Tipflation: With “kitchen appreciation fees,” restaurants try to address the back-of-house pay gap

This is the first of two stories about the changing frequency and nature of tipping.

Much appreciated: Saltie Girl, a restaurant with locations in Boston, Los Angeles, and London, adds to all checks a kitchen appreciation fee of 3%, to be split among kitchen staff.

It is “to directly benefit the back-of-house staff,” explained automotive website Wide Open Roads, “a massive nod to the under-appreciated and unseen humans that make the culinary magic possible.”

Kathy Sidell, president of the MET Restaurant Group, which owns Saltie Girl, told the Wall Street Journal that she instituted the fee to help lure kitchen staff back to the restaurant with a higher wage, but kept it in place because she wants to keep boosting kitchen pay even though her food costs are rising and she’s reluctant to raise prices.

“Our costs have increased exponentially, but there’s just a certain amount that someone’s going to pay for a lobster roll,” Sidell said.

Restaurants have long struggled with pay parity since servers earn tips and kitchen staff generally do not. And these days, one way to address it—the kitchen service fee—is sauté-pan hot:

• The number of restaurants adding service fees to checks increased by 36.4% YoY in April 2022, according to data from point-of-sale software developer Lightspeed cited in the WSJ.
• Fee revenue for restaurants nearly doubled for the same period.

But to consumers, the fees can seem like yet another tip they’re expected to pay, part of the expanding role of tipping beyond restaurants and Uber rides.

These extra charges can seem, that is, like tipflation.

Fee my guest: Unlike its portmanteau cousin, shrinkflation—which Merriam-Webster added in 2022 (and we declared 2022’s word of the year)—tipflation hasn’t made its way into the dictionary. But Wiktionary has an excellent crowd-sourced definition: “The phenomenon of tipping becoming both increasingly widespread and expensive (in terms of acceptable percentage) in society.”

In December, web searches for tipflation in the US hit a nearly five-year high, according to Google Trends.

As for the specific example of kitchen appreciation fees, Bob Vergidis, founder of The Point of Sale Cloud, which provides technology solutions to the restaurant industry, told us that the primary reason restaurateurs are implementing them is not to defray inflationary food costs, but rather for recruitment.

“They’re saying, ‘I want more tips to be able to attract people to work for me,’” Vergidis said. “I want to show them that [by] working for my restaurant, they will make more money.”

While Vergidis said restaurant owners certainly value shifting a portion of payroll to customers, he added that for many workers—and in effect for attracting talent—a lower wage with upward surges can be more tantalizing than a flat wage that’s higher.

For example, he said, if a prospective kitchen employee had an option of earning $20 an hour, or earning $15 an hour plus a 3% kitchen appreciation fee, “if you’re pessimistic, you will go, ‘I’d rather take that $20 an hour,’” Verigidis said. But, “if you’re optimistic you’ll go, ‘You know what? That’s kind of cool, and maybe I’ll make it $25 an hour.”

The tipping point: Hemal Nagarsheth, partner in the financial services practice of Kearney, a global strategy and management consulting firm, said that if kitchen service fees are explained adequately to diners, they’re apt to go over better than raising the price for the prime rib.

“One element of raising a price of any good or service,” Nagarsheth told us, “is that you’re taking some of that control away, because now they feel like, ‘You’ve imposed a price increase on me.’”

But when restaurants specify the price increase is for workers, and with the “goodwill towards the staff” at restaurants that rose during the pandemic, “folks say, ‘OK, I understand why my total bill is going up, and I appreciate the transparency because it’s something that I would support,’” he said.

But Edgar Dworsky, a consumer advocate and lawyer who publishes Consumer World, is not a fan of kitchen appreciation fees.

“It’s a sneaky practice,” Dworsky told us. “The problem is restaurants tend not to make a disclosure very conspicuously on your menu.”

But even when the fee is prominently disclosed, Dworsky still dislikes it.

“It’s kind of the resort fee of the restaurant industry, where hotels were accused of unbundling their charges for stuff that always used to be included,” Dworsky said. “Many diners would say they need to adjust their pay scale to workers and their prices on their menu to cover the actual expenses and salaries.”

Next time: In Part 2, we’ll look at the way tipping is expanding in other ways in restaurants—and beyond.