Service Charges That Aren't Tips

[weinoo]

Last week, my wife and I spent four rather glorious days in San Francisco, one of the great restaurant cities, if not in the world, at least in this country.

In another topic about tipping, service charges are discussed. But, what we found in a number of restaurants was quite intriguing, to wit:

At Water Bar, a new restaurant on the Embarcadero by famed San Francisco restaurateur Pat Kuleto, there was a little line at the bottom of the menu which read:

In order to provide the best health care for all of our employees, a 4% health care initiative surcharge will be added to all food & beverage purchases.

At Incanto Restaurant, Chris Cosentino's wonderful Italian in Noe Valley, there was a little line at the bottom of the menu which read, and I'm paraphrasing this one:

A 5% service charge will be added to your bill for our cooks & dishwashers. Looking further, on the Incanto website here, it is noted that:

Incanto is one of a small number of U.S. restaurants that includes a partial service charge (5% of the total bill) on each diner's check because we are concerned about the widening wage inequities that exist between tipped employees and non-tipped employees in San Francisco's restaurants...We use the funds from this service charge to offer comprehensive medical benefits to all our full-time employees and to share part of the rewards from each night's work with non-tipped kitchen employees.

Now, this came as a bit of a surprise to us, as we had not seen this practice before. I'm wondering, is it better just to raise prices 5%, and not tell the dining public about it? Is it written this way for tax purposes? Does it bother anyone? Is it the beginning of a new trend? Should we be outraged?

What do you all think?

[gfron1]

Interesting. When I read your title I thought, "If they pulled that crap with me I would just walk out and never return." But, now that I see the rationale and the explanation, it would move me to be even more loyal. If they just tucked it in and I didn't know it was there, it may benefit their employees, but it would not generate good will. I wholeheartedly support this practice...but then again, I'm a socialist at heart.

[weinoo]

Yes, gron1, I kind of agree with you there - be out in the open about it, and engender some customer loyalty (as well as staff loyalty, for what is being provided).

[Chris Hennes]

Now, this came as a bit of a surprise to us, as we had not seen this practice before. I'm wondering, is it better just to raise prices 5%, and not tell the dining public about it?  Is it written this way for tax purposes?  Does it bother anyone?  Is it the beginning of a new trend?  Should we be outraged?

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I'm with Mitch and Rob on this, as well, though I'm a bit surprised that it is in tiny print at the bottom of the menu, like they are hoping no one will notice it. As long as the full 5% really is being used for employee health care, I have no issue with it, and think it is actually a nice alternative to just raising prices. This way the dining public can see why the prices went up.

[Peter Green]

While the health care issue is an interesting take and a topic for separate discussion, I wonder about having to start tipping the support staff separately under a "service charge".

What ever happened to the old fashioned system where the tips worked their way through the back of the restaurant, either through a "pot" or else through the time honoured tradition of the waiters having to tip the cooks and plongeurs, or else risk not getting their orders filled?

You tip the waiter as he's your contact, but the grease should spread to the whole machine. At least, that's how it worked when I was a kid in a restaurant.

[weinoo]

Did the tips ever really work their way through to the dishwashers and cooks?

[K8memphis]

I don't think it necessary to announce it in that manner. I mean if they need a 2% increase in prices due to rising transport costs then raise your prices and leave the rest to the accountants. I mean even in the waitstaff jobs my daughter held she had to tip out the dishwashers and sometimes the cooks. There's another way to do this without publishing it on the menu. It's a worthy thing to do for sure but it doesn't belong on the menu as a surcharge in my opinion. The menu is not the place to list the costs of doing business.

Edited February 16, 2008 by K8memphis (log)

[gfron1]

But I don't think of it as a cost of doing business. To me this is social consciousness. And again, I appreciate them taking that stance.

[Miami Danny]

But I don't think of it as a cost of doing business.  To me this is social consciousness.  And again, I appreciate them taking that stance.

