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Service fee on group of 50 in private dining room

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The bill stated a charge for the food and a separate service fee of 21%. The guy (not sure if he was a manager or not) that presented the bill stated that the service fee went to pay for the staff and that no gratuity was included. I've never heard of food being priced without including the cost of the labor to prepare and serve. What's going on here?

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  1. Caterers often charge a service fee and then tack on a mandatory gratuity, when catering things like weddings, I found this out when I was shopping for caterers and wedding stuff many years ago. I find it appalling, but there isn't much you can do about it.

    1. As a former event planner and fundraiser, the 21% service fee was always added on at hotels and other similar venues. That said, I've never heard of a private restaurant adding this. Usually, I've encountered an automatic tip of 18% or more for large parties. They should have brought this to your attention when reserving and planning your get together.

      3 Replies
      1. re: TXMandy

        A relative did the planning and I'm confident they did disclose the service fee in advance, but I also think there was a presumption that WAS the gratuity.

        1. re: PappyAustin

          That makes sense, I probably would have assumed the same thing.

          1. re: PappyAustin

            that presumption is not the fault of the venue/caterer.
            this is a normal fee for every banquet event.
            it would be entirely reasonable for the venue/caterer to expect that you would know this.

        2. that's how it was done the last time i had a catered event.
          the catering manager alerted me ahead of time (he included the fee in his quote) so that i wouldn't be caught flat-footed.

          i have no problem what they name the various portions of the quote. (they could call it the "flying pig" fee if that pleases them.)
          i just need to be able to calculate my "out-the-door" number including tip. normally i also slip the servers some cash in addition to the charge that goes on the bill.

          1. Are you aware of the standard distinction between a service charge and a gratuity? In most states, a restaurant can do anything it wants with a service charge that is displayed on a catering contract or a menu (New York may be an exception), including distributing it to the employees as a bonus. And if it's a mandatory charge, the state will likely insist that sales tax will be collected on top of it. That still doesn't exempt a restaurant from paying its employees the legal minimum wage (state or federal, whichever is higher). If the restaurant did indeed pass on the service charge to the wait staff, it could very well be considered the equivalent of a normal tip and at 21 percent, not terrible.

            A gratuity, on the other hand, is widely regarded as a gift from the patron to the servers, not subject to sales tax, and the restaurant has no right to interfere other than stipulating how it should be divided among the wait staff.

            So if you pay a 21 percent service charge that all goes to the wait staff on top of their regular pay, any additional gratuity is essentially additional gravy for the wait staff (which may well be well deserved).

            3 Replies
            1. re: nocharge

              the catering managers i've dealt with here in california have told me that the service charge does NOT necessarily go to the servers.
              this is why i like putting green money cash into the hands of servers, especially servers at a banquet function.

              1. re: westsidegal

                Yes, I believe that there is no requirement in California that any money of the service charge whatsoever goes to the employees. The restaurant could conceivably keep it all. That, I believe, is consistent with standard labor law practices. (On the other hand, a restaurant that keeps the service charge could have a serious problem with employee retention unless it gives out very generous base salaries.) The famous New York case is, from my understanding, based on consumer fraud law, not labor law. Would consumers be led to believe that the "service charge" would go to the servers?

                http://www.foxrothschild.com/newspubs...
                http://waiterpay.com/legislation-prop...

                But going back to the original issue, if the manager told the truth about all of the service charge going to the servers on top of their regular base salary (and California doesn't have a tip credit), any additional gratuity would essentially be an additional tip for a job well done.

                1. re: nocharge

                  i have no problem leaving additional gratuities for banquet servers.

                  imho banquet serving is inherently difficult.

                  right at the time when the food is ready and all the guests need to be served it is not rare for PITA guests to surface: ones that want their own special meal (a meal that a normal banquet kitchen is not prepared to make) .

                  often, it is the server who ends up bearing the brunt of this situation.

