Can Restaurants Legally Add Gratuity?

Patron Paying BillMost people have seen the small mention of added gratuity at the bottom of restaurant menus. It is usually for groups of eight or more, but sometimes it’s added even for groups of six, or seven. This begs the question: Can restaurants legally add gratuity to your bill? The answer is a simple “yes”, as long as it is disclosed in advance.

In fact, most any fee a restaurant wants to add is legal as long as it is adequately disclosed. There are fees for delivery, for using credit cards, having an order to go, boxing up leftovers, drinking water (even tap), and many more. As long as it is disclosed and not discriminatory (such as a senior citizen surcharge), it is legally allowed. Whether customers will tolerate the fees, however, is another matter altogether.

Why do restaurants include gratuity for large parties?

The extra work that servers have when dealing with large groups requires that they devote a large majority of their time to one party, reducing tips available from other parties. Servers make decent tips by serving multiple tables and doing it well. By adding a mandatory gratuity, servers are ensured of getting an adequate tip for serving such a large party.

One major casual dining establishment added the fee for groups of eight or more only after repeated complaints and issues from servers. Vocal wait staff was incensed at being paid such poor tips for such hard work on large group parties. Soon, they were refusing sections with groups deliberately. One server received such a horrible gratuity from a group that, by the time she tipped the bartender and busboy, she was in the red and in tears.

When other eateries heard about the added gratuity for groups, the concept took off and is now common place. It is now rare to not find a mandatory tip requirement for large groups.

What is the average added gratuity?

Most casual sit-down restaurants appear to have gratuity for large groups set at around 15%, while fine dining establishments edge closer to 18%. The exceptional few are as high as 20%. Additionally, most establishments only have mandatory gratuity on large groups or on things like hotel room service, poolside food, or delivery service.

A few take-out restaurants that deliver add an automatic gratuity, but most just add a delivery fee and prominently mention it is not a gratuity. However, a major pizza delivery chain charges a $2.49 convenience fee for deliveries and reminds customers it is not a gratuity. What most customers don’t know is that each driver is paid $1.49 of that fee for gas/auto expenses at the end of the night based on each delivery. So, in reality, it is a mandatory gratuity—albeit a small one.

Can you opt out of added gratuity?

Usually, added gratuity for large groups is a done deal. Most restaurants also do a good job of prominently placing a sign or notice near the hostess stand and in the menu. However, if service wasn’t up to par or you had to repeatedly ask for refills, ask for a manager. Usually, the manager will want to please the group and reduce the tip to whatever you feel is appropriate. However, some may refuse to budge and will just say the mandatory gratuity is set and clearly noted on the menu.

If you pay it but really feel you were forced to add gratuity for sub-par service, you do have another option. Although this is not a sure-thing, you can pay the bill with the added gratuity and then dispute the charge with your credit card provider. With good documentation and witness statements, it could very well be reversed. Or, even better, the restaurant will see the dispute and settle it amicably.

Do people avoid restaurants with mandatory gratuity?

Most people are going to an eatery for the food and service, and if they are both excellent then gratuity is a minor issue. It is unlikely that mandatory gratuity is going to stop loyal customers, but newcomers may be put off by the policy. The few times people really take issue with forced gratuity are when service is, well, not service.

People who are opposed to mandatory tipping explain their reason is simply that the server has no incentive to provide superior service and outstanding care during the meal if he is already assured of receiving a fixed gratuity anyway. No matter how delayed a waiter is at refills or how inattentive they are to their table, they are guaranteed a nice gratuity. This doesn’t entirely seem right.

As comparison, imagine a child who always gets $50 allowance each month and a child who gets $20 a week only if they do all of their chores. Which child do you think is going to work harder?

Many consumers feel having a mandatory gratuity, no matter how great the restaurant’s intention, prevents the staff from truly earning a tip. It takes the choice away from the customer on how to recognize good, or bad, service.

Comments
  1. Jerry Rhinestonne

    I always eat at places where there is no Gratuity added, but I do leave a small tip around 7% of the total. The waitress waits on 10 tables per hour with and average tip of $1.65 do the math, that’s making good money to some people. Why add Gratuity.

    • Casey

      Jerry, you should try waiting tables before you make up numbers. First of all, as servers, we wait on at MOST 4-5 tables at a time. There is no way any server can handle 10 tables at a time; this is impossible without incredibly INCREDIBLY slow service. A server taking care 10 tables in one hour is absolute BS. Second, many places have a tip-out, which means that we have to pay out from the tips that we receive. This figure is generally 2-4% of our SALES, not our tips but our SALES, which means that if we do not get tipped by a table, we actually LOSE money by serving them because the tip-out is based on the food that was sold. Here where I am, most restaurant servers generally get paid $2.13 per hour, and tips make up the rest of our wages. Finally — all servers anywhere will have sidework. This is work that they have to do while they’re serving and have to finish up after they are done serving tables. The server cannot leave work until they have completed all the sidework. The sidework generally takes anywhere from 30 to 90, and possibly even 2 hours to complete.

