Her husband was in the mood for tacos, so Christine Pomorski thought back to her last dinner at a Mexican restaurant in Denver.
The aguachile and guacamole appetizers, tacos and horchatas at Mister Oso had tasted good enough. But her bill included something she hadn’t expected: a 20% service charge.
It wasn’t a tip, the disclaimer on the receipt explained, although Pomorski was welcome to leave one of those in addition to the service charge. Rather, “The 20% service charge on your check enables us to fairly compensate every team member who contributes to your experience. Thank you for helping us uphold an equitable pay model.”
Was it equitable, though? “And to whom?” Pomorski, a 45-year-old communications consultant, wondered. “I don’t understand the pay model. … I couldn’t determine if it’s something that’s fair to the staff.”
The outing left a bad taste in her mouth, Pomorski said. She and her husband went for tacos at a different restaurant.
Years after they were introduced as a way to keep employees paid and the lights on in the throes of the Covid-19 pandemic, service charges remain as divisive as ever among customers and employees at Denver restaurants, many of whom debate them on social media and in online forums like Facebook and Reddit. Dozens of restaurants use them, including major operators like Culinary Creative Group (Mister Oso, Kumoya, Bar Dough, Magna Kainan); Bonanno Concepts (Osteria Marco, Mizuna, Luca); City Street Investors (Union Station, Schoolyard Beer Garden) and TAG Restaurant Group (Guard and Grace, Hashtag).
Those who do appreciate that they are allowed to use them to help cover a wide variety of costs, whether that’s paying non-tipped staff like cooks and managers, buying raw materials or tackling health care premiums and credit card fees. But others prefer to stick with the traditional method of American tipping. The harshest critics, typically employees and diners, say they are inconsistently applied, sneaky and confusing — especially when it comes to whether the fees cover tips or not.
Colorado has attempted to rein in service fees in multiple industries using legislation; much of it focused on the housing sector, but restaurants are also required to disclose mandatory charges as part of a law that went into effect this year.
But confusion persists. After two recent lawsuits were filed by restaurant workers over the issue, the Colorado Department of Labor and Employment plans to return to the issue this summer in response to a plea from the attorney for two of the plaintiffs, a department spokesperson told the Denver Post last month.
“It’s the nickel-and-diming.”
Like a lot of restaurateurs, Frank Bonanno introduced service fees during the pandemic as a way to keep paying employees of his fine-dining restaurants Mizuna, Luca and Osteria Marco, who were earning less while social distancing rules were in effect.
But the 22% “Creating Happy People” struggled to make anyone happy once Covid rules relaxed, including servers who were used to tipping. One at Osteria Marco sued the restaurant last year in Denver County District Court, alleging stolen tips and a lack of transparency. The case was later settled.
Now Bonanno veers on the side of caution. “We’ve reworded everything to make it a little more clear, so that guests understand exactly where everything is going,” he said. “It’s just more transparency, I guess, is what it really caused.”
Sixty percent of the collected fees go to servers, 25% goes to the kitchen, and 15% stays in-house, Bonanno said.
But transparency remains an issue in many people’s minds. When Maureen Corley showed up for a tryout interview at one of Bonanno’s concepts earlier this year, she wasn’t encouraged.
“Even though it is written in itty-bitty font on the front of the menu that it’s not a gratuity, [servers] aren’t really encouraged to say that it’s not a gratuity,” said Corley, who now works at another restaurant without service charges.
Exactly how much of the money is distributed to which purpose isn’t explained. In fact, the Colorado Restaurant Association doesn’t encourage its members to be that explicit.
In a memo it sent earlier this year, the industry group told restaurants that: “You do NOT need to detail the percentage distribution of the service charge (ie, 5% to back-of-house, 10% to front-of-house, 5% to administration, etc.).”
Denver attorney Adam Harrison, who represented the server in the Osteria Marco case and another in a lawsuit against Culinary Creative Group, which was also settled, laid out the problem in a March interview with The Denver Post.
“A lot of customers in Colorado think that the service charge that they pay is going to the people who serve them, when in fact there are a hundred different things that restaurants are calling a service charge,” Harrison said at the time for a story on the settlement with Culinary Creative Group. “If you go to 20 different restaurants around this state right now, you’re going to find the service charge is done differently at every single one of them.”
Harrison declined to be interviewed for this story.
