We have service charge of 18% on large parties, which is printed on the menu and automatic in the POS. A guest complained it was unfair, since he tips less and it should be optional. He paid, but was unhappy. Who is right?
– Restaurant Manager, New York, NY
It is true that this is a common charge. A large table can occupy a disproportionate amount of a server’s shift and, if guests under-tip, can ruin a night. Automatic charges are popular with servers and operations, which can keep servers happy and avoid paying the tip credit if a server is stiffed. Guests generally understand. Where it gets tricky is the size of the automatic gratuity and the question of whether the guest has the freedom to opt out or reduce the charge.
First, I happen to like an 18% charge, since most guests tip between 15% and 20%. It also sends the message for future dining that 18% is a reasonable tip. And, of course, nothing prevents a guest from adding more. Some operations charge 15% for large parties on the basis that 15% is the accepted minimum and guests can add from there.
These policies have invited numerous disputes. What if a guest receives terrible service and wants to express that with a minimal gratuity? What if the bill is comprised largely of very expensive bottles of wine that require comparatively little service? (Consider, for example, the time and effort required to earn a $90 tip (18%) on a $500 bottle of wine as opposed to a $90 tip (18%) on $500 worth of assorted food and drink priced at $8 - $40 in the same restaurant).
Many restaurateurs take your position, that if the automatic gratuity is clearly stated up front, the guest is obliged to pay it. There has even been a case of a restaurant manager locking the guests inside while he summons the police to ensure that the entire gratuity is paid. That is a management technique I do not recommend.
Until recently, courts have found your guest to be right. Even if a gratuity was automatically included it was just that, a gratuity, and was ultimately at the discretion of the guest. In a 2004 case in New York State, for example, charges were dropped against a man who decided to pay 10% after a sub-par experience with a party of 9, rather than the automatic 18%.
Last summer, the IRS clarified the definition of automatic gratuities, finding them compulsory service charges rather than discretionary tips. My advice is to leave the policy as is but, on the rare occasion a guest asks to leave less, find out why the guest feels the service was lacking, work to earn a return visit from the guest, and correct the problem for the future.