      Now, let’s assume that in one hour, you can serve about 4 tables (this is an overestimate, the reality is more around 2-3). Assuming that each table orders on average, $30 worth of food and tips a standard 15%, then from 4 tables you’ll get $4.50×4 = $18. $18 + $2.13 = $20.13. $20 an hour wage for a serving position is looking pretty good right? Now we go to the tip-out, which is, where I work, 3.25% of sales. $30 x 4 = $120 3.25% of $120 = $3.90. So take out $3.90 from our wage: $20.13-$3.90 = $16.93

      So $16.23 an hour; still pretty decent eh? Don’t forget that servers have sidework too – the average is around one hour to finish up the sidework so they have to work for one more hour or so with no tables there for tips. ($16.23 + $2.13)/2 = $9.18 per hour.

      Not looking so good anymore is it? And that’s assuming that everyone is tipping at 15% too. Imagine what your server would be making if everyone tipped like you did at 7%. Not to mention, 4 tables starting and finishing in just one hour is an overestimate. The more appropriate estimate would be around 2-3 tables.

      In any case 7% is an absolutely TERRIBLE tip for service. If you’re tipping at 7%, you’re basically saying to your server that they did a horrible job of serving you. It’s pretty insulting to receive any tip under 15%, unless you could see that they just weren’t even trying to give you good service (like going out to take a smoke while you needed refills or something, and people were waiting on their checks).

      If you can’t afford to tip, why go to full service restaurants? McDonalds/Wendy’s would be happy to see you.

      • Raising Ur Bar

        @Casey Wow! Well said.

        • Charity

          I am a server and there are many days where I only have 1 or less than 1 table per hour because business is slow. If I give phenomenal service and am lucky to earn a 20% tip, I will make $3 or $4 that hour.

      • Bruce

        Charity,
        Tips do not make up wages. Wages are paid to you by your employer. A tip or gratuity is a voluntary token of appreciate to an individual for exemplary service. It is not obligatory. If you are looking for someone to pay you more money, you should have a talk with your employer.
        Tips/Gratuities have become a means for a restaurant owner to insulate themselves from having to pay wages on low earning days. On a slow night, the owner doesn’t have to pay their wait staff a living wage while not selling meals. The restauranteur externalizes the wage on to the customer.
        Also, a tip/gratuity, if offered, is for the person that went above and beyond to make the customer’s experience exceptional. It’s not for those that don’t interact with the customer (bussing staff, cooks, accountants, managers, dishwashers, etc.), as they earn a wage to do their job.
        Offering a tip or gratuity is the customer’s choice to give, not the restaurant’s. When I eat out, any gratuity “automatically added to the bill” will be subsequently removed, the total recalculated, and the restaurant will be added to our boycott list.
        I’m happy to compliment great service with a tip, but I’ll never have a restaurant tell me I have to.

    • Henry

      yes, because you are cheap person. Servers are making only min. wages.

      • Bruce

        Henry,

        It’s the restaurant owner that is the cheap person for only paying their staff minimum wage or less.

      • carlue

        Sad for you to complain about the fact that YOUR employer is cheap and doesn’t think that he/she should have to pay their employees……this has nothing to do with a customer being cheap….wages are mandatory tips are earned and voluntary for you to attack a customer is very sickening as it is not the customers responsibility to make sure you have a descent wage, that is yours and yours alone. If you don’t think you are being paid enough that is between you and your employer not you and the customer….waiters/waitresses attitudes on this make customers not want to return to the establishments. By the way; tips started out as a compliment to the chef/cook for cooking a good meal. It was something that the patron did because they wanted to not because it was expected and it is sad that YOUR employer exploited this and decided to try to make the customer pay for his/her service help. When and if a tip is added to my bill without my permission I have it removed and I am no longer a patron……I tipped in cash one time then got to the cashier to pay my bill and they added another tip on the bill and because of the greediness of the establishment I removed the tip from the table and canceled the charge on my credit card and only paid the amount on the bill…..why because it was my right to and Tips are a thank you for good service from me to the server not a requirement. I am not your employer and it is not my job to pay your wages.