            2. I work mainly in the field of functions/banqueting, and here is Australia, at least, a "service fee" is normally built into the per head cost.
              Tipping is rare over here, because we have a high hourly rate for our employees and its not culturally ingrained to tip.

              Any charge related to labour costs does not go to the staff, but is included to offset their wage.
              This is also reflected in charges such as room hire, corkage, theming etc. All of these charges go into general revenue which are realistically used to offset our high labour costs.

              1. So a large group is dining at a restaurant. I understand a mandatory 18% TIP. I think a group that large should demand an even larger TIP. but what's the service fee about? Does the reastaurant not price their food high enough? Usually, groups this large are in a back room somewhere so it is not about table turnover. How do restaurants justify such charges?

                45 Replies
                1. re: John E.

                  There is no such thing as a mandatory gratuity (or "tip"), that would be a contradiction in terms. If it's mandatory, it's a service charge.

                  1. re: nocharge

                    Yes, but on groups of say, eight or more, the TIP becomes a mandatory service charge instead of a TIP. You seem to have missed my point however. What's this about a service charge that is not instead of a TIP? Isn't a restaunt in the business of serving food to people? If the restaurant can accomodate 50 people, why don't they simply serve them food, as that's the business they are in?

                    To answer my own question, they add the service charge because they can. What I am interested in is how they justify it.

                    1. re: John E.

                      The idea behind a mandatory service charge for large parties is that large parties where everyone pitches in to pay the check tend to undertip. Often, a lot of people in a large party underestimate how much they owe and in order to make it all add up, they take it out on the tip thereby stiffing the waitstaff. (And since paying the bill was a collective effort, nobody will feel particularly guilty as long as they were under the illusion that they had paid their fair share.) A mandatory service charge distributed among the waitstaff in lieu of a tip resolves that problem and protects the waitstaff from getting stiffed. In return, the large party probably doesn't feel obligated to leave a real voluntary tip on top of the service charge unless they were really pleased with the service.

                      1. re: nocharge

                        IMHO, if a venue quotes a figure to serve 50 people that amount should cover everything, unless they specific what it doesn't cover. If I were quoted a "service charge" I would want to know what it goes toward.

                        Seems as if the real underlying question here is whether or not the "service charge" (or any part of it) goes to the staff. If you're not given the details on that (and all or part DOES go to the staff, and NOT for base pay) it seems like an underhanded way of possibly getting you to "over tip". I can't see being comfortable with a 'service charge' if I don't know what it's for.

                        JMHO.

                        1. re: Midlife

                          Whom the service charge goes to is a fair concern. I've heard of cases where the house has pocketed the entire amount. On the other hand, if it does indeed go to the staff on top of their base pay, I don't have much problem with it. Service charges are a fact of life for large parties.

                        2. re: nocharge

                          "...pitches in to pay..."

                          Where did you read that in the OP?

                          1. re: John E.

                            Obviously, a restaurant that charges a service charge for large parties doesn't know or care who will pay for what. The service charge is there to protect the staff from the worst case scenario.

                            1. re: nocharge

                              The OP said the service charge was to pay the employees and was not the TIP, meaning it was to pay the employees' wages. That does not protect the employees from a lousy tip.

                              1. re: John E.

                                A service charge is never a tip. A restaurant can choose to distribute all or part of the service charge to the staff on top of their base pay, but if it does, it's considered a bonus, not a gratuity. From what the OP wrote, you can't tell whether the service charge was used to pay for the employees' base pay or to pay them on top of that.

                                Here is an FAQ about tips that addresses service charges in item 6:
                                http://www.dir.ca.gov/dlse/FAQ_tipsan...

                                1. re: nocharge

                                  If a service charge for a large group is not a tip, what is it for? If a restaurant charges extra for a large group, then why are they in the restaurant business? They are in business to serve food. I don't get why they think they should charge extra for food for a large group, they should be discounting the food for a large group.

                                  1. re: John E.

