At the Indian-American sports bar Pijja Palace in Los Angeles, there’s a note written by owner Avish Naran on the menu right beneath a selection of chicken wings: This is a reminder that we have 19% SERVICE CHARGE. I put this under the wings section, so you can fly your ass out of here if you don’t like it.
It’s a playfully brash message—and just one example of the way restaurants are making sure their staff gets paid and their businesses make money, without relying on customers to leave a tip. Instead, restaurateurs are building fees into the cost of your meal.
Doing business this way is not entirely new. Some upscale tasting menu restaurants like The French Laundry in Yountville, California and Alinea in Chicago have been factoring service and food costs into the price of their dishes for years, as have some more casual restaurants throughout California, like the minichain Crab Hut in San Diego. But these fee-based models have only gotten more widespread in recent years, at restaurants like Middle Brow Bungalow and the forthcoming Thattu in Chicago, and Pizzeria Toro in Durham, NC. You’ve probably run into some of these fees by now. They come printed at the bottom of your check with often-ambiguous names like “dine-in fee,” “service charge,” “auto-gratuity,” “healthcare fee,” or “benefits surcharge.”
Unsurprisingly, service charges have become a source of public outcry everywhere from Oakland to Washington, DC, with some consumers calling them deceptive and even tacky. A new generation of restaurateurs, though, see these fees as a critical way to go against the old industry labor model of subsidizing restaurant worker pay through the so-called tip credit. That system allows restaurants in many states to pay their staff a subminimum wage as low as $2.90 per hour, with the remainder left to the discretion of diners. Only seven states, including California, don’t enforce a tipped minimum, with tipped workers making a standard minimum wage. Washington, DC is in the midst of phasing out the tip credit through gradual subminimum wage hikes, the first of which is coming in May, and will raise the subminimum wage from $5.35 to $6 per hour.
Yet even in places where the subminimum wage has been scrapped, you might still see surcharges on checks, as restaurants try to remain profitable and entice employees through the expectation of steady income. At a time when restaurateurs are struggling to hire and retain staff, the promise of higher, consistent pay has made these fees much more common. The array of fees—and the varying names they go by—can be confusing for diners and, of course, make eating out feel pricier than ever.
To help you understand where these charges go (and why), we’ve broken down the two broad camps into which added restaurant fees tend to fall.
If a restaurant is “tip-free” or “tip-included,” there’s usually an 18-22% tip factored into the price of each dish. Additional tipping is (probably) not expected.
Of all the fees that have showed up on restaurant menus in the past few years, tip-included menu pricing is perhaps the oldest and most tried—though with historically mixed success. In 2015, restaurateur Danny Meyer sparked a trend when he eliminated gratuity across eleven restaurants in his Union Square Hospitality Group (USHG). Restaurants like The Walrus & the Carpenter in Seattle, and Craft in New York followed suit, but ultimately walked the practice back, citing lost business and trouble retaining waitstaff. In 2020, USHG also reverted to a tipping model. Despite these past difficulties, restaurateurs are still determined to make this model work. Plenty of long-standing and new restaurants, including Miss Kim in Ann Arbor, Michigan; Sugarpine Drive-In in Troutdale, Oregon; and Bloomington, Indiana brewpub Switchyard Brewing Co., have adopted the practice.
