Do Service Charges in Restaurants Make Sense? - How to Run a Restaurant #restaurantowner

There has been a trend of adding service charges in restaurants that directly charge the guest for business operations, such as rising food prices and increasing minimum wage. Should you be using service charges in your restaurant? Watch this video to hear my opinion and reasons for that opinion.

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About Service Charges in Restaurants...
There is a major change in the restaurant industry and it's the appearance of service charges in restaurants. In some cases it's in place of tips. I don't think that's really what's happening, though. In most cases where restaurants are adding services charges, they add the charge and then the customer still adds a tip. Let's talk about why restaurants are doing this, what are the pros and cons?

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Why are you seeing service charges in restaurants?

The first reason is health insurance. The government passed legislation that mandated health insurance be provided to anyone who works for you full time, and it's an astronomical cost to business owners.

The second reason restaurant owners are adding service charges to their operations is a rising minimum wage. There is a $15 minimum wage sweeping the nation and if you haven't experienced it, it's not a matter of it but it's a matter of when.

The third reason you're seeing service charges in restaurants is rising food cost. Every time a food delivery comes to your restaurant, costs go up. A lot of restaurant owners are hesitant to raise menu prices so a service charge becomes the quick fix solution.

Especially with the minimum wage increase, I've seen these service charges in restaurants on the coasts, where these big changes have happened first.

The pros to the service charge include setting a kind of guaranteed amount of money for employees, allowing an employer to pay a little less.

The problem with this, or the con, is that employees stop caring. They don't have incentive to work hard and create a great experience for your guests.

When restaurant owners add a service charge, they are trying to shift blame from themselves and pointing people toward the "source" of the service charge, whether it's the local or federal government, the food distributor or some other outside force. Restaurant owners are afraid of raising their menu prices and so many default to this blame-shifting approach.

But is that the perception you want to put out there about your business? I believe in paying a fair wage, charging for your restaurant's value - the service and experience in your restaurant.

It's important to deliver on a great experience and take price out of the equation - exactly how customer service expert John DiJulius teaches - so that your customers are paying for the value of the experience in your restaurant not necessarily the meal on the table.

Train your team, put out an incredible product and price it all appropriately. Do these things instead of a service charge.

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Find more about how to run a restaurant business on my other platforms:

[DavidScottPeters]

Have you tried a service charge in your restaurant? Why or Why not? Share with me in the comments below. Thanks!

[lifelearner]

Service charge is the most unfair thing ever created! Trust me there is no staff happy with service charge or tronc system. At least not here in United Kingdom! Come to London and ask the waiter/waitress if service charge is included in your bill, nobody even answer you, because it is great way as owners of restaurant steal their tips!

[andreimarin]

I’ve bene working in many restaurants in London! None of them paid me The servicecharge and Most of The managers are asking us to lie that we get the servicecharge ! Restaurants are making big profits and that profit should pay our salaries ! If you want to make happy your waitress tip them straight !!!

[ghosttimer]

If I see a service charge I don't tip. Just add it to the cost of the food. I get bad service with a service charge. It feels deceptive. I been to a different restaurant in the same area no service charge.

[honestnewsnet]

Why should the customer have to pay the cost of doing business for restaurants?

[rancors]

Service charges are double dipping. People get angry and don't come back. It's purely seen as owner greed.

[sammas]

Customer Service Fee; just heard of it from a Facebook post; this is ridiculous (BS).
I agreed with this host. 👌

[realcubano]

The Employers using customer tips ( service charge) to pay employees wages . Disgusting 🤮 don’t pay service charge anymore. I definitely will not pay service charge!!!
In uk 🇬🇧

[kimsullivan]

If I see a service charge on my bill, I will not tip. Sad but true.

[pbpl]

I don't agree with service charges.
Its a bullshit charge.

I get it food, rent, wages go up.
So do like years before include with price of food. Calculate ur bussines cost and profit and change prices of meal. That fair.
But adding extra charge on food make stop peoples paying tips because think thats where that money go.

I always gived tipp but when se that service charge then dont anymore

[Scott-llrl]

Imagine any other business playing these games. Get a price for a new muffler but then “SURPRISE MF!!!” Go to your Accountant but get a bill with 12 extra line charges. Visit your Dr and expect to pay 20% of their wage on an invoice, but if you really liked the way they smiled, maybe there’d be a little something extra at the end. Preposterous!

Don’t tell me my meal is $25 when EVERYONE knows that it’s $25 PLUS $5 tip. It’s $30. Put $30 on your menu and pay your people properly. It’s a zero-sum game from the perspective of the guest… It’s $30.

[MrJenniferwahl]

I wont eat at any resturant that charges service fees and I am an excellent tipper

[goddess]

My service charge at work always goes up, and down

[grayblanchard]

I agree wholeheartedly. I spent 30 years in the restaurant business and no good comes out of service charges. If your prices are high, but you give guests a great experience- they will pay for it. Take care of your employees and build it into your prices. Service charges just make me angry as a customer.

[gunnerman]

I've not liked this charge but I've just ordered a meal and now they added a bag charge wtf??

[jaceski]

Id tip them more than the chargre. But if they want to charge, no tip. I didnt get tips making $9 an hour 20 yrs ago.