Lawmakers are looking to crack down on “junk fees” that have become increasingly common on restaurant checks. These fees cover a variety of expenses, including credit card processing, gratuities, and “inflation.” Last year, 15% of restaurant owners added surcharges or fees due to higher costs, and the number of restaurant transactions including service fees has more than doubled since the beginning of 2022. Critics argue that these fees can surprise customers and deceive them into paying more for their meals, leading to frustration among diners.
The Biden administration is targeting hidden and misleading fees, including those in the restaurant industry. The Federal Trade Commission is expected to publish a rule banning businesses from charging these types of fees in the near future. However, restaurants are defending their use of surcharges and fees, stating that they are necessary to stay afloat and compensate their employees fairly in a competitive industry with slim profit margins. The National Restaurant Association argues that not all fees are considered “junk fees” and that customers understand what they are paying for when it comes to most fees on a restaurant bill.
Some customers and advocates disagree with the restaurant industry’s defense of fees. While federal law prohibits management from keeping workers’ tips, mandatory service charges are considered the property of the restaurant. This creates a risk of wage theft, as employers may claim the money goes to workers but fail to distribute it properly. Opponents also argue that customers are less likely to tip on top of the check when a service charge is included, which can negatively impact workers’ income. The National Women’s Law Center has raised concerns about the impact of these fees on restaurant workers.
Restaurant operators maintain that service fees and surcharges help them pay their employees better and provide improved benefits. Fees like health-care costs or service charges allocated to hourly workers are designed to benefit staff members. By itemizing these fees separately on checks and menus, restaurants aim to provide transparency to their customers. Some restaurants argue that including these fees in menu prices could discourage customers, increase taxes, and complicate payroll. Fees also allow them to address issues related to tipping practices that have come under scrutiny in recent years.
On a state level, restaurants have been successful in some jurisdictions in getting excluded from laws targeting junk fees. In California, bars, restaurants, grocery stores, and grocery delivery services were exempted from a broad anti-junk-fee law that took effect in July. The National Restaurant Association believes that eliminating fees would lead to customer confusion, higher prices, less transparency, and costly compliance for restaurants. However, even some restaurant operators admit that not all fees and surcharges are justified, such as Covid surcharges implemented long after the pandemic.
The National Restaurant Association is advocating for the protection of specific fees commonly charged by restaurants, such as large party, delivery, and credit card processing fees. These fees are essential for preserving the slim profit margins that restaurants operate within, especially as costs continue to rise. The trade group emphasizes the importance of transparency, urging restaurants to be upfront about their fees so that customers are fully informed when dining out. As the debate over junk fees continues, both lawmakers and restaurant operators are navigating a complex landscape to find a balance between fair compensation for workers and customer satisfaction.
