Why are restaurants tacking on new charges?

When I hear from Daily Herald readers or talk to restaurant-goers, I get the same question: Why are restaurants charging me for things they never charged for before?

I get it. Menu prices are up (way up in some cases), and we’re already tipping our servers 20% or even 25%. It’s maddening as a consumer to see additional fees on the tab — because often they come as a surprise.

But let’s look at this from the restaurant owner’s or manager’s point of view, and you’ll see why my opinion has changed on some of these fees.

Credit card fees

I used to advise my clients against charging their guests the 3% fee that credit card companies levy. Post-pandemic, so much has changed that I now believe the guest should pay the credit card fee.

Making a profit in the hospitality industry was tough pre-COVID, but today it is nearly impossible.

Food prices skyrocketed, beer and alcohol prices went up, and containing costs has been like trying to herd cats.

The cost of labor also continues to rise. In Illinois, the tipped minimum wage (the minimum an employee can be paid if they receive gratuities) was $4.95 an hour in 2019. Today, it’s $8.40, and it will go up to $9 next year. Many restaurants are having to pay more to attract and retain employees.

Ten years ago, most of my clients were making a net profit of 12% or more. Now they’re lucky if they’re making a profit between 5% and 8%. So for me, the math is simple: The guest who pays the credit card fee is helping that restaurant turn a loss into a gain. If you want to see your favorite place stay in business, don’t begrudge them the 3% surcharge.

I do have clients who are avoiding this and continue to raise their prices to make up for the fee, but this can only go on for so long before their guests stop coming in because they are too expensive.

No-show fees

Ten years ago, restaurants that charged for reservation no-shows were mainly in the big cities like New York, Chicago and Los Angeles. Today, it’s become a much more common practice. For now, I have recommended to my clients to only utilize the reservation no-show charge during holidays (Mother’s Day, Christmas, New Year’s, Easter, etc.). That may change, too.

One of my fine dining clients offered a New Year’s Eve package that was a well-publicized $130 per guest. Once they hit 140 reservations, they stopped taking them to ensure each guest would have a memorable experience.

Unfortunately, 30 guests did not show up, nor did they call to cancel. Essentially, these no-call/no-show diners cost the restaurant at least $3,900. I find this to be unacceptable behavior on the part of restaurant patrons.

So this year, guests who don’t show up for a special event package, or who don’t cancel with at least 24 hours’ notice, still will be charged the full amount. They will also do some overbooking so the restaurant and servers don’t lose out on any income.

As the guest, you can avoid this fee by canceling reservations if your plans change.

If you enjoy eating out as much as I do, stop grumbling about these fees and start realizing that, by paying them, you are keeping your favorite places in business.

• Izzy Kharasch is president and founder of Hospitality Works, Inc., a bar and restaurant consulting company. He offers a free phone consultation with Daily Herald readers. Email him at: Izzy@hospitalityworks.com.