                                    I think in most cases, the restaurant will distribute the service charge to the employees in lieu of a tip, thereby protecting them from scenarios where the large group would have left a lousy tip. However, in most states, restaurants can legally stiff the employees and keep the service charge to itself, although that may not be a smart move when it comes to getting employees to serve tables with large parties.

                                    1. re: John E.

                                      I think that's related to the size of the restaurant. If they seat 500 people, then a party of 50 is not that big a deal. If they seat 75 people, then it's pretty clear that serving 50 people, ALL AT THE SAME TIME, is a logistical leap for them. I don't think it's as simple as you've defined it.

                                      1. re: John E.

                                        "they should be discounting the food for a large group."
                                        ~~~why on earth?

                                        while many places do offer pre-fixe options for large groups that are less pricey than a la carte, i don't get why you think these guests SHOULD pay less? it's the same food, but with a ton more labor and man-hours to setting up/breaking down and food prep.

                                        as to the 21%? am guessing 15-18% went to the servers, 3-4% went to the sales/marketing person and the rest went to the management slush fund. in most states it's illegal for salary staff to participate in tip pools. calling it a service fee, rather than a gratuity, is a walk around that.

                                        1. re: hotoynoodle

                                          I was being a bit facetious with that renark about discounting the food. When I wrote that first post, I was no considering a banquet situation. I took the OP as meaning a groip in a back room ordering off the menu. I think a restaurant should charge enough, per dish as written on the menu, to pay the staff. If they want to add an additional fee that is still not a TIP to the waitstaff, that should be made aware before the bill arrives. I understand the oroblem about people shorting the tip on a large bill, but that was not the question asked in the OP.

                                          1. re: hotoynoodle

                                            the servers don't necessarily get any of the service fee.

                                            1. re: hotoynoodle

                                              "discounted the food for a large group"
                                              ~~~~~~~

                                              You can negotiate discounted pricing if your group is large enough to warrant it. It's also called the economies of scale. The caterer can then negotiate discounts from their vendors based on the quantities purchased. My company does this all the time, and our larger clients expect it. Some of our smaller ones too...

                                              1. re: alwayshungrygal

                                                alwayshungrygal:

                                                so you work for a RESTAURANT or a BANQUET organization that finds it less expensive to serve a large group ALL AT THE EXACT SAME TIME than it is to serve an equal number of people who can be fed using a staggered schedule?

                                                AMAZING!
                                                how, exactly, can they pull this off?

                                                as i'm sure you know, food costs generally account for less than half of the true cost of getting the food on the table?

                                                the decrease of per unit food cost as a result of increased volume is more than offset by the increase in other expenses, both variable and fixed, that are part and parcel of banquet events.

                                                and, i'd assume your company has taken into account the tremendously higher cost of refrigeration and labor and capital items that play a central role in running a successful BANQUET?

                                                i'm dying to know how your company can get around these costly requirements that are involved in every banquet.

                                                i want to hire them at the discounted rate that they offer for big banquets ( a rate that i assume they can easily offer because of the lower per unit food cost, right?)

                                                1. re: alwayshungrygal

                                                  i have worked in fine dining and private events almost 25 years and never worked for a company that does this. i also do not know a single vendor that charges less for 100 pounds of steak than he does for 50.

                                                  as a sommelier, i can sometimes get discounts on large case drops, but frequently most restaurants do not have enough storage space for that kind of thing. and the discount never amounts to more than a few dollars per bottle. it would mean no discount for the guest.

                                                  1. re: alwayshungrygal

                                                    One of the banquet facilities I worked at was attached to a golf course. There were only four organizations that ever got a break on the cost of their food.

                                                    1. The Men's Club from the golf course. They would pay a flat rate and the executive chef would develop a menu for them based on what he could get for that cost. he balance of the price was paid by the golf course so it was really an accounting gimmick.

                                                    2. The Ladie's Club from the golf course. Same as #1 above.

                                                    3. The local Chamber of Commerce. They had an arrangement similar to the Men's and Ladies's clubs where they paid a set fee and the chef developed a menu for them. We wrote this off as a form of advertising as it got other members of the Chamber in the door to see and experience our faciliy.

