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Dinner contract includes 22% gratuity

Just asked for a reservation at a restaurant for a group of 15 - they wanted a credit card form filled out in advance to hold the reservation- no problem with that - they asked for a $200 cancellation fee 24 hours in advance - ok with that - then in the small print it says a gratuity of 22% will be added to the bill - I have never seen that - I have seen 18% and normally up that to 20% but has anyone seen an establishment ask for a 22% service charge?

I am awaiting a response from the manager - I have requested a reduction to 18% on food and 10% on beverages - normally I would have paid 20% on everything but think they are being obnoxious asking for 22% - what do you think?

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  1. If you have a party of 15, and want appropriate service, you will probably have a server assigned to your table exclusively, meaning that he or she will not have as many covers as normal for that time. Adjusting the tip up a little is not a problem for me in that case.

      1. re: Janet from Richmond

        restaurant agreed to 20% on food and 10% on wine - the server just lost about $60 (10% on 6 bottles of wine @ $100 each) - I would have agreed to 20% on everything - the 22% number just rubbed me the wrong way - thank you for pointing out that you would not have been affected by it - I will make sure the server gets the extra dollars - just did not like the automatic extra tip

        1. re: carlylecat

          Agree on the feeling about the automatic.

          FWIW, I would inform the server and who ever is bussing that the required amount is the minimum, that you are open to leaving more.

          1. re: carlylecat

            I think it was unlikely it was going straight to the server anyway. Also, your negotiations were possibly affected by it being slow season ie/ they charged you the party season rate and were willing to back down for the off-season business... but won't necessarily do the same another time of year.

            1. re: julesrules

              Agree this time of the year is classically slow for functions, if it was in June, they probably would have stayed at 22%.

            2. re: carlylecat

              fwiw,
              call me cynical, but:
              i always leave the servers with green-money-cash tips IN THEIR HANDS.

              i like really knowing that the gratuity, indeed, goes to the server(s).

              1. re: westsidegal

                I've read that's the best way to leave a gratuity, however, when my daughter was waiting tables in a chain restaurant, the manager expected to get all the tips, including cash, into one pile to be split amoungst the entire staff. That job didn't last long.

                1. re: mikie

                  wonder how much the manager took for his/her share?
                  bet there was nobody auditing the take. . . .

                  1. re: westsidegal

                    in many states if the manager took one cent of the tip money it is illegal

                    1. re: bagelman01

                      in those same states, it doesn't stop them from doing it.

                      1. re: bagelman01

                        yeah,
                        the managers at starbucks did it for years before they lost their case in court.

                        1. re: westsidegal

                          It's hard to imagine that any deep-pocket organization would allow for something stupid like that to happen given that the class-action lawyers would form a mile-long line outside (And the word "stupid" is an understatement. As a restaurant investor, if I suspected that anything like that was going on at a restaurant, I wouldn't touch it with a ten-feet pole, of hundred-feet pole, or thousand-feet pole.) But here is a link to the Mario Batali suit:
                          http://www.huffingtonpost.com/2012/03...

                    2. re: mikie

                      Tip pooling can be illegal under the Fair Labor Standards Act, depending on who gets a cut. The manager, for example, is not allowed to take servers' tips.

                    3. re: westsidegal

                      In France where 15% is included in the bill, that money does not go to employee who is on salary, it goes to repay the owner who is paying the employee.
                      If you add a pourbois, or little more, give cash to the server directly.

                    4. re: carlylecat

                      > the 22% number just rubbed me the wrong way
                      >
                      i agree. good job.

                    5. That extra two or four percent may be being given to the banquet coordinator.

                      1. It's pretty standard for a group of that size to have an automatic, larger tip than some people would expect to pay. Also, depending on what state you are in, the service charge/gratuity/tip may be subject to tax. When the SC/tip is negotiated, it becomes part of the sale and is thus subject to tax.

                        1. the extra 2% above 20 frequently is the commission for the person that booked the party. Assuming they do a healthy business where contracts are required, a large party/private dining coordinator is who you're dealing with.

                          2 Replies
                          1. re: plaidbowtie

                            it was the restaurant owner/chef's wife

                            1. re: carlylecat

                              as somebody who worked in restaurants a very long time...

