Inflation is hitting the restaurant and service industries hard. As the cost to operate a restaurant goes up, meals are getting more expensive. When you’re buying concert tickets online or ordering off a delivery app like UberEats or Grubhub, service fees are the name of the game, and often keep us from clicking “order” when a $20 order jacks up to $40 in fees. They hurt to see, but we expect them in these places—less so though do we expect to see them on a restaurant bill.
That might be changing though. Eat This, Not That! reported that 13% of fast food restaurants are now charging service fees, and it’s even higher overall in higher-priced restaurants, like fine dining.
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What Is A Service Fee And How To Spot It
Between tipping, delivery fees, and service fees, it can get a bit confusing when you check your order bill and it's 30% more than you anticipated.
What is a service fee anyways? Service fees are different than the tip—they are an added charge on your bill typically to help offset the restaurant's operating fees. Yes, you still have to tip.
To spot it, you'll want to review your receipt before setting your card down or placing "order" online or through an app. There will be an added line next to the taxes and tips labeled service fee. Some restaurants will also warn customers of service fees on their menu.
But, it should always be listed as a separate line if it's not already accounted for in menu prices. Check your bills!
Nearly 15% Of All Restaurants Are Adding Service Fees
Now, The National Restaurant Association released its annual State of the Industry Report for 2023 and found that 15% of all restaurants are utilizing service fees. It's even higher for fine-dining restaurants, where 17% have the extra fee.
Service fees are becoming more common, but there's no exact definition for what the restaurant's service fee goes towards. While some hope it means extra security for staff wages, some restaurants report using it to account for increased operating costs, such as food, labor, and utilities. According to the report, 80% of restaurateurs polled said that their electricity, gas, heating fuel, and water bills jumped in 2022, rising on average a whopping 11.8%.
Restaurants are using service fees as a way to offset costs in labor, #food, insurance and #rent. But there is no guarantee that every #employer, will use the fees to help those needing it the most. The servers. #Tips come from guests, service fees are from your #restaurants. pic.twitter.com/DMJgdZ6exG
— capital restaurant management (@capitalfsmgmt) April 5, 2023
Still, many don't disclose what the fee goes towards, which leaves some customers unsurprisingly confused by the non-descript charges. If you see it on your bill, you can always ask for clarification and see how the restaurant replies. That way, you can decide for yourself whether the meal is worth the added fee. Of course, transparency would be nice too.
Majority Of Restaurants With Service Fees Plan To Keep Them Around
Restaurants were especially challenged after COVID-19 thwarted in-person dining. Owners had to rely on delivery service apps, which eat 15-30% of their profit margins.
Despite the pandemic waning, we might see service fees stick around. The 2023 report found that 81% of restaurants currently charging the fees plan to keep them around for more than a year.
For the consumer, that means jacked up costs on your favorite takeout. Restaurants are operating much differently than pre-pandemic, and for some, it's only getting more expensive for them to keep doors open, even with the return of in-person dining.
As prices increase, consumers will have to make calculated decisions on whether or not to eat out. Without an increase in wages to follow the increasing costs to eat, more and more patrons may begin cutting back on their dining spending. And as talks of an incoming recession loom, restaurants and customers all around may feel increased stress as they manage their spending decisions.
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