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I don't really understand how separately charging the public for a fee that the restaurant claims goes to the dishwashers and cooks is anything but silly. If the restaurant is so concerned about the wage difference, charge a full service charge and divvy it up how you want. Your payroll, or how you pay for health care, is really not my concern. And, oddly enough, although I'm not casting aspersions here, restaurants may abuse these charges. Edited February 16, 2008 by Miami Danny (log)

[K8memphis]

If the diner has a choice to pay it or not then it's more of a social thought. But it's a requirement on a business deal. You feed me I pay you and apparently I also pay for the dishwasher to go to the doc. Wtf. Maybe we should put a surcharge for the dishwasher's little girl to get a new outfit so she feels good about herself going to school.

It's a surcharge and should just be added quietly to the price of the food. Lots of places offer health benies without advertising it. Your service providers do not list this on thier invoices. Like your lawn service or your phone bill or places like that. But they sure as shooting collect our money to pay for those benefits.

So maybe I grant you that it is indeed in response to social consciousness, it still does not belong on the food menu. I'm there to appreciate a good meal. Maybe they should collect for the March of Dimes too.

How about teachers stating on kids' report cards how much of our tax money goes for their benies? I think it's silly. Shoot me.

[jackal10]

if there is a 5% surcharge for waitstaff and others health insurance (which they presumably would otherwise buy themselves from tip income), do you tip 15% or 20% on top?

In other words are you now tipping 25%, and would the wait person actually like that 5% spent on health insurance, or would they rather have the cash?

What comes next? Pension contribution? Holiday fund? Training charge?

Fuel surcharge?

[dragonflychef]

as a restaurant owner in california , the reason for the service charge is simple ,

in this state the word gratuity refers to any person responsible directly for the serving and clearing of food, so in that instance the restaurant cannot touch the tips to distribute them to the staff, that is law, and several cases form precedent, of restaurants forcing waitstaff to tip out kitchen , it has been determined to be illegal and millions have had to be repayed, but as for a service charge that can be distributed by management anyway they see fit. it is an interesting concept and if the motivation is pure then it helps to bridge the disparity of pay gap in the industry, a more interesting example is at coi , where a service charge is sharde by the entire staff , ala europe and the laundry

Last week, my wife and I spent four rather glorious days in San Francisco, one of the great restaurant cities, if not in the world, at least in this country.

In another topic about tipping, service charges are discussed.  But, what we found in a number of restaurants was quite intriguing, to wit:

At Water Bar, a new restaurant on the Embarcadero by famed San Francisco restaurateur Pat Kuleto, there was a little line at the bottom of the menu which read:

In order to provide the best health care for all of our employees, a 4% health care initiative surcharge will be added to all food & beverage purchases.

At Incanto Restaurant, Chris Cosentino's wonderful Italian in Noe Valley, there was a little line at the bottom of the menu which read, and I'm paraphrasing this one:

A 5% service charge will be added to your bill for our cooks & dishwashers. Looking further, on the Incanto website here, it is noted that:

Incanto is one of a small number of U.S. restaurants that includes a partial service charge (5% of the total bill) on each diner's check because we are concerned about the widening wage inequities that exist between tipped employees and non-tipped employees in San Francisco's restaurants...We use the funds from this service charge to offer comprehensive medical benefits to all our full-time employees and to share part of the rewards from each night's work with non-tipped kitchen employees.

Now, this came as a bit of a surprise to us, as we had not seen this practice before. I'm wondering, is it better just to raise prices 5%, and not tell the dining public about it? Is it written this way for tax purposes? Does it bother anyone? Is it the beginning of a new trend? Should we be outraged?

What do you all think?

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[jsmeeker]

But I don't think of it as a cost of doing business.  To me this is social consciousness.  And again, I appreciate them taking that stance.

←

is providing benefits for your employees (salary, health care, training, equipment, etc. ) not a cost of doing business?

[Fat Guy]

To answer the original question, yes, it's a new trend.

Of course it's great, for a variety of reasons, that some restaurants are helping their employees live better. But I dislike the nickel-and-dime aspect of the practice. Paying a restaurant bill in the United States is already a silly exercise in surcharges, and this new trend adds additional surcharges. In France, you just pay the amount on the menu. If you have a 20 Euro starter, a 40 Euro main and a 10 Euro dessert, you get a bill for 70 Euros that includes all taxes and service charges (in Europe, health-care comes out of taxes, but it's just as simple to account this way if you have a private-insurer system).