  2. Justin

    As a reply to your statement Jerry “why add gratuity?” Let’s do the math as you said a server has 10 tables an makes $1.65 per table that is $16.50 which could be in their entire shift. Lets for argument sake say a shift is 4 hrs. So take your $16.50 / 4 = $4.12 add in a server wage of $2.35 you get $6.45/hour. So this server just made less than minimum wage. Now do you think it’s fair to not add the stated gratuity??? If you worked in this industry you would be a little more understanding. Don’t get me wrong there are nights this server could make far more than minimum wage, however in your example that was not the case. You take the good with the bad an in your case it will most defiantly always be bad. Just my 2 cents thank you an hopefully now you have a better understanding of why gratuities are added.

    -Justin

    • carlue

      For your information if you read the laws on minimum wages for wait staff you would no that if a tipped employee does not make the minimum wage in any given hour after including the tips it is their EMPLOYERS responsibility to make it up so if the 2.13 or whatever it is now + the tips don’t add up to the actual minimum wage it means that it is made up in the paycheck that the employee gets from their employer and if their employer is not paying them equal to minimum wage it is the employees responsibility to make the employer pay it or report them to their labor board as the employer is violating the minimum wages laws. It is your job as an employee to know your rights and it is your job to make sure your employer is not abusing your rights….it is not the customers job to pay employees wages it is your employers and your employers alone job to pay their employees so stop trying throwing this off on the customers.

  3. Danny

    I can understand auto gratuity for large groups (like greater than 6 people say). But when my gf and I went out to a Japanese grill, gratuity was not mentioned by the server nor was printed on the menu. When I got the bill, it was ~$80 + 20% gratuity + tax. I normally leave 15-20% pending on service, but just having this option taken out of my control makes me upset. If restaurants need the extra income to cover their staff cost, why not just raise their overall menu prices??? What’s next? a fee for reservation? Window seat fee? Imagine if every other services starting tacking gratuity fees, like cab drivers, furniture delivery guys… just makes no sense from the consumer satisfaction point of view.

  4. Brad

    As the owner of a restaurant let me set this straight. Tipped employees minimum wage is now $4.76 per hour. Most shifts run 6 hours. The IRS taxes their Credit Card tips which are seen by all and then assumes at least 10% of any cash exchanges is taxed as well. Servers also must tip out backservers (bussers) and bar from what they make. My restaurant tips the bar 5% of all bar sales from the servers and 3% of all food sales to bussers. If you are leaving less than 10% then that server just paid more than they made. Some restaurants tip out the host and the kitchen as well. It is stated on my menu that 20% gratuity will be added to all parties of 6 or more and any table that splits checks.

  5. Linda

    Why do restaurants feel it is their customers responsibility to pay the restaurants’ employees. It is the employers who should pay them. No other business forces the customer to pay their employees wages. Gratuitys should be optional and be extra monies( To Insure Prompt Service)

    • Jessica

      Thank you! This is exactly how I feel. A restaurant owner above is explaining all that he has to pay to the bussboys, bar staff, minimum wage e.t.c. Why should I as someone who was hungry and just came in simply to eat food be concerned with the mathematics of you running your business? Why should I have to be bothered about someones living expenses when all I came to do is eat food for crying out loud?! Tipping should be what it is, a gracious gift for excellent service, a thank you, A TIP! Restaurant and waitstaff are now feeling entitled that it is my obligation, recently a friend and I went to a restaurant and at the end of the meal had a auto gratuity tacked on, this used to be for groups of 6 or more, even the IRS recognizes auto gratuities for groups of 6 or more as not tips but service charges, now some restaurants are adding it anyway as an obligation.
      This practice is becoming annoying and it’s my research on the legalities of this that brought me to this page because I do not want to be forced to pay a “tip”, I believe I have the right to decide where my money goes and how much of it depending on the service I receive. This is also where I agree with Ed below, it is now becoming a form of extortion.

  6. Ed

    I have been to many counties where tipping is illegal. They look at it as a form of extortion that they don’t want to get started and always makes people feel uncomfortable when they are having a nice evening.

  7. Pamilyn Kennedy

    I have been doing this work since I was a young teen-ager which adds up to more than 40 years. I am FIRMLY against an added gratuity for family or small parties, and have clashed and been suspended for fighting it, there are SOME arguments.

    I have worked with more servers that DID NOT deserve tips than did. There are students trying to earn spending money, and slackers that do it because it’s easy money, and then there are people like me that do it because they love it. I am excellent at what I do. It is my goal to treat people as if they deserve only the best, and I give it to them. I do this with enthusiasm and a great deal of pride.