                              anything over and above 18% is most likely NOT going to your service staff. the extra is going to the house. since you say there is no function coordinator, then yeah, it was going to the wife.

                          2. Just be on the lookout for additional tip requests. I went to a restaurant in Chicago where the check included a 20% service charge and a line for me to include "gratuity". I can only guess that they hoped I didn't know what "gratuity" means.

                            32 Replies
                            1. re: Querencia

                              Local restaurant has a reputation for doing that sort of thing.

                              Menu clearly states 10% service charge will be added. And so it was. Server presents the credit card machine:

                              Server - "Press this button to add tip"

                              Me (being alert to the scam) - "Isnt the service charge already added"

                              Server - "Service charge isnt tip"

                              Me - "I think you'll find it is, matey"

                              That's perhaps the most outrageous example I've come across. But there's been several occasions where a service charge has been added, yet the card machine has remained programmed to ask if you want to add a tip.

                              1. re: Querencia

                                sometimes guests want to leave extra on top of the auto-grat. that's why the "tip" line is there. not to screw you.

                                1. re: Querencia

                                  When I ate at One Flew South in the Atlanta airport the waitress was very upfront with us about the fact that a 20% gratuity is automatically added to the bill. Her up front honesty, along with outstanding service lead me to tip her an additional few dollars on the gratuity line of the check.

                                  1. re: Querencia

                                    Service charge and gratuity are not the same thing.

                                        1. re: fourunder

                                          Thankfully.

                                          So, from what you say, when I've visited the States and seen a 20% service charge on the bill, that's not the gratuity and another 20% is required as the gratuity? Bollocks!

                                          1. re: Harters

                                            I'm sure Chicago feels the same as you.

                                            What you seem to fail to realize is every business is different and every situation is not the same. What you think you know as a rule may not be true, e.g. a restaurant, compared to a catering facility.

                                            It's been noted quite frequently on this site that any party over 10 may not allow the party to order off the menu, but may have to order off a special menu. Any large party can fall into the category of special event. In such a case, the restaurant assigns workers to the party and they may be guaranteed a set wage or payment for the event, or party and are no longer bound to the restrictions of the hourly wage. To paint a broad stroke and think you know what the house policy is on paying their workers is none of anyone's business. The business has a right to establish it's own rules....if you don't like it, you certainly have the option of accepting or declining....and the better the restaurant, there are few that decline.

                                            The service charge as explained above is a labor charge, not a gratuity.....and the gratuity is always listed as additional.

                                            1. re: fourunder

                                              I think you're just misunderstanding the nature of service charges. I understand that. They are comparitively rare in America, so it's not surprising that you may well not be used to them, or understand that they replace the tip, as they do elsewhere in the world.

                                              I've only come across them a couple of times in America - both in New York City. As I'd expect, I paid the charge. No further tip/gratuity was expected. At least in those cases, the restaurant was being clear about its intentions. Unlike a couple of other places which added an auto-gratuity, even though there was only two of us - no doubt hoping to rip-off foreign visitors who might then double tip.

                                              1. re: Harters

                                                First of all, I'm very aware of what the Service Charges here are in the States. I've applied them to both Private clubs and Privately owned restaurants. We charged for both with nary a complaint. I've also paid them, as they were listed clearly.

                                                And you seem to ignore this was for a group of 15, not 2.

                                                What you seen not to understand is this is common practice in the States and this is not the UK....nor the rest of the world. ...and will continue, even with the recent change in guidelines by the IRS.

                                                1. re: fourunder

                                                  Sorry. Still not understanding your point. I suspect we are at cross purposes and that you're also at cross purposes with Querencia's similar point.

                                                  But let's leave it there. Further discussion seems a tad pointless.

                                                2. re: Harters

                                                  Harters,

                                                  Service charges are not rare in the US, but they are usually applied to situations where there is a suspicion that a voluntary tip might be underwhelming. A very common scenario is for the restaurant to charge a service charge for parties of six or more. I was in Miami Beach over New Years and found that quite a few restaurants and bars charge service charges no matter what size the party. The reason, of course, is that a large percentage of tourists who go there come from countries that don't have the same tipping culture as the US. Most likely they do it not to rip off tourists, but to prevent the servers from getting stiffed.

