OK, But What Are The Service Charges On My Restaurant Bill?

It seems like the cost of going out to eat at a restaurant is always a hot topic for debate; between rising prices, gratuity requests popping up at counter-service spots and seemingly random surcharges, many diners now find themselves studying their restaurant bills more closely than ever.

One type of extra fee that’s becoming common in the hospitality world is a “service charge.” These line items usually involve a percentage of the final check, but you may be left wondering what these “service charges” cover, why they’re appearing on bills so much more frequently now, and whether you can opt out of them as a guest.

We’re here to answer all of these questions with the help of restaurateurs, restaurant consultants, small-business attorneys and accountants.

The recent popularity of service charges can be directly linked to COVID.

First, it’s important to remember that service charges are nothing new for restaurants. “ I’ve seen this for decades under names like ‘Staff Wellness Charge,’ ‘Administrative Fee,’ ‘Service Charge for Tipped Employees,’ and ‘Sustainability Charge,’” said hospitality consultant Jason Littrell .

But the big and recent rise in service charges happened for one clear reason: the COVID pandemic. “The restaurant world has been forced to make many changes since COVID and the rise of inflation,” explained Jonathan Kish , CEO of Queen Street Hospitality Group in Charleston, South Carolina. Kish pointed out that “inflation has been tough on everyone, particularly in restaurants. We work on tight margins that are less than most other businesses, and a 1% increase in cost can yield a 10% loss of profit or more. The ability to pass on a tangible cost to the consumer has saved many restaurants.”

Littrell