Restaurants have increasingly turned to surcharges and fees to cover rising costs, such as credit card processing fees and employee compensation. According to the National Restaurant Association, 15% of restaurant owners added surcharges or fees to checks last year. The use of service fees has also grown, with a recent report from Square revealing that 3.7% of restaurant transactions processed by the company included a service fee, more than double the figure at the beginning of 2022.
However, opponents argue that these fees can surprise customers and lead to them paying more for their meals without realizing it. Some customers have compiled spreadsheets of restaurants charging hidden fees in cities like Los Angeles, Chicago, and Washington, D.C. Critics claim that these fees can be misleading and may contribute to “junk fees” that the Biden administration is targeting. The Federal Trade Commission is expected to publish a rule banning businesses from charging hidden and misleading fees.
Restaurant owners, on the other hand, argue that these fees are necessary to keep their businesses afloat and ensure fair compensation for their employees. Sean Kennedy of the National Restaurant Association acknowledges that not all fees are “junk fees,” and that customers generally understand what they are paying for. However, the National Women’s Law Center claims that service fees increase the risk of wage theft and can reduce workers’ income if customers choose not to tip on top of the check.
Some restaurants, like Galit in Chicago, have implemented fees to cover healthcare costs and provide better benefits for their employees. Co-owner Andres Clavero emphasizes the transparency of these fees and the ability to distribute them to the back of the house. He also argues that incorporating the fees into menu prices could lead to customers choosing cheaper options that don’t provide the same benefits for employees. Additionally, fees can help restaurants navigate legislation, such as the phasing out of the tipped wage in Washington, D.C.
Lobbyists and legislators have been at odds over the regulation of these fees. In California, for example, bars and restaurants were excluded from a broad anti-junk-fee law, allowing them to continue charging mandatory fees without listing them. The National Restaurant Association argues that eliminating these fees would lead to customer confusion, higher prices, less transparency, and costly compliance.
While there is disagreement over the use of fees and surcharges, both sides recognize that not all fees are worth protecting. Some restaurant operators oppose the use of Covid surcharges several years after the pandemic, viewing it as dishonest. The National Restaurant Association is pushing the FTC to protect three fees commonly charged by restaurants: large party fees, delivery fees, and credit card processing fees. They argue that these fees are necessary to preserve the razor-thin profit margins of restaurants, which are already facing rising costs.
Ultimately, the debate over restaurant fees and surcharges reflects the challenges and complexities of the industry. While some fees may be necessary for restaurants to survive and provide fair compensation to their employees, transparency and clear communication with customers are crucial to avoid misleading or surprising them. Striking a balance between protecting workers’ income and ensuring the financial viability of restaurants remains a central concern for both sides of the argument.
