Welcome to Ask Eater, a column from Eater LA where the site’s editors answer difficult dining questions from readers. Have a question for us? Email firstname.lastname@example.org.
Hey Eater LA,
What’s up with the service charge fees at the bottom of my bill? I keep seeing extra fees added onto the cost of my meal which are sometimes 3 percent with the most being an 18 percent charge. When I asked my server, they told me this wasn’t a tip. The printed language says the extra tip is given to the non-server staff, others just say it’s a healthcare surcharge. Is this legal? Is the money going to the servers, the rest of the staff, or both?
Diner Confused About Service Fees
Hello Diner Confused About Service Fees,
Happy to answer your question about restaurant service fees. But first, some background.
Over the last five years, it’s become common practice for Southern California restaurants to acknowledge additional “service fees” at the bottom of menus and subsequently include them on bills at the end of the meal. This differs from an actual tip or gratuity and can vary widely from 3 to 20 percent of the bill. It appears that you, like many others who dine out regularly, need some clarity about where that money ends up.
Restaurants like Silver Lake’s All Day Baby instituted a 3 percent “kitchen love” charge. Popular Melrose restaurant Ronan added a 4 percent “healthcare” charge on each check. At Bone Kettle in Pasadena, the bottom of the check says the following: “To provide our team with a livable wage, please note that an automatic service charge will be applied. While not required, additional tips are welcomed and greatly appreciated.” At Barra Santos in Cypress Park, a Reddit user who dined at the restaurant said staff told them that tipping above the service charge was unnecessary.
In Los Angeles, these service charges are often labeled as “health insurance,” “administration” fees, convenience fees, or surcharges. No matter which term is used at an establishment, these service charges could refer to tips; an actual service, like bottle service at a club or bar; or even delivery fees from a third-party operator like Postmates or Doordash.
Since 2021, restaurant operators have struggled to keep up with higher operating costs and inflation. Simply raising prices can be a tricky strategy in LA’s competitive restaurant scene and could result in customers feeling taken advantage of or even angry. As a result, restaurants use service charges to counter the appearance of higher menu prices, becoming so widespread that Reddit users have been tracking LA restaurants that implement them.
Some restaurant owners use the fees to pay for growing labor costs. In other states, service workers earn a lower tip-adjusted minimum wage, a wage structure with pitfalls that are amplified in cities with a high cost of living. At the federal level, the minimum wage for tipped workers is $2.13 plus tips, creating an industry reliant on a tipping economy that leaves large disparities between earnings for servers and other non-management restaurant roles. California has a mandated minimum wage of $15.50 as of January 1, 2023, and in cities like Los Angeles, the minimum wage increased from $16.04 to $16.78 on July 1, 2023. These imbalances are complicated by businesses that allow tips to supplement their employees’ wages.
Not only are diners confused by the service charges, but employees are as well. It’s part of the reason why former employees filed a class-action lawsuit against Joint Venture Restaurant Group, the parent company that operates Jon & Vinny’s, the now-shuttered Animal, Son of a Gun, Petit Trois, Helen’s, and Cookbook. The plaintiffs are former and current servers who allege confusion surrounding the restaurants’ standard 18 percent service charge that resulted in fewer tips and lower take-home pay.
Some operators have been public about their struggle to equalize pay for front- and back-of-house staff. The subject hits close to home for Andrea Borgen, who owned and operated Downtown LA restaurant Barcito before it closed in 2021. In 2018, Borgen wrote about restaurant wage equity on Medium, and on June 21 she addressed the Times’ Joint Venture Restaurant Group lawsuit report in an Instagram post. Borgen tells Eater LA the entire restaurant community could use a complete retool surrounding worker pay and tipping.
“The reason we’re here is because the restaurant business model is built on the backs of a low wage,” says Borgen. “It’s hard because there are just so many issues to untangle: Tipping as compensation; who deserves a piece of that tip; how we even got here in the first place; [and] where we go from here. Customers have tipping exhaustion but they also hate service charges.”
In October, Gov. Gavin Newsom signed Senate Bill 478, also known as the junk fee ban, which will become state law on July 1, 2024. Though SB 478 is directed at fees associated with concert tickets and hotel stays, it could impact restaurants that utilize extra service fees. State Attorney General Rob Bonta’s office told Eater SF would not confirm if restaurants would be permitted to continue using the fees. As this story develops, Eater will keep diners and operators aware of what’s to come.