Consumer Trends

Diners aren't pleased with service fees: 'You feel like you're paying a cable bill'

Some say they’d be less likely to return to restaurants with a fee, while others say they would tip less or not at all.
Illustration by Midjourney

Neal McGarity was surprised when he got his bill at The Shark On The Harbor in Ocean City, Md., a few months ago. 

It’s not that the total was more than he was expecting—not exactly. It’s that instead of one bill, he got two: one with the price if he paid in cash, and the other with a 3.5% “convenience fee” if he paid with a card.

McGarity didn’t have enough cash on him to pay that way, so he had no choice but to accept the upcharge. Though the difference was small, he left feeling confused and a bit cheated. And he hasn’t been back to The Shark since.

“In my mind, that’s a really wacky way to go about things,” he said. “Why does the customer get penalized for the convenient, widely accepted choice?”

It’s a question more diners are asking themselves as the dreaded service fee spreads from hotels, airlines and online ticket-sellers into restaurants. Last August, 16% of operators told the National Restaurant Association that they planned to add surcharges to help control rising costs. These have taken the form of fees for everything from employee benefits to credit-card processing to water. Some are tacked on with no explanation at all. And many come with little warning other than some fine print on the menu. 

The issue reached a new pitch earlier this month when Dave Anthony, host of "The Dollop" podcast, tweeted a picture of his bill from Los Angeles restaurant Alimento. It included a 4% fee for staff health insurance and a $3 "water donation." 

"Lotta bullshit going on here," Anthony wrote above the now-viral image, which drew backlash as well as some words of support for the restaurant. 

Alimento owner Zach Pollack responded in an Instagram post, saying that the restaurant chose to offer health benefits to its 25 employees even though it's not legally required to. The 4% service charge "barely covers the bulk of it," he wrote. "We lose money by electing to provide health insurance to our employees." 

Despite what is arguably an admirable effort on operators' part, consumers have shown strong opposition to fees of any kind on their restaurant bills.

“The understanding that a consumer has when they come to the restaurant is there’s a price on the menu, and that’s the price I should expect to pay,” said Robert Byrne, director of consumer insights at Technomic. Adding fees to the equation “runs the risk of making the consumer apoplectic. You feel like you’re paying a cable bill.”

“You have to be batting a thousand in every other category when you have a fee on your bill.” —Robert Byrne, Technomic

Customers’ distaste for service fees came through loud and clear in a recent survey by Technomic, which asked 1,000 people how they would react if a service fee of any amount was automatically added to their bill at a restaurant.

A whopping 4 in 10 said they would be less likely to return to the restaurant, making that the most popular response by far. In contrast, just 13% said they wouldn’t care.

Byrne noted that the opposition is fairly uniform across demographics, generations and political affiliations. “There is no group that it doesn’t have any effect on,” he said. 

For many, the fees are more than just a minor annoyance, giving operators little room for error. 

“You have to be batting a thousand in every other category when you have a fee on your bill,” Byrne said, “because the odds are so stacked against you.”

The survey results also highlight how service fees can be confuse customers and undercut their stated purpose. For instance, more than a quarter of respondents said they would assume an extra charge was a tip and wouldn’t tip on top of it. Another 21% said they would tip less.

This issue came to light recently in a lawsuit filed by employees of Los Angeles restaurant Jon & Vinny’s, which adds an 18% service charge to its bills. The employees argued that customers assumed it was a tip, and it should therefore have been passed along to staff, but it wasn’t.

The restaurant has since added the following disclaimer to its check: “The service charge is not a tip or gratuity, and is an added fee controlled by the restaurant that helps facilitate a higher living base wage for all of our employees.” 

“We hope it truly goes to the people or that they truly are offering benefits.” —Ana Lucia Seguin, Los Angeles resident

Customers are not necessarily unsympathetic to restaurants’ rising costs. But some question whether a separate fee is the best way to handle them. 

“Why would the restaurant not deal with the merchant card fee as a cost of doing business and maybe just charge a few dollars more for the meal rather than make it a very bumpy finish line for the customer?” McGarity asked.

Byrne said that even when the restaurant mentions a service fee on its menu, it can easily go unnoticed by customers, creating an unpleasant surprise when the bill arrives. Customers can ask the restaurant to remove the fee (and 21% told Technomic they would do that) but that adds even more discomfort at checkout.

“You’re making the consumer do all the work,” Byrne said. “That is the opposite of hospitality.” 

Not all customers are so strongly against service fees. And it may ultimately be something that people will get used to, as they have in other contexts.

In Ana Lucia Seguin’s neighborhood in the eastern part of Los Angeles, surcharges are common at restaurants. They are typically small—around 3% or 5% of the total, she said—and they haven’t prevented her from visiting certain places.

“I think people are kind of used to it now,” she said. “I never see people arguing about it.”

She acknowledged that restaurants could just raise their menu prices instead. But she also appreciates the transparency of the fees and said they can be a way for restaurants to share how they’re supporting staff.

“It almost helps us feel better that they are trying to facilitate those things for them,” she said. 

She just hopes the money ends up in the right place. “We hope it truly goes to the people or that they truly are offering benefits,” she said. “We choose to believe that.”

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