                                                  If a restaurant charges you a 20 percent service charge, there is no cultural obligation to leave any additional tip unless you appreciated the service so much that you feel like doing so.

                                                  However, service charges and tips in the US have historically been two completely different animals. A service charge, if explicitly spelled out on a menu or catering contract, has been considered a mandatory cost of the meal just like the $15 for that appetizer you ordered. Hence, it would typically be subject to sales tax. And it would be owned by the house with no legal obligation to pass on any of the money to the servers involved (although typically, money would be passed on). There are some regional exceptions to that due to various court decisions, perhaps most prominently in New York State, but that has traditionally been the rule.

                                                  In contrast, a tip has been considered a voluntary gift from the patron to the waitstaff, not subject to sales tax, that the restaurant has no right to interfere with other than establishing policies for how it should be divided among the front-of-the-house staff that may have been involved in the service.

                                                  1. re: nocharge

                                                    Nocharge

                                                    I'd vowed not to return to this discussion but thank you for your helpful post. It confirms the view I had about service charges - as you say, if there is one, then that generally replaces the tip.

                                                    I take your point about "rare". As I'd said, I've only twice seen a service charge mentioned by an American restaurant, whereas in the UK, probably the majority of places levy it instead of old-fashioned tipping. Your mention of Florida and foreigners may well account for my two experiences being in New York City where, I guess, there will be many foreign visitors as well. As you'll appreciate, I'm more than happy to see places levy a service charge instead of there being a tip.

                                                    1. re: Harters

                                                      Harters,

                                                      Thank you. A couple of more random comments on the topic of service charges and tips in the US.

                                                      1. Service charges for parties of six or more are pretty much standard in US restaurants.

                                                      2. There is a fair amount of legal confusion regarding who decides who gets the proceeds of a service charge or a tip. One legal argument in favor of forcing the restaurant to distribute a service charge to the servers is kind of a truth-in-advertising one. The New York State Supreme Court got into that one and a few years ago held, that in New York State, service charges would have to be distributed to servers unless it was explicitly stated on the menu that that might not be the case. There has also been a case making its way through the federal appeals courts as to whether the restaurants ability to make rules for how tips should be divided is part of the minimum wage laws. That is, if the restaurant is paying a server more than the minimum wage, does it have more power of deciding what to do with tips than the traditional standard?

                                                      Bottom line, there have been a lot of court decisions in this area that has made it somewhat confusing, but regular restaurant goers probably don't need to worry too much about that aspect.

                                                      1. re: nocharge

                                                        Thanks

                                                        Yes, on regular visits to America since 1980, I've often seen menu mention that a percentage tip would be added to the bill for larger parties. But there's only been the two occasions where I've seen an addition described as a "service charge".

                                                        By the by, there's similar legal dispute in the UK about service charges as well as tips paid on a credit card. Our law is unclear and an increasing number of restaurants are making their position clear on their menus. End of the day, if a place wants to retain its staff, then it will treat them right. Personally, I much prefer the situation in countries like Belgium and France, where the menu price inherently includes service and no tip is expected or required - but that's another story.

                                                        1. re: Harters

                                                          The wording on a menu can have a lot of influence as for whether a surcharge is legally enforceable. The use of the words "gratuity" or "tip" has generally been interpreted as a voluntary contribution just because of the semantics of the words.
                                                          http://www.nytimes.com/2004/09/15/nyr...
                                                          Calling it a "service charge" probably gives the restaurant a bit more leverage. Of course, most people just pay the charges regardless of what they are called and there are no legal disputes.

                                                          1. re: nocharge

                                                            there are some very high-end restaurants in the states, like per se and masa, that have a service charge on the bill, regardless of party size. that is distributed to both boh and foh. i have never been able to discern if the house takes a slice too, but the reason offered was because the wage discrepancy was so large. god forbid the owners pay the staff more as a cost of doing business.

