Restaurant surcharges & service charges: threat or menace?

A lawsuit over price fixing for adding a surcharge to pay for healthcare.

“ The complaint also cites the restaurant’s newsletter, still posted on its website, which explains the surcharge to consumers as a means to help cover the cost of providing healthcare coverage.

“We’ve recently sat down with other like-minded local chefs and restaurant owners like Suzanne Goin, Carolyn Stein and David Lentz, Jon Shook and Vinny Dotolo, and Josiah Citrin to come up with a plan to offer coverage and have decided to implement a 3-percent employee benefit surcharge added to all of our checks beginning Sept. 1 to pay the October 1 premium,” the newsletter says”

Also, I’ve worked with a hell of a lot journalists over the years. When they are accused of shitty journalism, it’s by know it alls who’ve been proven wrong by by their reporting


Maybe healthcare surcharges are different, but the issue with these fees is honesty and distribution/disbursement. Former J&V servers have reported, on both Reddit and Glassdoor, the service charge is kept in part by ownership.

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Service charge is not a tip. It’s not something which gets cashed out at the end of service.

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Never say never. People said Lake Mead and Lake Powell would never empty.

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Not sure I follow the point you’re making.

When it de facto replaces a tip but gets disbursed by the restaurant in opaque ways, it’s not crazy to wonder how it gets distributed. Same with healthcare surcharges (unless there’s a law governing those I’m unaware of).

What percentage of former Zuni servers chose not to return after the restaurant reopened because of the tipping policy? Two are on record saying they did. Beyond that we don’t know.

Making an unsupported claim that is from all evidence false is shitty journalism. Who you’ve worked with and who accused them of what and why and whether they were refuted are irrelevant. Your argument is a sophistic pile of logical fallacies.

We do know because other news orgs reported on the issue like the Chronicle which I didn’t post because its behind a firewall and I note about 8 who were said to have that as their primary reason for leaving. I’m guessing they and others left because their overall take home pay was lowered and they couldn’t afford to live in SF any more so they moved away and didn’t want to put up with the BS of being a server. Also while most of the FOH left, most of the Kitchen stayed, since their wages had increased significantly under this system. If the issue were the other reasons you state, wouldn’t there be similar attrition in both FOH and Kitchen?

The kitchen was doing takeout during the year-plus that the dining room was closed.

I count one former server who told the Chron he did not go back because of the no-tipping policy. He said there were at least seven more. The Chron also quoted another former server who left the industry for other reasons. The chef said five old servers had returned. I don’t see how Eater got their 90%, and they don’t explain it.

I’m not sure what restaurant these receipts are from, but none of the wording promises that all surcharges go to the employees. One receipt doesn’t say it at all and one says it “enables us to provide equitable wages”.

This is not a subject I’m particularly passionate about, but every time these topics get split I get notice and every time I or someone else posts that they dined at a restaurant that adds a service charge this argument starts.

Here goes…

I don’t need to see a financial statement before dining at a restaurant. Employees who demand to see an accounting of a company’s monetary distribution are naive and out-of-line, imo. It’s unheard of for a company to show employees their financials… unless said employees are shareholders or have some form of profit participation. It ain’t done. I’m speaking from experiences as a hostess, server, restaurant bookkeeper, accountant, business manager and a diner.

Personally, I like to leave a little extra on top of the surcharge (cash preferably). But I respect those who don’t. Imo, nobody should feel obligated to leave a tip on top of a surcharge. I’m sure the restaurants would rather have your business than not.

And if it means anything - the majority of Animal’s employees returned after two+ years of being closed. Long-term employees are essential to a business’ success. I think this says something.

Happy Eating! Anyone wanna go to Animal with me?!



I don’t need to see a financial statement before dining at a restaurant.

I mean this respectfully, and forgive me if I’m too passionate, former labor law person, but I have trouble understanding this pov and think it misunderstands the issue, especially given the history of tipped minimum wage and worker protections.

Employers aren’t legally allowed to keep the wages of their employees. I know tipping is weird and arcane, but with service charges, money that was legally required to go to specific employees now gets hoovered into to an opaque, unclear, loosely regulated system. We have tons of anecdotal reports from Kismet and Jon and Vinny’s employees that owners pocket some of the service charge. Not only does this shifts the balance of power away from workers, but ironically it’s all done under the guise of equity.

