What Is a Hospitality Fee?

A hospitality fee is an extra charge a restaurant adds to the guest’s bill, a percentage of the total amount, like 3% to 20%. Some restaurants call it a service charge or a staff benefit, but the concept is the same. It’s a set amount added on top of your food and drinks, and the guest doesn’t get to choose it.

Owners usually bring it in to cover costs and fit into menu prices. That might be better pay for kitchen staff who don’t get tips, health insurance for the team, or rising costs like food, rent, and credit card processing. Some restaurants use it to move toward a no-tipping model.

The hard part is how guests feel about it. Even though it is shown on the menu, a lot of people consider it to be a hidden fee. The majority of complaints are not related to the money itself, but rather to surprise.

Keep the cost up front if you add one. Post it on the menu, your website, and the check, and teach servers how to properly explain it. Be honest about where the money goes.

Check your state’s rules too, since several states have laws on how extra fees must be shown. Also ask your accountant how the money is taxed and paid out, since that depends on how you set it up.