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 agreed and emphasized that service charges aren’t instituted with a greed-based goal of gouging the restaurant’s clientele. “The misconception that restaurants are profiteering from these charges overlooks the stark reality of high failure rates and modest owner incomes. By passing on costs responsibly, restaurants can sustain operations, retain talent and continue providing quality dining experiences amidst economic uncertainty,” he said.
Because these charges are intended to help support employees (more on that in a minute), it’s important for restaurants considering service charges to be as transparent as possible. Our experts suggested printing a clear statement about what the service charge covers right on the menus, broadcasting these policies on social media and sharing them with the local restaurant press, and ensuring that staff is fully informed about the policies and can explain them in detail to inquiring guests.
Service charges cover a wide range of operational costs and employee benefits.
Source link