Maybe that’s fine and we should trust restaurant owners, but there’s a reason restaurant owners don’t disclose this. Most customers leave a tip, service charge, whatever the nomenclature to benefit the people waiting on them. Not the owners of the restaurant. That’s what, broadly, a service charge is for, and is the reason the tipped minimum wage is/was so low.

I get that it’s exhausting and unsustainable to investigate labor practices, but the law hasn’t caught up with this, and until it does, it’s valid to question. Would you patronize a restaurant violating child labor laws or convicted of wage theft? There’s a whole history of labor protections out of the New Deal/FLSA, preventing owners from exploiting workers. I get this isn’t quite that serious, but it smacks of that, and if restaurants owners are pocketing a tip/service charge, I’d like to know.

EDIT: I really do think they need to equalize front and back of house pay, but it’s tricky when things shift from an 18%/20% gratuity or whatever that I know legally goes to certain employees, waiters, to a system where service charges get distributed in opaque ways that allow the owners to keep whatever amount they want.


After dining, I don’t need to see a receipt with suggested tips of 10% / 12% / 15% / 18% IN ADDITION TO an 18% surcharge. Especially when the explanation of the surcharge is vague enough that the owners are free to do whatever they want with it. More so when I’ve read reports from disgruntled servers who don’t seem to be getting a very big share. Even more so when customers report being pushed by servers to tip 18%, and they’re mum about who, if anyone, gets health care.

It’s not common, but it’s an increasingly popular model. For example:

DayTrip has a 20% service charge. When they bring the iPad with the bill, there are buttons to add 2% / 4% / 6%.

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Money is fungible. The restaurant collects a big pool of revenues that include both regular charges and service charges. Employees are paid from that single pool of revenues. If there is a restaurant whose total wages and benefits paid to employees is less than its total service charges as represented to diners, then I would agree that’s problematic and even constitutes fraud. But I doubt that’s the case. Google searches show that average restaurant labor costs are between 25% and 35% of revenues, which is significantly higher than any service charge I’ve seen.

Respectfully I think this is way too credulous towards restaurant owners, given the history of wage theft and labor laws. Not to mention the anecdotal but credible reports about these restaurants on Glassdoor and Reddit. I mean, former employees are saying directly that it’s fraud. I know someone who used to work for Kismet in this era. Next time I run into them, I’ll just ask lol.

I also think there’s something to the Jon and Vinny’s Kismet break up, just my conspiracy theory, but I’d love to see Eater or Joe Rosenthal or someone investigate.

EDIT: I get your point about pools of money, but it’s an issue of disclosure and skirting how restaurant labor laws require money to be distributed.


Depending on what they tell people they do with the service charges, they may go into a separate pot.

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I doubt it really goes into a separate pot. I suspect the restaurant will receive one payment, not two, from credit card companies. Then the restaurant will give at least 16.6% of that payment to the employees. (Tricky math here, but 16.6% of the total payment from credit card companies would actually be equivalent to a 20% service charge.)

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By the way — to the extent restaurants are required to pay employees an hourly wage in addition to tips, I would expect those wages to be paid to employees in addition to all service charges. Otherwise it is potentially fraud (on diners). Employees need to get at least all service charges plus all wages.

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C’mon man. Service charges, unlike tips, are not legally required to be disbursed in any specific way. That’s what this whole debate is about.

If the restaurant tells customers that a service charge is for one thing and they use it for something else, they could be sued.

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Yes, I understand. There are many vagaries, sides and opinions on this topic and I’m aware mine is only one of them. Some validate J&V’s former employees’ complaints and with probable cause. But I’m not aware of lawsuits filed or labor laws being broken, no accusations of tip garnishing or cheating on O/T. I won’t address the child labor laws comment, as this situation is not that serious.

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See, I don’t even know that I agree with that. You have to take into consideration the fees and whether or not restaurants are being taxed on that service charge, etc. There’s so many variables to consider about restaurant management today.