Independent Restaurant Coalition
For Immediate Release
Independent Restaurant Leaders Challenge President Biden’s Call to Eliminate Service Charges, Citing Crucial Contributions to Workforce Stability and Equality
12 Million American Workers Are Not “Junk”
WASHINGTON, D.C. (March 8, 2024) — Today, independent restaurant leaders are pushing back against President Biden’s commitment, made at the State of the Union, to eradicate restaurant service charges as part of his Strike Force on Unfair and Illegal Pricing. If implemented, this policy would significantly curtail the progress these businesses have made to fairly and properly pay their workers and negatively impact the very people President Biden and the Administration purport to help.
The Independent Restaurant Coalition (IRC), representing over 150,000 independent restaurants and bars across the country, strongly disagrees with President Biden’s characterization of restaurant service charges as “junk” and implores the Administration to rethink the recent Proposed Rulemaking on Unfair or Deceptive Fees as it applies to these businesses.
The IRC acknowledges and appreciates President Biden's commitment to addressing economic disparities. However, restaurant service charges are not arbitrary or detrimental, and these clearly disclosed service charges are a strategic and crucial component of the evolving compensation structure within the independent restaurant industry.
Historically, the restaurant business model has relied on a tipped minimum wage, with employees depending on tips to supplement their income. Recent studies, however, have exposed the complications of this model and the challenges posed by the pandemic-induced labor shortage have prompted restaurant owners and operators to explore alternative business practices, such as service charges. Additionally, the reliance on a tipped minimum wage model has been proven to perpetuate disparities in wages among women and communities of color. The introduction of service charges has allowed restaurants nationwide to adopt innovative business practices, ensuring a more equitable and predictable compensation for their workforce.
David Nayfeld, chef/owner of Che Fico in San Francisco, implemented a 10% service charge upon reopening after the peak of the pandemic and said, “Implementing these changes has enabled our employees to work a single job rather than needing to augment their income with two or three other jobs, giving them more opportunities for growth. By utilizing the service charge, our employees don’t need to rely on public services as they might otherwise. We have also added a 401k with a 4% match and profit sharing to our compensation model. The service charge is clearly stated at the time of booking as well as on our menu before the guests order their food.”
The proposed elimination of service fees, in the Federal Trade Commission’s Proposed Rulemaking on Unfair or Deceptive Fees , fails to recognize the nuanced nature of the restaurant industry. Service charges have been instrumental in providing higher wages, consistency, and benefits for employees, thereby improving the overall well-being of the workforce. These charges represent a proactive step toward rectifying historical wage disparities within the industry.
“The state of the union is not strong when neighborhood restaurants and bars – the heartbeat of every community and one of the largest private sector employers in the country – are ready to close permanently,” said Erka Polmar, Executive Director of the Independent Restaurant Coalition. “The restaurant industry operates in a highly competitive environment. With increasing food costs, increasing labor costs, and tireless competition, operators have razor-thin margins. Mandating a service-included model will not only result in customer loss and jeopardize the ability of restaurants to survive, but it puts tens of millions of employees at risk, as well.”
The IRC urges the Administration to reconsider its stance on service charges and recognize their positive impact on the restaurant industry's workforce. The Coalition remains fully committed to fostering transparency and ensuring that diners are aware of the use of service charges in their chosen establishment. The Coalition also supports fair practices within the restaurant sector and its members are eager to engage in further discussions to find collaborative solutions that ensure the vitality of independent restaurants and bars and while protecting the livelihoods of the millions they employ.
ABOUT THE IRC:
In March 2020, the restaurant and bar community formed the Independent Restaurant Coalition (IRC) to save the independent restaurants and bars from the devastating impacts of the COVID 19 pandemic. We continue to fight to create meaningful change for independent restaurants and bars nationwide by providing strong advocacy centered on making sure that independent businesses are being seen, heard and supported by federal policy makers.
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