But more fundamentally, the idea of a service charge is antithetical to the idea of predictable benefits. It keeps the risk burden on the employees. What happens in a slow month when dining-room receipts are low? Do the employees not get health-care that month? In most serious corporations it's the employer's responsibility to manage cashflow and charge sufficient prices such that there's money in the bank to pay benefits during the slow months. There are of course incentive bonuses and such, but the surcharge system in a restaurant is like saying your health-care benefits are like an incentive bonus based on sales. Or, if the benefit is not linked to performance, the surcharge is actually just a marketing device.

[weinoo]

Y'know, I kind of had a feeling it was because it was California - ground breaking in a lot of ways, but not always to everyone's liking, and sometimes in the long run not even in the interest of those for whom the benefit is being applied.

BTW, slightly off topic, but in each of the aforementioned restaurants, filtered sparkling water was offered on the house - .

[duck833]

I am a CPA in public practice and have four employees. I pay approx $40,000 per year for health insurance alone for all my employees. Somehow I don't think my clients would appreciate it if I put an 8% surcharge on all their accounting bills to pay this cost. It is still a cost, but is covered in my normal fees that I charge everyone, including my restaurant clients.

Rather than single out a % surcharge they should just raise their prices 5%. I also am getting tired of all the special surcharges by hotels. 2-3 Dollars a night for an energy surcharge, wi-fi surcharge, warm water surcharge, pool and exercise room surcharge, what a bunch of crap. Just quote and charge a room rate and leave it alone.

[gfron1]

Do any of you shop at a store that promotes its green-ness? Do any of you shops at a store that supports social causes/charities. Do any NPR listeners shop at a store because it supports NPR? If you answered no to these then you won't understand the point. At best its letting your customer know your business philosophy and hoping they'll return the thought. At worst its marketing. Either way, those of us who say yes to the above questions are fine adding a few bucks on knowing the low pay of the back of house staff, and being willing to support them.

[annecros]

Now, this came as a bit of a surprise to us, as we had not seen this practice before. I'm wondering, is it better just to raise prices 5%, and not tell the dining public about it?  Is it written this way for tax purposes?  Does it bother anyone?  Is it the beginning of a new trend?  Should we be outraged?

←

I'm with Mitch and Rob on this, as well, though I'm a bit surprised that it is in tiny print at the bottom of the menu, like they are hoping no one will notice it. As long as the full 5% really is being used for employee health care, I have no issue with it, and think it is actually a nice alternative to just raising prices. This way the dining public can see why the prices went up.

←

Well, I would have to pat you all on the heads and explain that any employee benefits are already written into the costing of the food. Your prices have already absorbed the cost of the benefits. Adding a few more points on the bottom of the bill may make you feel better personally, but it is only because they did not want to raise the price to you per plate to provide the same benefit they have provided in the past. Or they wanted you to feel self righteous over the price you are paying, because all of a sudden you are responsible for their employees health care.

I think the small print is just silly.

Always has been. Just saying. As a banquet bartender with a corporate place a while back, and so way back when I didn't have to dye my grays, it is almost silly the way they do not compensate employees. In speaking to nieces, nephews, etc. it is my understanding that nothing has changed.

The Maitre'D actually charged a gratuity to the entire huge freaking party, didn't do any work, and then kept it for herself. No splits to any of the people who did the work.

I am entirely skeptical.

Why should we sing the praises of a corporate persona that just now raised prices, cutting into tips, in order to provide benefits that they should really provide anyway? Then tell you it is a "surcharge" that benefits the employees? Shell game.

This practice makes me singularly angry on a very low level. It is just - skeevy.

Go European and write everything into the price per plate.

[gfron1]

And you would feel better if they added the 5% on and didn't tell us where it was going? How does that make it better? I at least now know that this is a business that is trying to make a difference in how its employees are handled. If they didn't tell me then I could assume they treat their back of house like crap like everyone else and raised the 5% to pad their own pockets.

And as for the use of small print - its the same as "printed on recycled paper."

