Definition
Service charge
A service charge is a mandatory amount, usually a set percentage, that a restaurant adds to the check, distinct from a voluntary tip the guest chooses.
A service charge is added by the house, not chosen by the guest: a fixed percentage on large parties, a flat event or catering fee, or an all-in surcharge some restaurants use in place of tipping. The tax and legal treatment is the key distinction from a Tip pooling gratuity. In the US a mandatory service charge is generally the restaurant's revenue, not a tip, so the business decides how it is distributed and it is taxed and reported differently.
Service charges have spread as operators try to stabilize pay in a tight labor market and offset rising costs, but they carry real risk if handled carelessly. Guests notice surprise fees, and an unexplained line on the Guest check is a fast route to a one-star Online review. Whatever you charge has to be disclosed clearly up front, and if you imply it goes to staff it needs to actually reach them. Transparency is not optional here, it is what keeps a reasonable policy from reading as a hidden price hike.
The mechanics are a POS configuration (apply the charge, split or retain it, report it correctly), so the leverage from AI is downstream: review-management tools surface quickly when a fee is generating guest complaints, so you can fix the wording or the policy before it dents your Star rating. See review management.
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Related terms
Your next service / Ready when you are
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