But restaurateurs who introduced the fees say they did so to stay afloat in an industry with notoriously thin margins. Some say the funds are being used to offset the cost of higher wages they must pay workers as a result of Initiative 82, which was passed last year to raise wages for Washington, D.C. restaurant workers . Other owners say the fees go to fund workers’ health care. And some restaurants introduced service charges at the height of the pandemic. The pandemic may have eased, but the costs remained.
Customers, meanwhile, are surprised by bills that can be 10 to 15 percent higher than they expected, with fees they don’t understand. Employees are divided on the issue and sometimes unsure whether the fees contribute to their personal bottom line. The issue has proven extremely complex, even for professionals charged with helping to regulate the industry.
The controversy came to a head in recent weeks when several well-known restaurants and hospitality groups agreed to lower their prices in the face of public pressure or the threat of litigation.
Here’s where the problem stands now and what you need to know.
Public resistance to service fees is growing. In January, Travelers United, a nonprofit organization opposed to what it considers “deceptive” fees in the travel industry, filed a lawsuit against Knead Hospitality and Design, a restaurant group that owns nine restaurants in the district, including Succotash, Mi Vida and the Grill. . The suit took aim at Knead’s “Initiative 82 fees,” which added an additional 3.5 percent to each tab. Like Clyde’s Restaurant Group, owner of Old Ebbitt Grill, Clyde’s, the Hamilton and others, which Travelers United sued in late 2023, Knead dropped his fee.
Lauren Wolfe, legal counsel for Travelers United, says the organization’s goal is to prevent restaurants from charging tourists and residents fees they don’t expect or understand.
“Our wheelhouse is misleading fees,” Wolfe says. “[Tourists] …I don’t know why there are suddenly hidden fees at every restaurant in DC. We believe these deceptive fees only take advantage of tourists in Washington, DC. »
After Clyde’s dropped its surcharges, Wolfe says, Travelers United stopped pursuing the case.
Earlier this week – and without the threat of legal action – Dacha Beer Garden announced that it would also remove the 15 percent surcharge on menus at its Shaw and Navy Yard outposts, a move that was praised by fans. customers and staff.
In 2018, DC voters passed Initiative 77, which would allow have gradually increased waiters’ pay to match the standard minimum wage rather than expecting them to rely on tips for the majority of their income. However, it was ultimately repealed after restaurateurs, servers, and members of the Restaurant Association Metropolitan Washington (RAMW) lobbied against it.
In November 2022, voters passed Initiative 82 with nearly 74% in favor. The goal of the initiative is the same as its predecessor: to phase out the $5.25 hourly wage by 2027, eventually requiring restaurants to pay staff the standard amount of $17 an hour (it will increase to $17.50 in July), which applies to all other DCs. businesses.
This time, the Washington Council chose not to pursue the initiative, and I-82 took effect last spring. Restaurants, already struggling with rising rents, food and labor costs, amplified by the pandemic, began looking for ways to supplement their profits. According to RAMW President Shawn Townsend, some restaurants raised their prices, but others feared the menu hikes would scare away customers. Enter the surcharge, which the Washington attorney general’s office has asked restaurants to clearly disclaim on menus and checks — although not all diners read the fine print of a menu.
Today, D.C. restaurants must compensate staff for the difference if their base pay plus tips don’t total the $17 minimum wage. Initiative 82 also increased tipping from $5.25 to $6 per hour in May 2023, then from $6 to $8 per hour in July. This base salary will continue to increase year over year until 2027, when it will match the “standard” or non-tipped minimum wage.
What was the public reaction?
Reactions to the implementation of these service fees have been mixed.
Labor organizations such as One Fair Wage, a key player in lobbying for the initiative, are monitoring public reaction. Saru Jayaraman, president of One Fair Wage, says these service charges may have been well-intentioned and many restaurateurs use them responsibly, but in some cases they have been “corrupted” by those seeking profit. financially unfair. keep workers’ funds. Service charges, unlike tips, belong to the restaurant and can be distributed as the owner wishes, which is why some diners and organizations are calling for greater transparency.
“There are still some great, fairness-minded employers that are using service fees in a way that we think is the right way, which is essentially a guaranteed gratuity for workers,” says Jayaraman. But others, she said, use fees in ways that “mislead both consumers and workers.”
Jayaraman also says the majority of workers and consumers are frustrated and confused by these fees, to the point where some are boycotting restaurants they believe are charging operating fees. And customers are increasingly airing their complaints on the Internet.
“It’s hard to know what to do at this point,” one D.C. restaurant wrote in the comments of a discussion on X, the social media platform formerly known as Twitter. “Menu prices have increased considerably [up]. Then there is 10% tax and 20% [service] charge. Are we supposed to tip 20% more? No idea what the expectations are – or what’s reasonable. DC should ban service fees for a level playing field.
“It’s the 1-15% fees that are so obnoxious and infuriating,” another local customer responded. “I feel cheated and/or lied to.”
Jason Berry, co-owner of Knead Restaurant Group, which Travelers United sued, claims its servers reported a decrease in tips after Knead implemented its Initiative 82 surcharge and, as a result, the group was already in the process of removing the surcharge when it learned of the lawsuit .
Berry wants diners to know that it’s not just servers who get tips; they are also bartenders, hosts, bussers, barbacks and more. He estimates that between 65 and 70 percent of his staff receive tips. At the same time, he says, restaurant profit margins are notoriously thin, forcing restaurateurs to find a way to stay. in the dark.
“A good restaurant in the United States has a 10% profit margin,” says Berry. “People think this restaurant is so busy that it makes so much money. …They are busy when you expect them to be busy, and they are slow when you expect them to be slow, but we pay the rent, electricity, gas and water all day, every day.
Dmitri Chekaldin, co-owner of Dacha, the beer garden that recently dropped its supplements, said Dacha servers had to continually decode service charges for confused diners.
The decision to remove Dacha’s service fees sparked an “extremely positive” reaction, according to Chekaldin.
“The staff are delighted,” he says. “It just means…they will have to explain less and will tip more.” »
What does this mean for the future of DC restaurants?
Restaurants are working with the District Attorney’s Office and the DC Council to clarify service charge language. One bill up for consideration is the DC Restaurant Relief Bill, which RAMW’s Townsend said would provide more specific instructions to restaurants on service charges and create a public education campaign on Initiative 82. Some advocacy groups employees, including One Fair Wage, however. , worry that the bill, before the D.C. Council, could encourage some restaurants to implement more ambiguous service charges and reduce tipping even further.
The bill will likely be amended as it moves through the council voting process, and some restaurants have proposed eliminating tipping immediately, rather than phasing it out.
In the meantime, Wolfe says Travelers United plans to continue filing lawsuits against restaurant groups it says are violating laws regarding service fees, including those that don’t specifically reference who will receive the money. Additionally, the Fair Price Fair Wage Coalition, an advocacy group of which One Fair Wage is a member, created an Instagram page that tracks which DC restaurants have service fees and whether they are displayed correctly, according to the guidelines from the DC Attorney General.
Read the fine print on your menu to see if tipping is included in the service charge, but like the Post’s Tim Carman and Justin Wm. Moyer wrote in May 2023, it’s always a good policy to tip your servers. Read their helpful guide to tipping in a post-I-82 world here.
Attention, DC restaurant workers: The Post wants to know how you have been affected by Initiative 82. Fill out our quiz to share your experiences.
