Are Service Charges the Savior of the Restaurant Industry?

Are Service Charges the Savior of the Restaurant Industry?

Besha Rodell shares many opposing viewpoints

In lieu of a restaurant review this week, Besha Rodell tackles the important issue of service charges in the restaurant industry. B. Rod makes the very dire statement that despite how much buzz surrounds new restaurants, in some part thanks to the critic’s very own reviews, “the food world is about to collapse on itself.”

The main force behind this dreary prediction is, of course, labor. The minimum wage in California is due to rise to $15 an hour by 2022. In an industry plagued with such razor-thin margins, many restaurant owners are unsure where this additional payroll will come from. Adding to the complexity of the issue is the discrepancy between tipped front-of-house staff, defined as those who have physical interaction with customers at the table, and un-tipped back-of-house staff.

Recently notable restauranteurs like Danny Meyer have tried to ease this contention by implementing a service charge, usually an 18% or 20% fee at the end of the bill. Rather than falling in the hands of the front-of-house staff, that fee actually belongs in full to the business to do with as they please. Which, of course, leaves some servers disgruntled with dishonest restauranteurs:

“At first it was great — we were all making a ton of money. The dishwashers were making, like, $18 an hour! It was amazing for them to have an actual living wage. Everyone was so happy. The servers were making money, the cooks were making money. And then the owners realized that there was all this cash that was legally theirs, and they were giving it away. And slowly, the money started to disappear. We weren’t any less busy. But the money went away, and it went straight into the pockets of the owners.” [LAW]

On the other hand, operators like Emil Eyvazoff, the owner of 71Above, find it a transparent tool to redistribute funds between the front and back of house:

“It is also completely transparent,” he says. “If anyone on staff wants to see what money came in, where it’s going, they can do that.” (I independently confirmed with one of the servers at 71Above that this is indeed the system, and that he feels it is above-board.) The upshot, Eyvazoff says, is that kitchen staff make a slightly higher wage than they usually would, and service staff make a slightly lower wage. But because 71Above has high check averages, the servers still are doing well, even by fine-dining standards. [LAW]

The answer certainly isn’t a simple one, as paying higher wages while operating within notoriously thin margins while simultaneously improving the equality of pay between chefs, bussers, dishwashers, and servers isn’t a small feat.

The thoughtful piece ends with a plea by Eyvazoff for restaurant operators to remain honest in the hopes of saving the entirety of the industry:

“This is maybe our one chance to save this industry,” he says. “If people abuse it, it will fall apart. Maybe you’ll make some extra money for a year or two, but at what long-term cost? If workers distrust it, if the public distrusts it, the model will go away. And right now it’s our only hope for a restaurant industry that’s economically viable.” [LAW]


Are Service Charges the Savior of the Restaurant Industry?.” Eater LA – All. http://la.eater.com/2017/1/24/14373112/besha-rodell-service-charge-tipping-los-angeles.

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