Operations

The restaurant service fee situation is getting dicey

Working Lunch: Add-on charges are now under scrutiny at both the federal and state levels and could be in danger of drawing even more unwanted attention.

The temperature is rising on restaurant service fees.

We already know the Federal Trade Commission is targeting restaurant charges as part of President Biden’s effort to rein in so-called junk fees across a number of industries. The commission is expected to announce a new rule on the issue before the November election. 

But the charges are also under attack in many state legislatures, presenting an added threat for operators and putting more attention on the issue.

Eleven states, including Colorado, Hawaii, Illinois and Minnesota, are looking to regulate a range of charges that many restaurants are using to help offset the rising costs of doing business. 

The added scrutiny means restaurants are walking a fine line by implementing these fees, say hosts Joe Kefauver and Franklin Coley on this week’s episode of Working Lunch. 

Though they didn't discourage operators from the practice, the public affairs specialists expressed concern about the mounting regulatory focus on fees as well as the growing use of the phrase “deceptive charges” to describe them. That language could act as a sort of Bat signal for attorneys general, they said, which is the type of attention restaurants definitely do not want. 

Both agreed that restaurants' best bet is to be transparent with customers about service charges in order to distance themselves from any allegations of deception. 

Kefauver and Coley are joined this week by Brennan Duckett, director of technology & innovation policy for the National Restaurant Association, who discusses the association's work on the service fee issue and offers advice on how restaurants should handle it. 

Hit play to learn more.

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