Restaurant owners say service charges are not illegal; it is for the benefit of the staff

The restaurateurs reiterated that the collection of service charges by them is not illegal and that the amount of the service charge is clearly mentioned on the menu cards for customers to exercise their choice before enjoying the services. They said the charge is for the benefit of restaurant staff and serves as an incentive to motivate them.

“On behalf of the entire restaurant industry, we have strongly reiterated all facts with evidence to the Consumer Affairs Department that the collection of service charges is neither illegal nor an unfair business practice as alleged. , and this debate in the public domain creates unnecessary confusion and disruption to the smooth running of restaurants,” the National Restaurant Association of India (NRAI) said in a statement.

The service fee is transparent, worker-friendly and is also recognized by numerous court orders that have been shared with the DoCA, the NRAI said, adding that the government also derives revenue from the service fee as the tax is paid. by restaurants.

The view was echoed by a similar industry body, the Federation of Hotel and Restaurant Associations of India (FHRAI). Its co-secretary Pradeep Shetty told FE that the June 2 meeting with the ministry was fruitful as the industry was able to present its point of view and explain the nuances behind the collection of service charges in restaurants.

The individual restaurateurs FE spoke to also reiterated that charging service fees was not illegal, but a matter of individual policy, and in line with practice followed by other industries as well.

Rachel Goenka, CEO and Founder of The Chocolate Spoon Company, said, “The charging of service fees is neither illegal nor an unfair business practice as alleged. GST is collected and paid on the service charge, so it’s odd that the legality is up for debate. Service fees exist in many industries, but are called differently. Aggregators call it a delivery fee, ticketing platforms call it a convenience fee, various government departments call it a processing fee, airlines and airports levy all kinds of fees and surcharges. However, the restaurants are singled out, as usual. We are always an easy target for the government.

She added: “The service charge exists for the benefit of restaurant staff and serves as an incentive to motivate employees. After extending zero support to the catering industry during the pandemic, it is unfortunate that the government is now targeting the earning power of catering staff. Ultimately, this could set a bad precedent for government overreach and lead to undue influence on pricing policies across industries. »

Based in Mumbai, The Chocolate Spoon Company owns restaurant brands such as The Sassy Spoon, House of Mandarin, Wicked China and Baraza Bars & Bites.

Foodlink F&B Holdings India CEO Sanjay Vazirani said that our goal has always been to provide quality experience and customer satisfaction. “We would welcome any policy and framework announced by the government regarding service charges that would benefit the customer and make them happy,” he added. Mumbai-based Foodlink F&B Holdings India owns restaurant brands such as Glocal Junction, China Bistro and India Bistro.

“In nine out of ten places, the outlet mentions on the menu itself that they charge a service charge. So the customer has the right to decide whether they want to dine there or go elsewhere. In many places , if there is a standee with the menu printed on it, it says at the bottom that the outlet has a service charge,” said Subhankar Dhar, owner of Esplanade, a specialty Bengali restaurant in Bangalore.

“Dining on site is a luxury service and it is for the employees that the restaurant takes a service charge. It’s to motivate employees and give them a little extra for the service they provide to each table or customer. Service fees that accrue to employees make them feel cared for and rewarded for their service on top of their salary,” Dhar said.

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