Restaurants Add New Fees to Drive Employee Retention Amid Inflation

As restaurants look for ways to drive employee satisfaction amid inflation, tips are not the only added payments that operators are leveraging.

In an interview with PYMNTS, Chef Ana Castro of New Orleans Mexican restaurant Lengua Madre noted that the eatery has introduced a 4% “wellness fee,” optional for customers, to cover rising costs of health insurance and benefits for employees. She added that, while this fee rubs certain customers the wrong way, further increasing menu prices could alienate consumers.

“For the time being I think that wellness fee is going to stay until we can figure out another way. With inflation, everything is way more expensive,” Castro said. “You already have to raise prices, so if you were to tack on that fee, it would be like vroom. The price would go way up.”

Indeed, throughout this inflationary period, many restaurants have added new fees. Reports have circulated of charges popping up on checks with names including “noncash adjustment,” “fuel surcharge” or “kitchen appreciation” to offset ongoing cost increases.

Castro noted that it would be difficult to bake the restaurant’s elective wellness fee into menu prices, given diners’ existing frustrations with menu prices. Indeed, PYMNTS Intelligence reveals that consumers perceive restaurant price increases to be even higher than the measured rates.

“I think people psychologically are not prepared to spend that,” Castro said. “Everybody’s feeling inflation, so the amount of disposable income that people have has gone down.”

Still, the social pressure to tip remains in effect, and Castro notes that Lengua Madre has seen median tips of 22%.

In fact, this figure is well over the median that consumers tip across different types of purchases. According to the latest edition of PYMNTS Intelligence’s Consumer Inflation Sentiment series, “Consumers Overwhelmed as Inflation Pressures Reach Tips,” which draws from a census-balanced survey of 2,000 U.S. consumers, the median tip is only 15%.

The study also found that 34% of consumers say tipping expectations have gotten out of hand. Still, 95% tip when prompted when paying for food from a table-service restaurant.

“I would love for everyone in America to just realize that service industry is just a career and borderline an art form and a necessity,” Castro said. “And our work matters.”

Castro said technology has made it easier to track tips and streamline operations. With the advent of point-of-sale systems and user-friendly interfaces — the restaurant uses technology from BentoBox — managing tip payouts has become more efficient.

Tipping behaviors in the restaurant industry are evolving, influenced by changing dining preferences and rising costs. The use of technology has made tip payouts more efficient, while new fees have emerged as a means for restaurants to cover additional expenses. As the industry continues to adapt, it remains to be seen how fees and tipping norms will evolve.

“There’s so much in the restaurant industry that is left up to chance,” Castro said, “especially with a tipping model, which is a model that at some point is going to need to change.”