfortable position.
Some municipalities have considered eliminating service fees to keep prices transparent.
New York City has strict rules on service charges. “Mandatory tips” and “living wage fees” are prohibited.
California recently passed an anti-junk fee law that would also ban restaurant service fees. But after opposition from the restaurant industry, Governor Gavin Newsom signed another law in July clarifying that restaurants can still charge these fees.
The Federal Trade Commission is currently studying potential regulations to address a number of junk fees and is considering a ban on restaurant service fees. The potential regulations are expected to be released in the fall.
