Why restaurants are automatically adding tips to your bill

Diners are being forced to pay tips at some restaurants, as an increasing number of venues automatically add service charges to their bills.

Sydney restaurants are expanding the practice of building automatic surcharges into diners’ bills to cover the extra work of providing for larger groups.

Diners at Lotus restaurant can tip staff in addition to a service charge added to the bill of group bookings.
Diners at Lotus restaurant can tip staff in addition to a service charge added to the bill of group bookings.Credit: Dominic Lorrimer

Customers are already routinely slugged an extra 10 per cent on weekends and 15 per cent on public holidays, but restaurants are increasingly adding service fees to group bookings because operators say it is more difficult to provide service to large tables, which also may forget to tip.

Crown Sydney adds an extra 10 per cent to the bill for all group bookings at restaurants such as Nobu, Oncore by Clare Smyth and 88 Noodle.

A Crown Sydney spokesman said the service fee or gratuity was non-discretionary and applied at all of its restaurants for groups of 10 or more diners. The charge was not added for smaller groups.

“We are fully transparent about service charges which are advised during the booking process,” he said. “Like other hospitality venues, these charges are a common component of overall pricing.”

Group bookings at Lotus restaurants face an additional 10 per cent service charge on their final bill.

Large groups of diners sometimes forget to add a tip when splitting bills, while corporate diners were usually not able to leave tips on their company credit cards.
Large groups of diners sometimes forget to add a tip when splitting bills, while corporate diners were usually not able to leave tips on their company credit cards.Credit: Domino Postiglione

Lotus Dining Group chief operating officer Tara Sullivan said the service charge was part of the restaurants’ booking policy and a long-standing industry practice.

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“Parties do choose to leave a discretionary tip on top of the service charge,” she said.

A bill from The Malaya Restaurant showing the 8 per cent gratuity added to group bookings.
A bill from The Malaya Restaurant showing the 8 per cent gratuity added to group bookings.

Sullivan said larger groups require an administrative process between the reservations team and a venue to coordinate menus, beverages and special requirements, while waiters worked harder to serve groups of diners.

“If you are looking after a large group you are going to work hard, more wine glasses to fill, more plates to carry, more personalities to entertain,” she said.

Sullivan said tipping was a contentious issue, but Lotus’ guests were “absolutely in control of whether they would like to leave a tip”.

Italian fine dining restaurant OTTO in Woolloomooloo charges groups of eight or more diners an extra 10 per cent on their bill, while Quay Restaurant in The Rocks charges an extra 10 per cent for groups of six or more.

Both restaurants are operated by the Fink Group, whose chief executive Jeremy Courmadias said the service charge was discretionary.

“We remind guests of the discretionary service charge when presenting the bill so they don’t unknowingly add an additional tip,” he said. “And should they ask for it to be removed, our team will, of course, facilitate with no questions asked.”

Courmadias said groups often split their bill, sometimes in varying portions: “Our experience has found it generally less confronting for guests to settle a set total amount including a tip than to discuss how much tip each individual is going to leave.”

The Malaya Restaurant adds an 8 per cent gratuity to bills for groups of eight or more diners to ensure staff are “rewarded” for the service they provide to larger groups.

The Malaya spokesman said larger groups sometimes forgot to add a tip when splitting bills, while corporate diners were usually not able to leave tips on their company credit cards.

“The policy is intended to make it easier to calculate a tip, and to streamline the tip process for larger groups,” he said.

He said the restaurant took numerous steps to inform customers about the 8 per cent gratuity during the booking process, but guests could request its removal from the final bill.

“We do not force customers to pay the gratuity if they don’t want to,” he said. “For us, it is not worth the inevitable loss of goodwill, and most likely, loss of a customer. That harms everyone, including our staff who the policy is designed to reward.”

Diners may also be faced with automatic tips when paying at venues that use hospitality sales and marketing platforms such as me&u.

Marketing senior vice president for me&u Boden Westover said the platform shows several tipping options, which include a percentage and dollar amount, as well as a clear button to not tip at all.

“Tipping is becoming much more common, both in hospitality settings in Australia, but also anywhere, where a service is provided, which Uber has popularised,” he said.

Westover also said QR codes increase, not decrease, levels of service when customers order for themselves.

“Servers can spend more time welcoming the guests, talking through the menu and any specials, and checking in on guests more regularly – because they spend less time going between the tables and the point of sale,” he said.

Australian consumer law requires restaurants and cafes to display clear and accurate prices, and not mislead consumers about their prices.

“This includes being clear and upfront about any additional costs such as surcharges that might apply, as well as when a charge is optional,” an Australian Competition and Consumer Commission spokesman said.

He said customers should be made aware of any additional costs that apply before they order.

“Restaurants and cafes that add extra charges to purchases without disclosing them in advance are at risk of breaching the consumer law,” he said.

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