                                                    4. A local charity had a annual fundrasier at the golf course. We deeply discounted their food but the cost was supplemented by the golf course. Another accounting gimmick. In return for this, the radio station that hosted the event gave us free advertising for the year.

                                                    These were the only peple who ever got a discount. Period. We operated on a 28% food cost so even if we were able to get a modest discount from our suppliers this would not come out to be much of a discount on the final bill.

                                                    We would have people that would try to negotiate pricing. I would kindly remind them that if they were looking for a more economically friendly venue there were a number of churches and fraternal lodges in the area that would be happy to host their events. We were simply just not in the business of giving our services away for a loss.

                                                    1. re: jpc8015

                                                      i have run events like this, particularly for non-profits. they present a figure of $x pp and we create a menu, while still adhering to our standard food costs. we're not giving them discounts on "regular" menu items. that's a sure recipe for failure.

                                                      and if john doe shows up and says, "i know your normal price for this package is $150 pp, but i'd like that same package for $75 pp." that would not be done.

                                                      1. re: hotoynoodle

                                                        Agree 100%

                                                2. re: John E.

                                                  I don't agree with you.
                                                  It costs the restaurant more to handle that large group. The room has to be set for the 50 people. It takes staff to arrange the tables and chairs and set the tables and to break them down afterwards. And in all that set up time and breakdown time the tables are not producing revenue.
                                                  A large group generally takes longer to dine than a 4 top. It may be that this is a celebration and time is spent on opening gifts, speeches, toasts, etc. Or a business meeting with a presentation and speeches. All of this cuts down on table turns.
                                                  Furthermore, the establishment may have to pay the servers party rates, not the subminimum pay that tip based servers may be permitted by law.
                                                  When running an event, I (a former caterer. restaurant owner and waiter) assume that the staff is being paid for the party, NOT getting $2 per hour plus tips, and I don't tip the servers. I might give some cash to the Maitre D or Party manager if service was exceptional and ask that it be distributed, but often just pay the bill including the service charge.

                                                  That said, the $2 per hour server who waits on me in a restaurant gets a 20% (average tip). The party server getting $100 for the party gets no tip.
                                                  My 25 yo teaches school, but works as a server on the weekends (to be with a group of friends in a particular establishment). Tomorrow, she's working a party in the afternoon 12-3 and getting $100 flat party pay. Then she's working 5-1 in the dining room 8 hours at $3 per hour plus tips. She'll probably clear $200 in tips for the shift. She doesn't lose out working the oarty for no tips.

                                              2. re: John E.

                                                John E::
                                                the OP is clearly confused about the normal practices involved in the banquet business.

                                        2. re: John E.

                                          John E:
                                          why would the restaurant have to "justify" it?
                                          whatever the restaurant chooses to name their charges really doesn't matter to me.
                                          if they call 10% of the total tab the "flying pink pig fee" why would i care?
                                          the only things that matter are:
                                          1) the total amount being charged
                                          and
                                          2)what that amount covers.

                                          fwiw, i've never arranged a banquet event that didn't involve a service fee. also, i never assume that the fee actually goes to the servers.

                                          1. re: westsidegal

                                            When I said jusfify, what I meant was I want to know the costs up front. The OP seems to have been presented with a bill with a fee in addition to the price of food on the menu without prior knowledge of the fee. I understand there are extra charges for a 'banquet' situation. The OP did not mention a banquet.

                                            1. re: John E.

                                              Feeding 50 people in a private dining room is a banquet.

                                              1. re: jpc8015

                                                If a restaurant does not charge enough for their food to pay their wait staff, what are they doing in the restaurant business?

                                                1. re: John E.

                                                  you're joking, right? only a very few states even force owners to pay servers minimum wage.