The Denver Post attempted to contact the owners of more than a dozen restaurants to share the breakdown of their disbursements. Several declined to comment, with some worrying about potential backlash online. Others declined to speak through publicists or did not return calls.
But here are some of the ways restaurants describe their fees on websites or menus.
Stoney’s Bar and Grill has a 2.5% fee that its website says goes to “general restaurant operations.”
American Elm, a restaurant in the Highlands, applies a “5% living wage fee to all tabs that goes directly to our back of house staff,” according to its menu online. LoHi restaurant The Hampton Social lists an 18% service charge on its menu, all going to “service staff.”
Leven Deli and Leven Supply, two popular counter-service restaurants, charge a 10% service fee and pay their employees minimum wage, according to their websites.
Dear Emilia and Restaurant Olivia, upscale Italian restaurants that share management, list a 20% service charge split among staff “in an equitable manner.”
City, O’ City and Watercourse Foods, sister vegan restaurants in Denver, use service charges.
So does Kawa Ni, a Japanese restaurant that employs a 20% surcharge for hourly employees.
The Schoolyard Beer Garden in Denver, one of the adaptive reuse concepts spearheaded by City Street Investors, charges a 20% service fee and does not accept tips. The Edgewater Beer Garden, which it also owns, lists an 18% fee online. Vendors inside Union Station charge a “Historic Preservation Fee.”
At Molino Chido, Uncle and Hop Alley, restaurants owned by chef Tommy Lee, the service charge applies to takeout orders, a model he implemented at the start of the coronavirus pandemic. The 15% fee helped pay staff since customers weren’t dining in and tipping as much, he said.
“Psychologically, it’s the nickel-and-diming, I think, that’s wearing on people,” Lee said about service charges in general. “Why don’t you just tell me the price I’m going to pay before I decide? I think that’s what the law this year is trying to figure out.”
“Service should be about serving the customer”
Simeran Baidwan refuses to add a service charge to checks at Little India Restaurant & Bar, his small chain of Indian food restaurants. “You’re going to make the consumer run away and go somewhere else,” he said.
An adherent of the traditional service model with tipping, Little India’s Baidwan said it’s a turn-off for customers to see an added fee on their receipt. “Did I really get that experience? Was there really a ‘wow’ factor there?” he asked. “It’s really up to the customer what kind of experience they’re having in order to give the right gratuity to the right server who took good care of them.”
Instituting the “Creating Happy People” fee led to quite a bit of employee turnover at Bonanno’s concepts, he said. Now he brings it up during every job interview. “There are bartenders and servers that just want to go in, work a station, get their tips and leave,” Bonanno said. “This system isn’t for that. This is a system where it’s more team-oriented.”
Corley said service charges have contributed to “complacency” among servers in the restaurant industry. “I’m not sure how the plot got lost since Covid,” the 34-year-old bartender and server said. “Service should be about serving the customer.”
After attempting to find legal clarity on service charges and their prescribed uses through the courts, Harrison contacted Kristina Rosett, a director with the Department of Labor and Employment, asking the state to weigh in. A spokesperson for the labor department last month said they received Harrison’s request and would be taking it under consideration.
“We intend to hold a listening session over the summer to gather broad stakeholder input on this topic and others of interest in the restaurant industry,” department spokesperson Jessica Smith said in a statement.
“If the Division determines that administrative rulemaking on this topic or others is warranted, this session will be followed by the steps required by state law, which include a public hearing and notice and comment process on such matters,” she added.
Sam and Tricia Maher grew up and lived in Sydney and Melbourne before moving to Denver and opening their vegan restaurant, Somebody People, in 2019. They now employ about 20 people, all of whom are paid per hour above minimum wage.
It was their staff who sought a service-charge model during the Covid-19 pandemic, Tricia Maher said. At the end of a meal at Somebody People, the server places the bill on the table and explains that a 20% service charge is included and that is shared with the front and back of house.
The added cost of service more closely resembles the way business is done in Australia, she said.
“Everybody is getting paid what they should or what is agreed upon for that role,” she said. In Australia, “hospitality has always been a livable wage and tips were never expected or assumed on top of that.”
Their fee is largely accepted and acknowledged by their clientele, she said. Rarely does a customer raise an objection.
“The transparency is the biggest thing, in my opinion. We’re not trying to hide anything. We’re trying to just give you the price.”
