Gracefully Explaining and Implementing Service Fees to Customers

Sometimes the most relevant business issues are revealed in encounters that we experience from the other end of the transaction: as the customer...

Since the pandemic, several restaurants we frequent have adopted the habit of tacking on an extra charge to the bill called a "Service Fee." Only if you take the time to read the fine print on the bill, you see it states that "A 15% Service Fee has been added to your meal total." The only reason we read it was because our total seemed high - if we’d been less vigilant, we might have paid the fee unknowingly, then added a tip as usual. We called our server over and asked what the Service Fee was for - and who received the money. He responded that it was split between the kitchen and wait staff, sort of like a "mandatory tip," and that we were free to add a tip on top if we felt so inclined. It was, we assumed, a strategy by the management of the restaurant to ensure that their employees were adequately compensated without paying them out of their own pockets - but we couldn’t be sure because it wasn’t communicated to us.

As customers, we thought long and hard about this practice. We felt like we have always tipped generously (especially when service exceeded expectations) so the thought of it being required as part of the bill to include this Service Fee was, at first, off-putting and confusing. Upon further consideration, we’ve determined it to be management ensuring their staff made enough income to remain satisfied enough to stay in their employ. Desperate times call for desperate measures, perhaps.

Looking back, there were some measures the restaurant could have taken to help this new policy go down a bit easier with us, the customers. Here are some things they could have done better to help with more graceful customer adoption of their newly-implemented Service Fee:

Transparency - Allow the customer to get on board with a new fee by explaining your rationale. If, indeed, it is to ensure your staff can make a living wage, explaining that fact will go a long way in helping them to buy in - and will gain your business some good will with the public as being a good employer.

Adequate notice/communication of the change - Should you decide that a Service Fee of some sort is appropriate, avoid springing it on customers out of the blue. It can be awkward to talk about your prices, but it’s best to address the issue directly so as to build and foster customer trust that you’re not simply making a money grab. Choose a date to implement the new policy, then notify customers of the change with messages on your website, social media accounts and signage in your physical location. Of course, even these steps won’t ensure that everyone gets the memo, but it will minimize the number of people taken off guard and will prevent you from having to explain your decision to each and every customer. Such prior notice will allow customers to either accept the new fee or decide to go elsewhere.

Allow time for customers to adopt the new policy - Change can be difficult to accept. People may complain even though you’ve explained and communicated your Service Fee policy. Exercise patience while they come around. Chances are, most will end up being fine with the extra expense and continue doing business with you. Some will not accept the change and will move on; this is fine - recognize they were not your most loyal customers to begin with.

Sometimes it’s necessary to make policy changes for the good of your business and its employees. There’s no doubt that implementing Service Fees and the like can impact your business. You can mitigate any negatives by being clear about why the change is necessary, clearly communicating that to your customers and giving them time to adapt and adjust to it.