The Federal Trade Commission (FTC) is cracking down on “junk fees,” but restaurants are pushing back. If you’ve ever been hit with an unexpected surcharge or service fee at a restaurant, you’re not alone. The FTC’s proposed rule aims to eliminate hidden charges, but many restaurants argue these fees are essential for their survival.
Why Are Restaurants Adding Fees?
In recent years, surcharges and service fees have become commonplace on restaurant bills. According to the National Restaurant Association, 15% of restaurant owners added extra charges in 2023 due to rising operational costs.
Here’s why restaurants are turning to these fees:
- Cost Management: Fees help offset rising expenses, from credit card processing to inflation.
- Employee Compensation: They support fair wages and better benefits for staff.
- Price Stability: They prevent menu prices from skyrocketing, which could scare away customers.
The Battle Over Junk Fees
Junk fees, such as undisclosed charges on concert tickets or hidden resort fees, have come under scrutiny. The Biden administration is targeting these practices, and the FTC is expected to release a rule this fall banning misleading fees.
However, restaurants argue their fees aren’t the same. They say:
- Transparency: Many restaurants clearly disclose their fees, unlike hidden charges elsewhere.
- Necessity: Fees help maintain operations and employee satisfaction in an industry with slim profit margins.
Customers’ Perspective
Not all diners are on board with these extra charges. Critics argue:
- Surprise Costs: Unexpected fees can shock customers, especially when they’re already budgeting carefully.
- Fee Disputes: Some restaurants have been criticized for misusing service charges, like claiming they go to staff but not distributing them fairly.
For instance, a Denver-based worker claimed his restaurant kept 30% of the proceeds from a service fee, despite the claim that it was distributed among staff.
Examples from the Industry
Different restaurants use fees in various ways:
- Galit, Chicago: This Middle Eastern restaurant includes a 4% fee for healthcare costs and a 20% service charge. They argue it helps manage payroll and avoid higher menu prices.
- Kaliwa, D.C.: Implements an 8% surcharge to handle rising labour and operating costs. They aim to be transparent about why they charge extra.
- Square Report: Found that 3.7% of restaurant transactions included a service fee, up from 1.7% in early 2022.
Legal and Legislative Landscape
States are reacting differently to the crackdown on junk fees:
- California: Excluded bars and restaurants from a new anti-junk fee law, allowing them to continue using service charges.
- New York: Enforces its own laws on service charges, ensuring they benefit staff.
The Restaurant Industry’s Defence
Restaurants argue that fees like large party charges, delivery fees, and credit card processing charges are crucial:
- Large Party Fees: Help cover the extra costs of serving big groups.
- Delivery Fees: Offset the cost of delivering food.
- Credit Card Fees: Cover the high cost of credit card processing.
The National Restaurant Association claims eliminating these fees could lead to higher menu prices and customer confusion. They estimate that updating menus alone would cost over £3,800 per restaurant.
Navigating Controversial Fees
Not all fees are justified. Some restaurants have faced backlash for:
- Covid Surcharges: Clavero from Galit believes these should have been removed long ago. Ongoing Covid surcharges might seem like a red flag for financial struggles.
- Hidden Costs: Some fees are seen as less transparent and could lead to customer frustration.
Conclusion: The Future of Restaurant Fees
The battle over restaurant fees is complex. As the FTC’s rule approaches, restaurants are fighting to keep their essential surcharges while maintaining transparency with diners. The outcome will shape how we pay for dining out in the future.
Understanding the reasons behind these fees can help you make more informed decisions when dining out. Stay informed about your local regulations and the policies of the restaurants you visit.