[annecros]

And you would feel better if they added the 5% on and didn't tell us where it was going?  How does that make it better?  I at least now know that this is a business that is trying to make a difference in how its employees are handled.  If they didn't tell me then I could assume they treat their back of house like crap like everyone else and raised the 5% to pad their own pockets.

And as for the use of small print - its the same as "printed on recycled paper."

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Well, I would feel better if they added the 5% and actually purchased health insurance for employees. Inform me or not, that is an internal HR function, and none of my business.

How do you know how they use the 5 points, and do you expect them to actually open the books and inform you?

Agreed on the small print. It's bull.

You can say anything in the world all day long. The burden of proof is shifted to the consumer in this unfortunate situation. The real burden is on the staff.

[gfron1]

Well, I would feel better if they added the 5% and actually purchased health insurance for employees. Inform me or not, that is an internal HR function, and none of my business.

How do you know how they use the 5 points, and do you expect them to actually open the books and inform you?

I don't need them to open the books, nor would I want them to. I can't go through life distrusting everyone all the time. I would happily offer my 5% and trust that the employee will get it in one for or another. If its not insurance, then cash. The employee can then decide how to spend the money. And the outcome is an HR function (pay or insurance), but this is about corporate philosophy and marketing in my opinion.

Agreed on the small print. It's bull.

I didn't say it was bull. To me 'printed on recycled paper' is important - not important enough for me to pick a restaurant or not, but again it gets to corporate philosophy. Half of the country is going to jive with that philosophy, half isn't.

[ChefZ]

Reading this I admit I am torn. I think cost of health care should be calculated into to price like other all other costs. What would be next 30% surcharge for cost of food, 20% for leasing/rental costs and another 15% for utilities? As much I like the idea to tip the cook and dishwashers, I believe it should not be done by adding an additional charge.

In my entire career I have worked in only one place where we had on tip pot/pool and it was shared between all employees, maitre d, servers, hostess, busboys, cooks and dishwashers. Grated there were different points for each position, and it was fair. The beauty of this was that everybody worked towards a common goal. It was the smoothest service, and best teamwork/camaraderie between front and back of the house. Special request were welcome and executed quickly and always beyond guests expectations. Overall the servers made as much tips as they would have done without having the pool. It was about ten years back in Europe. Average tips were 8-10%. In this particular restaurant we averaged 24% into the tip pool.

So as noble it might sound I truly believe there are other ways to compensate the entire staff properly.

Z

[annecros]

Recycled Paper

[5] 'Recycled' paper is available that includes anywhere from 10 to 100 percent "post-consumer" paper.[6] The EPA mandated the use of 50% post-consumer recycled paper by the federal government, state governments that receive federal funding, and many companies that receive money from the federal government. However, this excludes copy paper.[7] The EPA does not regulate recycled paper used outside of the government; it only sets a minimum guideline.[1] The UK also does not have any legal standards, only non-mandatory guidelines instituted by a variety of different organizations.[1]]My Webpage

So, your paper may be recycled or not, between 10& and 100% post consumer paper. I would like a minimum of 50% for my personal comfort. No regulations, no enforcement.

When they make a notation at the bottom of your bill telling you that 5% of your check is going to the employee, wouldn't you expect them to back that up in black and white?

[gfron1]

Wouldn't I expect them to back it up - no. Why would I? Again, I can't imagine going through life living with the assumption that everyone is out to screw me over - that would be a very tiring life. Maybe I've lived in a small town too long. When I lived in New Orleans, I was screwed over on the shell game once, but you know what - I'm still alive and happy, and not missing my $5.

They've made the public statement of what the money is for. Good enough for me. If it turns out that the bean wasn't under any of the shells, I wouldn't support them anymore...but that's life isn't it?

[annecros]

Reading this I admit I am torn. I think cost of health care should be calculated into to price like other all other costs. What would be next 30% surcharge for cost of food, 20% for leasing/rental costs and another 15% for utilities? As much I like the idea to tip the cook and dishwashers, I believe it should not be done by adding an additional charge.

...

So as noble it might sound I truly believe there are other ways to compensate the entire staff properly.

Z

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Thank you, I wish I could have expressed myself as well as you did.

Why is overhead a surcharge on the bill? Last I heard, overhead was overhead.