FTC Junk Fee Crackdown Leaves Restaurants Feeling Queasy

The Biden administration’s anti-junk-fee campaign is targeting the restaurant sector.

But as CNBC reported Sunday (Aug. 25), restaurateurs are trying to avoid this fight.

The report, citing data from the National Restaurant Association, said that 15% of restaurant owners added surcharges or fees to checks due to higher costs last year. And a recent report from Square found that 3.7% of the restaurant transactions it processed in the second quarter included a fee, more than twice the amount from two years ago.

While the White House has gone after a range of so-called “junk fees” such as undisclosed service charges for concert tickets, the Federal Trade Commission (FTC) is expected to publish a rule banning businesses from “charging hidden and misleading fees” in the fall.

Restaurants, however, say their fees and surcharges help them stay in business and compensate their workers fairly, the report added.

“The challenge for the restaurants is that not all fees are junk fees. … People know what they’re paying for when it comes to most fees that are on a restaurant bill,” Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, told the network.

The report said some customers may not agree, pointing to a Denver restaurant worker who said in a public comment responding to the FTC’s proposal that while his employer claims fees are “equitably distributed to the staff,” the restaurant actually holds onto 30% of the proceeds.

Consumers, meanwhile, are also getting fed up with “tipflation, the upward march of the tips paid at the table and for delivery, which adds to the bill and subtracts from diners’ wallets,” as PYMNTS wrote earlier this month.

As our reporting on the perceptions around inflation shows, around three-quarters of consumers have noticed the impact of price increases from their favorite restaurants. The pinch is being seen at table service restaurants and quick-service eateries alike, with indications that delivery apps are denting consumers’ wallets as well.

The PYMNTS Intelligence report “Tipflation Is Changing Spending Habits of 1 in 6 Consumers” found that consumers across all income groups are spending less due to tips driving up the cost of goods and services. 

“Data showed that 29% of consumers say tipping has gotten out of hand, as it seems they are universally being prompted at the point of sale to sign off on some level of suggested tipping,” PYMNTS wrote. “A full 17% of respondents to our surveys said that they have actually cut back on spending on items — including food and delivery — because the tipping aspect makes things cost too much.”