    But this has required me in a lot of cases to deal with “the gimmee’s”. A party (for example) of four that can not order their drinks a the same time, that will ask for a condiment, and when you return with it will ask for another, then another.I always set my tables as soon as I submit the order, meaning I get everything on the table BEFORE the food arrives, so I am astounded when I encounter this issue.

    Then there is “the orderer” who must interfere when anyone orders or asks a question. Any experienced sever deals with an order in an orderly way, yet it’s very frustrating when one person at the table insists on controlling the table.

    Separate checks are NO BIG DEAL! But there always seems to be someone that has to make you aware of this ten times while you are trying to take the order for one table. Orders are submitted as ONE, and splitting them isn’t an issue for any competent server, yet it’s SUCH A BIG DEAL for cheap people that are so afraid of being linked to family and friends they have CHOSEN to dine with!

    I believe with all of my heart that gratuity should be the choice of the patron. I have fought it being added for as long as I can remember. Servers, however, did not create the pay scales and rates. I personally have not received a paycheck in years, but I pay more taxes than most every month as a result of it. I do not regret my choice of employment because I really believe I make dining a very pleasurable experience for anyone I serve, but believe that blaming your server for the fact that tips are there only income, and that is a fact in more than 98% of food servers, anyone should be ashamed to not honor gratuity on large parties (more than 20 people), and should tip BASED ON SERVICE as well as knowledge.

    If you want excellent service be prepared to pay for it. If you get poor service, don’t just leave a bad tip! See a manager! Don’t punish a whole group of people because you have one that doesn’t appreciate you or their job!

  8. Snooks

    What a lot of you servers are not saying is that under federal law you must receive minimum wage. If you are not receiving the minimum wage for the hours you work,your employer MUST make up the difference. I bet you were never told that he must ensure that you get at least the minimum wage after tip outs and other expenses for bus boys etc.
    Keep records of hours and tips,then collect from employer if the amount does not amount to at least the minimum wage.

  9. Peter Rilling

    A couple years ago I took my family to an Indian restaurant. There were about ten of us. They added 18% to the bill and I lowered it when paying; however, they confronted me before leaving and after a discussion I paid the full amount to avoid the hassle, but will never return. The much lowered amount was more than adequate and here is why. The restaurant was buffet style, meaning we each had to get up and serve ourselves from a food lineup. And when it came to refilling water, they only filled a couple pitchers on the table, requiring us to fill our own glasses. Can anyone tell me how this is work 18%?

  10. David

    Peter, I had a similar problem at a Mothers’ Day brunch. I refused to pay the mandatory tip as there were only four of us. Standard tip amount for buffets is only around 10%, but as with any tip percentage, this is just a guideline. There was certainly NO justification for a 18% tip. I stood my ground talking to the manager at the Maitre’ D station and whether he either didn’t want to make a scene or agreed, he accepted my payment. A tip is not a service charge, and I do not believe it can be legally dictated.

  11. Ted Darcy

    A tip should be earned regarless the size of the dining party. a large group is more patrons! DUH? That’s the goal of being in business, customers. Why charge more for the customer that is bringing more business? If the agrument is the time wasted on one table, then pay your servers more. You just made more money. simple.

  12. vicki

    I really hope someone can help me.
    I was discriminated and refused delivery from a restaurant. The manager lied and said his delivery guys were sick and afterwards told me the tip is too small. Then later said they had bad experiences with me and my address which is an untrue claim and I demand proof of this. Is there a place where I can file a claim?

    • dave

      yelp

  13. Ivan

    Plain and simple. If you are leaving a poor tip, I as a servers, and I’m sure 90% of servers out there will be more than ok with that when you as the poor tipper let us know about your tipping beforehand.

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  15. simon

    leave a tip. While a gratuity can be added it can be asked to be taken off for a different amount ranging from $0.00 to as much as the person wishes to tip.
    Tip: a small present of money given directly to someone for performing a service or menial task; Gratuity: a gift of money, over and above payment due for service, as to a waiter or bellhop;
    Gift: something given voluntarily without payment in return, as to show favor toward someone, honor an occasion, or make a gesture of assistance;
    Voluntarily, being the emphasis in the argument, you (Owner) cannot make an arbitrary decision to force someone involuntarily pay. :p

  16. Susab

    5P9p

    Why not do away with tipping?

    And, why are restaurants adding “tip” jars to counters – like Chipotle, etc? No one is serving me – shouldn’t the cost of business (handing the food over the counter) be included?

    Hairdressers – with the current high charges – make more an hour than I do – and I work in an establishment that “serves” customers but we don’t require tips/gratuities.

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