                                                  1. re: hotoynoodle

                                                    I am in Minnesota, Minnesota is one of the states that requires minmum wage for food wait staff, however that is not the point of the OP. The service charge in the OP was about paying wages, at whatever their amount, to the staff instead of the restaurant paying those wages, at whatever rate they are, out of the revenue from the cost of the food from the rates on the menu. It was not about TIPS.

                                                    I don't really understand the confusion on this topic. I believe the costs charged to someone dining at a restaurant should be be made aware to the diner(s) prior to the bill being presented. That is the primary interest of the OP.

                                                    1. re: John E.

                                                      i think i explained this. by calling it a service fee, and NOT a tip, it allows management to take a cut. it's a work-around the law and i have never worked in a place that doesn't do it. utterly bogus, but happens everyday.

                                                      some places may also take some of it to give to kitchen staff for their extra work, but that's extremely rare.

                                                      the op isn't saying they weren't told up-front, just that he/she doesn't understand what it's for.

                                                      1. re: hotoynoodle

                                                        "...by calling it a service fee, and NOT a tip..." Where was this explained by the OP, where was this information provided to the OP prior to receiving the bill?

                                                        The only way to interprret the OP as written is to assume that the'service fee' that was not in lieu of a TIP was not mentioned until the bill arrived. Most service fees mentioned on menus is for large groups is to ensure the TIP for the waitstaff.

                                                        That is not the case the OP presented.

                                                        1. re: John E.

                                                          I am absolutely certain that the service fee was mentioned somehwere on the brochure, literature, service contract, or banquet event order completed by the person who interacted with the caterer.

                                                          Just because the customer did not see it does not mean that it wasn't there.

                                                          1. re: jpc8015

                                                            "...brochure, literature, service contract, or banquet event order completed by the person who interacted with the caterer."

                                                            Please point out any of this in the OP.

                                                          2. re: John E.

                                                            nowhere in the op does he/she state they were NOT told in advance about the "service fee".

                                                            the person paying the bill may also not be the person who booked the function.

                                                            1. re: hotoynoodle

                                                              Exactly my point. The person who booked the banquet very well may not have been the person who received the bill when it was all said and done.

                                                              There is no way a group of fifty people walked into a random restaurant off the street. They had to have set up a special meal ahead of time. I can guarantee you that during the correspondence this fee was communicated, in writing, to the person who set up the party. This is a fundamental part of setting up the function. Just because the person who received this information failed to read it or failed to communicate it to the person paying the bill does not mean that it wasn't there.

                                                              1. re: jpc8015

                                                                am on your same page. the title of the thread involves "private dining room". clearly this was pre-booked.

                                                    2. re: John E.

                                                      And which restaurant/banquet facility do you manage?

                                                      1. re: John E.

                                                        John E:
                                                        i've never seen a restaurant that fully pays their waitstaff.
                                                        where have you seen this?
                                                        what city?
                                                        what restaurants?

                                                        i'm dying to find out where this is common practice.

                                                        1. re: westsidegal

                                                          You seem to have misunderstood me. There are about four states, Minnesota being one of them, that have to by law to pay at least minimum wage. The only part that I am finding a problem with is the restaurant apparently not making clear that the service fee goes to the owner of the restaurant and does not go to he staff as a TIP. i see on menues all the time that on groups of 8 or more there is a mandatory service charge and I have always assumed this to be the TIP to the staff, not their wages. I think wages for restaurant staff should be paid for out of the revenue from food sales. If that isn't high enough, the menu prices should be raised.

                                                          Yes, I am familiar with banquets. In a former job I helped to plan a few banquets (four) that were from 39 to 52 tables of ten in a large hotel ballroom. I consider 50 in a private room at a restaurant to be a groom's dinner. Again, the restaurant can charge whatever they wish to, however I think it should be made perfectly clear to the customer what the charges are for so there are no misunderstandings when the bill arrives.

                                                          1. re: John E.

                                                            it was NOT called a TIP.
                                                            it WAS called a service fee.
                                                            if the person booking the banquet didn't understand what a service fee normally is, they should have asked.