                                                            1. re: hotoynoodle

                                                              Actually, per se fully includes service within its menu price, not as an addition. It'd be interesting to know their remuneration structure for, particularly, serving staff - I wonder if they are on a fixed salary or the company pays a additional periodic bonus, based on profits .

                                                              1. re: hotoynoodle

                                                                I think in most cases, service charges are distributed to the staff without the house taking a cut. And in the case of per se, the legal situation in New York State would come into play. On the other hand, the fact that a restaurant distributes service charges may have an impact on how much it needs to pay servers in base compensation in order to retain them, so the entire concept is a little murky.

                                                                I've heard of some blatant cases, though, where the house keeps all of a service charge. I was listening to a talk-radio station a couple of years ago that had an ask-a-lawyer segment. A woman who worked as a bartender at a country club outside San Francisco complained that during private events, she was not allowed to keep a tip jar since it would be considered tacky. The country club would charge a mandatory service charge for such events, but she didn't get to see a single penny of it and she asked if she had any legal recourse. The lawyer's response was that her best bet would probably be to argue that the service charge might misleadingly lead customers to believe that it went to the service staff, somewhat similar to the reasoning of the New York State Supreme Court. Given that a prolonged court battle would cost hundreds of thousands of dollars in legal fees and be a long-shot anyway, I kind of doubt that she pursued that option.

                                                                1. re: nocharge

                                                                  "I think in most cases, service charges are distributed to the staff without the house taking a cut."

                                                                  ~~~~

                                                                  you'd like to think that is the case but having been on the receiving end of illegal tip-dipping more than once (as have ALL my friends who ever worked for tips) i doubt that is true.

                                                                  1. re: hotoynoodle

                                                                    I can absolutely believe there are many cases where the house takes a cut and there have well-known places that have been sued for illegal tip-dipping. On the other hand, think of it this way: It may not be in the best interest of a restaurant to discourage servers from working a party of six (service charge) by taking a cut as opposed to working a party of five (tip).

                                                                    1. re: nocharge

                                                                      lol, as a server, you usually don't have a choice as to what parties you "take".

                                                                      1. re: hotoynoodle

                                                                        No, but you have a choice of whether you want to work for the restaurant in question. If you are good, there is no reason for management to piss you off by making less money when working a party of six as opposed to a party of five.

                                                                        1. re: nocharge

                                                                          1) sometimes even favorite/senior servers have to suck it up

                                                                          2)sometimes even an ace server may clash with a new manager who just wants to squeeze you out

                                                                          it's an ugly business. am happy to be done with it.

                                                                          1. re: hotoynoodle

                                                                            That's understood. But well-run restaurants, like other businesses, have an incentive to keep good employees happy. A fine-dining restaurant, where the quality of service may be part of the chance of success, would not be wise to stiff the servers on a party-of-six service charge. If it did, I would hope that the best servers would eventually leave to less ethically challenged places to the detriment of the restaurant's chances of success.

                                                                            I know quite a few restaurant owners, managers, and executive chefs, mainly at quite-a-bit-better-than-Denny's restaurants, and I can't think of a single one that would condone something like stiffing a server.

                                                                            1. re: nocharge

                                                                              it still happens all the time in the boston/ cambridge
                                                                              ESPECIALLY. in the higher end restaurants where its team service, runners, boh expo, cold station, hosts, & owners taking a cut.
                                                                              there are a lot of confidentially agreements signed at hiring

                                                                              1. re: kewpie

                                                                                Are you saying that the owners are taking a cut of a service charge or a tip? If it's from a tip, it may well be lawsuit material as opposed to servers having to share part of their tips with hosts, which traditionally has been considered acceptable. If the owner takes a cut out of something that is labeled as a service charge, it is much more likely to be legally kosher but one parameter as to why employees would want to work for the establishment.

                                                                                1. re: nocharge

                                                                                  yes, that IS what I am saying. the " best" in town, james beard award winners, etc ( im speaking of boston/ cambridge ma)

                                                                                  1. re: kewpie

                                                                                    If restaurant owners are taking a cut out of actual tips, I sincerely hope they will be sued. That's all I can say.
                                                                                    From the web page of the Mass. Attorney General:
                                                                                    "Under no circumstances may management employees or owners receive any portion of their employees' tips."
                                                                                    http://www.mass.gov/ago/doing-busines...

