Gavin Kaysen added a 21% hospitality fee in 2020 to the bill at Spoon and Stable, the upscale Minneapolis restaurant he owns and where he is a chef, to boost employee pay equity.
It includes an explanation and a pie chart showing, on average, where the costs go: 73% for the service team, 12% for cooks and other staff, and 15% for business expenses.
So far, award-winning chef James Beard’s servers aren’t giving up, and he’s only had occasional questions about abandoning the traditional practice of tipping 15% to 20%.
“What the hospitality fee does for us is it takes the control away from the guest,” Kaysen said. “I know that the 21% we received, we are able to distribute to our team.”
Suddenly, a new fee called a service or hospitality fee is slipping onto the check as restaurateurs look for ways to raise the pay of cooks and dishwashers, who often earn less than servers. Some facilities may charge a percentage for “welfare” to cover increased health care costs.
“When it comes to calculating your bill and tipping, it will take a little more math than before,” said Robin DiPietro, director of the School of Hospitality, Restaurant and Tourism Management. University of South Carolina.
These fees add a new complexity for diners. To help understand how to tip in this new environment, we turned to several hospitality industry insiders for their advice.
What is Minnesota law regarding tipping?
One of the reasons some restaurants opt for a hospitality fee is that owners cannot legally ask servers to split their tips.
Under Minnesota law, a tip or gratuity is a transaction between the customer and the server. Servers can choose to pool tips for other staff, but that’s ultimately their decision.
A hospitality or service charge is a transaction between the customer and the restaurant, so the company has a say in how the money is directed, said Joe Schmitt, attorney for Nilan Johnson Lewis.
He has worked with more restaurants to implement hospitality fees as companies strive to share tips beyond the server.
“It dramatically reduces the pay disparity for everyone who contributed to the meal,” Schmitt said.
To make matters more confusing, guests can see that hospitality fees are not a gratuity under Minnesota law, but the intent of these fees by responsible owners is to split the money among staff. .
Could an owner pocket the money? It’s possible, but they’re unlikely to maintain servers in this competitive environment for workers.
“It’s this misguided notion that this hospitality fee goes straight into our pocket. I don’t get anything out of it,” Kaysen said. “It’s a way of sharing and distributing the money because it’s illegal for me to do that with tips. You can’t do that with tips as an owner.”
Do I have to tip in addition to the hospitality or service charge?
“Generally, I think the tip standard is 20%, but if the employer adds some, you can adjust accordingly,” DiPietro said. “But you have to be careful with the bill.”
If it’s unclear, she advises asking a manager how hospitality costs are split in case you want to leave more than that as a direct tip for your server.
Spoon and Stable offers explicit language on its invoice: “Should I tip? There is no provision for tipping in addition to the hospitality charge. The tip line is provided as an option to express appreciation for an exceptional experience.”
“If the service went beyond what you expected and you want to leave $10, $20, $30, just do it. That’s great. It goes straight to the server,” Kaysen said.
Patrick “Jocko” Tierney, a bartender and server at Manny’s Steakhouse for 25 years who lives on tips, considers the hospitality fee inconvenient for customers.
“You’re in a real dilemma because the server might say it’s not all up to them,” Tierney said. “I don’t think it’s fair for someone to say, ‘That’s not my tip’ when it’s added to the bill.”
What about wellness fees? How do you tip then?
Many restaurants that did not replace tipping added a wellness fee, sometimes labeled health benefits or health and wellness.
At Manny’s, Tierney sees some customers put off by the 5% wellness fee. He accepts that these fees sometimes have an impact on his tip. “If you think it’s too much and you tip 15%, then I eat the other 5%,” he said.
Parasole Restaurants, owner of Manny’s, Pittsburgh Blue, the Good Earth and Salut, instituted a wellness fee a few years ago to offset health care costs. The company increased fees during the pandemic as remediation spending increased.
But you won’t see a hospitality fee at Parasole’s restaurants. “I think it works well for new concepts, but the restaurants we have are mature brands,” said Donna Fahs, COO of Parasole.
Why don’t restaurants just offset the cost of doing business by charging more?
Many restaurants have hiked prices, but they say there’s still a long way to go, fearing customers will stop in for $50 burgers.
Landlords have faced unprecedented closures during the pandemic to meet skyrocketing costs. They are also struggling to win over workers even as base pay exceeds the $15 minimum wage in Minneapolis (for companies with more than 100 workers) and St. Paul.
“There’s no one in my restaurants making less than $15 an hour,” said Troy Reding, owner of Rock Elm Tavern in Plymouth and Maple Grove and Holman’s Table in St. Paul. “The minimum wage in this state is really irrelevant.”
Reding tried a fee-for-service model during the pandemic. In the end, he stopped service charges, reverted to traditional tipping, and added a 3% wellness fee.
“Employees were struggling with service charges because customers confronted them,” he said. “Quite simply, I got tired of fighting and we went back to the standard gratification situation here.”