                                                    3. re: John E.

                                                      JOHN E:
                                                      in the title of the the original post it says that the event involved feeding 50 people in a private dining room.
                                                      that is a BANQUET.

                                                      1. re: westsidegal

                                                        I don't consider 50 people ordering off the menu a banquet.

                                                        1. re: John E.

                                                          "private room" implies banquet. "banquet" is not a roman orgy. it's a large group, pre-booked. period. they may not even have a private space. have moved many folding screens in my day.

                                                          this REALLY is just a reach-around so the resto can circumvent the laws and allow salary peeps to dip into the tip pool.

                                                          1. re: John E.

                                                            There is no way that 50 people ordered off the menu. They may have been provided with a choice of chicken, beef, or pasta but they could not have been given the complete menu to choose from on the night of their event. That is a logistical impossibility for 99% of all professional kitchens.

                                                            1. re: jpc8015

                                                              You are correct of course because even a 200 seat restaurant does not expect everyone to order all at once. That makes the job in the kitchen even easier with just three choices for the diners. They should be prepared and there should be no hiccups.

                                              2. I used to be the catering manager at a Marriott property. This is standard practice.

                                                The amount of time that it takes to set up a special dinner for 50 people is incredible. The folks who were serving your food were more than likely hauling tables, chairs, and linens from storage prior to you arriving and stayed late into the night putting all of that equipment back into storage. Additionally, the kitchen crew was busy in the kitchen staging warmers and prep stations that are in addition to the regular kichen serving line. There was more than likely additional kitchen staff brought on to work this function.

                                                If this had been a function at the property I worked at there would have also been a room rental fee in addition to the price for each meal. If you had chosen to bring in some sort of celebration cake there would have been a plate fee for serving it to your guests. If you held your wedding on our property there was a chair fee for setting up and breaking down your wedding. If there was going to be music and dancing after your dinner we charged a fee to set up a dance floor.

                                                I would always explain all of the fees to my potential customers in detail prior to their booking. Every now and then I would get someone who would try to nickle and dime me down but I had to stand my ground. All of these things that we were doing required additional people and those people had to be paid for their time. We operated on a rzor thin margin and if I started giving services away we would have gone into the red.

                                                3 Replies
                                                1. re: jpc8015

                                                  jpc8015:

                                                  staging a banquet, as you mention, is a HUGE, DIFFICULT, undertaking fraught with hazard.
                                                  it's only easy if you're the person sitting on your duff being served.
                                                  for everyone else, it's a crushing amount of work that requires a tremendous amount of equipment (capital cost).

                                                  1. re: westsidegal

                                                    That was something I forgot about entirely...the additional equipment required to serve a banquet. Those chafing dishes are expensive, at least the pretty shiny ones you see at nicer banquets are. When I worked for Marriott we had thosands of dollars wrapped up in chafing dishes alone.

                                                    I know that people will say that we didn't need to buy the expensive ones but those same people would complain about ugly chafing dishes showing up in their wedding photos. It truly is damned if you do and damned if you don't for people working in this industry.

                                                    I swear that some people honestly believe that these banquet facilities should be a not for profit organization hosting these huge gatherings out of the goodness of their hearts.

                                                    1. re: jpc8015

                                                      you also didn't mention the costs involved in making available the tremendous amount of refrigerator space that must be dedicated to a banquet event.
                                                      the refrigerators themselves are a huge fixed capital cost, and they also consume a lot of electricity.

                                                2. <<I've never heard of food being priced without including the cost of the labor to prepare and serve. >>

                                                  it sounds like you've never set up a banquet and this time the person who did the original booking either didn't read what was given to him/her or didn't listen to what was told to him/her.

                                                  over several decades in three different cities i have set up many banquet events. EVERY TIME the service fee was spelled out in advance. i find it impossible to believe that the person who negotiated and booked the event wasn't informed about it.

                                                  at least on the two coasts of the United States, this is the normal practice.
                                                  now you've heard about it.