                                                                      1. re: kewpie

                                                                        it has happened to me, and to friends, in boston. i know plenty of people who have received settlement money in class-action suits. when i got big-time screwed it was from a james beard award winner, but we were a small staff without the resources to hire a lawyer.

                                                                        the last place i worked was a high-end steakhouse -- an international chain. one which has paid out many, many hundreds of thousands of dollars because of misappropriating tips, yet they still do it with private events. there is a 20% "service" charge on each contract and then the bill that is presented to the guest. when the paperwork gets done after the event? 15% goes to service staff, 3% to the sales manager and 2% goes to the managers. TOTALLY against the law. sop for them.

                                                                        1. re: hotoynoodle

                                                                          Again, there is a difference between service charges and tips in most US states in terms of legislation. I have no sympathy for the concept of servers getting stiffed regardless of whether it's in terms of tips or service charges. But if the restaurant stiffs a server out of a tip, it may have different legal ramifications than if a restaurant stiffs a server when it comes to a service charge.

                                        2. I think it's entirely right and appropriate for a restaurant to be clear about its terms of doing business with customers. It's equally entirely right and appropriate for customers to accept or decline those terms.

                                          3 Replies
                                          1. re: Harters

                                            In absolutes (either accept or decline) or in a discussion like I did in the above example?

                                            1. re: carlylecat

                                              Any catered affair, whether in house or off-premise is subject to negotiation.
                                              Bringing a group of 15 to dine during the slow winter months also opens the door to advance negotiation regarding price, service charges, freebie extras, etc.
                                              This is what the free market system is about. You spoke with owner's wife and apparently she has authority to negotiate.......

                                              1. re: carlylecat

                                                Discussion/negotiation is fine in any business transaction (I had posted before I read your later post). 'Tis no different with restaurants.

                                            2. I don't know about the rest of the country, but here in Texas I've been hearing that the IRS will no longer allow an automatic tip to be added to any check. Seems very harsh to me. Has anyone else heard about this?

                                              2 Replies
                                              1. re: amazinc

                                                There is another thread running on that subject. BUT an automatic tip and service charge, while similar in nature to the diner are not considered the same thing by the tax authorities.

                                                1. re: amazinc

                                                  I don't think that's actually correct. The IRS is saying that auto grats are going to have taxes withheld automatically, as opposed to leaving it up to servers to declare them:

                                                  http://www.thebartendingmasters.com/b...

                                                2. I certianly don't mind a gratuity and I don't mind one added to my tab, but I do mind being, as the phrse goes, "nickel and dimed to death". I take a very simple approach to doing business and dining in a restaurant is no different. You (mr. restaurant owner) have food, I want food, I also want it cooked (you should know that in advance) and have it brought to my table (you should also know that or you would have opened a cafateria instead of a restaurant). So cut the crap and put a price on the food that reflects how much you really want for it. I came here for a meal not some sort of used car negotiation where the tires are extra. It seems to me if you negotiate a price with a certian gratuity then that's what it should be.

                                                  1. Personally, I would have told the manager to "stuff it" and looked for another venue.

                                                    2 Replies
                                                    1. re: grampart

                                                      is that because you find the additional 2% offensive....or the gratuity in general?

                                                      1. re: fourunder

                                                        I'm one of those who believe 15% is still an adequate gratuity, although I almost always leave at least 20%. When the 18% first started showing up for parties of 6 or more, I didn't even flinch. The 20% charge may have rankled just a bit, but this trying to squeeze another 2% is pretty much the proverbial straw as far as I'm concerned.

                                                    2. It's too high, in my opinion.

                                                      1. I have not looked at the "other thread" mentioned here about the IRS - but will say that as of 1/1/14, the IRS does indeed consider a service charge to be mandatory and a tip or gratuity voluntary and they must be handled differently by whoever's doing the books. It's a long, confusing thing - I had to write about it for a local publication - and is the reason we're seeing more of the "suggested gratuity" amounts on computer generated dinner tabs.