Gavin Kaysen added a 21% hospitality fee in 2020 to the bill for Spoon and Stable, the upscale Minneapolis restaurant he owns and where he works as a chef, to boost pay parity for employees.
It includes an explanation and a pie chart, on average, where the fee goes: 73% to the service team, 12% to chefs and other staff and 15% to business expenses.
So far, the James Beard Award-winning chef’s servers haven’t stopped, and he only has occasional inquiries about switching from the traditional practice of tipping 15%-20%.
“What the hospitality fee does for us is that it takes away control from the guest,” Kaisen said. “I know that the 21 percent that we received can be distributed among our team.”
Suddenly, a new fee called service or hospitality fee is starting to creep into the check as restaurateurs look for ways to increase the wages of chefs and dishwashers, who often charge less than servers. Some organizations may charge a percentage on “wellness” to cover higher health care costs.
When it comes to figuring out your bill and tip, it’s going to take some more math than it did before,” said Robin DePietro, director of the School of Hotel, Restaurant, and Tourism Management at the University of South Carolina.
These fees add a new complexity to pioneers. To help understand how to tip in this new environment, we turned to several hospitality industry insiders for their advice.
What is the Minnesota law regarding tipping?
One reason some restaurants choose hospitality fees is that owners cannot legally require servers to share their tips.
Under Minnesota law, a tip or tip is a transaction between a client and a server. Servers may choose to collect tips for other employees, but that is ultimately their decision.
Joe Schmidt, attorney for Neilan Johnson Lewis, said that a hospitality or service fee is a transaction between a customer and a restaurant, so the company has a say in how the money is directed.
He’s been working with more restaurants to implement hospitality fees as companies work to share tips off the server.
“It significantly reduces the disparity in compensation by all the people who contributed to the meal,” Schmidt said.
To make matters more confusing, customers may see language that the hospitality fee is not a bonus under Minnesota law, but rather the intent of these fees by responsible owners is to share money between employees.
Can the owner pocket the money? It is possible, but it is unlikely that they will keep servers in this competitive environment for workers.
“This is a misconception that the hospitality fee goes straight into our pocket. I don’t receive any of it,” Kaysen said. “It’s a way of sharing and distributing money because it’s illegal for me to do that by tipping. You can’t do that by tipping as the owner.”
Do I need a tip in addition to the hospitality or service fee?
“Overall, I think the standard for tipping is 20%, but if your employer adds some of that, you can adjust it accordingly,” DiPetro said. “But you have to pay attention to the bill.”
If it’s not clear, she advises asking the manager how to split the hospitality fee in case you want to leave more than that as a direct bonus to your server.
Spoon and Stable offers clear language on their bill: “Should I tip? There is no expectation of tipping in addition to the hospitality fee. The tip line is provided as an option to express appreciation for a great experience.”
“If the service goes beyond what I expected and you want to leave $10, 20, 30, do it. That’s great. This goes straight to the server,” Kaisen said.
Patrick “Jocko” Tierney, a waiter and server at Manny’s Steakhouse for 25 years who thrives on tips, finds hospitality fees embarrassing for customers.
“You’re in a real dilemma because the servant might say it doesn’t all go to him,” Tierney said. “I don’t think it’s fair for someone to say, ‘That’s not my advice’ when that much is added to the bill.”
How about a charge of wellness? How do I tip after that?
Many restaurants that did not replace tipping added health care fees, sometimes touting health or health and wellness benefits.
At Manny’s, Tierney sees some clients put off work due to the 5% wellness fee. He agrees that these accusations sometimes affect his information. “If I feel like this is overrated, and I worry the 15%, I take the remaining 5%,” he said.
Parasol Restaurants, owner of Manny’s, Pittsburgh Blue, Good Earth, and Salut, instituted wellness fees to offset healthcare costs a few years ago. The company raised fees during the pandemic as sanitation expenses soared.
But you won’t see hospitality fees in Parasol restaurants. “I think it works well for new concepts, but the restaurants we have are mature brands,” said Donna Vass, Parasol’s COO.
Why don’t restaurants just offset the cost of doing business by charging more?
Many restaurants have raised prices, but feel they still have to go too far, fearing customers won’t stop for $50 for a burger.
Owners have faced unprecedented shutdowns during the pandemic to counteract now rising costs. They also struggle to attract workers even as the basic salary exceeds the minimum wage of $15 in Minneapolis (for companies with more than 100 workers) and St. Paul.
“No one in my restaurants earns less than $15 an hour,” said Troy Reding, who owns Rock Elm Tavern in Plymouth and Maple Grove and Holmans Table in St. Paul. “The minimum wage in this case is really irrelevant.”
Reding has tried the service fee model during the pandemic. In the end, he stopped the service fee, went back to the traditional tip and added a 3% health fee.
“Staff were struggling with service charges because guests encountered them,” he said. “Quite simply, I am tired of fighting it and we are back to the standard reward state here.”