The End of Tipping? How the Pandemic Changed Your Checks

Updated: Nov 4, 2020

Picture this: after hours of anticipation, the doorbell finally rings. For the first time since the pandemic started, you and your family are finally getting food from your favorite restaurant delivered. 


You rush to the door and pick up your contactless delivery. You check the receipt, just to be sure everything you ordered is accounted for – and that’s when the other shoe drops. Unbeknownst to you, the restaurant added a 20% surcharge to your order. Suddenly, your favorite food tastes a little less flavorful. 


If this sounds familiar, you’re not alone. Lots of restaurants have added standard service charges since the COVID-19 outbreak began. What’s the deal with surcharges, and why are restaurants suddenly adding them to our bills?



America, Tipping & COVID-19


In the United States, restaurants rarely add service charges to people’s bills. That’s because it’s culturally expected that customers will pay a large tip (15 to 20%) to their server. State laws reflect this expectation – in some states, servers can legally be paid as little as $1.95 per hour because it is assumed they will make most of their income from tips. 


While this feels normal to Americans, tipping culture is actually pretty uncommon worldwide, and it creates unique problems during a pandemic.


By its nature, income from tips varies from night to night. Some days you win big, somedays you scrape by. Economic downturns like the one brought on by COVID-19 can exacerbate this problem. 


To mitigate this uncertainty, many restaurants are now automatically adding service charges to their bills. Typically, some portion of each service charge goes to the restaurant and the rest goes to the servers as either direct income or benefits, like health insurance.


By adding a service charge, restaurants can provide greater stability for their employees during uncertain times.  


How Should Restaurants Handle Service Charges?


Truthfully, most Americans probably wouldn’t mind switching to a service charge system. The purpose of this post is that problems arise when service charges show up on customers’ receipts without warning. That’s why restaurants should proactively communicate the addition of the service charge to manage their customers’ expectations. 


If you have a website for your restaurant (which you should!), create a page that explains why you added the surcharge and what it goes towards. Consumers will respond positively to an employer that takes responsibility for supporting its employees. 


If orders are placed by phone, have your staff communicate the surcharge as part of their standard script when taking an order. While this notice may result in one or two cancellations, it will be far less damaging than the impact of a surprise surcharge, which might break the trust of a long-term customer.


How Should Consumers Respond to Service Charges?


If you are ordering from a restaurant, be sure to ask about service charges and mandatory gratuity before you finish placing your order. 


As far as tipping goes, it’s still appropriate to tip in addition to service charges depending on the size of the surcharge and the quality of service. When in doubt, ask what the surcharge goes towards. If the money goes primarily to the restaurant’s revenue, consider tipping on the value of the meal before tax and the service charge. If the service charge goes primarily to the server, you might not need to tip at all.


Have more questions about the evolving restaurant industry? 


The KEG team is here to help – and your first hour of consultation is free.


Contact us at 651-775-9078, or send an email to mike@kegconsult.com


#restaurants #tipping #consulting #covid


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