Barring restaurants from levying service charge is unfair, reeks of discrimination

There seems to be a war with the restaurant industry over a sitting duck. We saw the 4th of July fireworks when the Central Consumer Protection Agency issued guidelines – this distinction is important because they are still guidelines at the time of writing and not a law – regarding service charges in hotels and restaurants.

legitimacy Pay the service fee It has been considered and handled by the Supreme Court of India, High Courts, National Consumer Dispute Compensation Commission, Former Monopolies and Restrictive Business Practices Commission, Income Tax Appeal Court and has been upheld in various court decisions.

The concept of variable fees and variable wages is neither unique nor a concept that has fallen out of the sky. As customers, we encounter them under different aliases in the myriad services we use every day because different companies have and should have different pricing models. The restaurant service fee disproportionately provokes hostility because it is believed to be something the customer should not pay.

The front of the house – a restaurant – talking about the workers interacting with customers – the restaurant is not made. There are many workers who toil in the background to ensure you get the meal you love and yet they are at a disadvantage from an earning perspective, simply because you don’t see them or interact with them. Service charges, which are associated with restaurant sales and independent of wages, formalize a fair and equitable distribution across the board and discourage improper incentives.

Service charges also serve the important function of price transparency for the customer as well as for the restaurant operator. The restaurant typically offers takeaway and takeaway services as well as side-by-side delivery services, each with their own costs. Maintaining separate price groups for each of these revenue channels can be a sports nightmare and is often confusing for the customer, which is why in most cases you see a basic list price with service, packaging, and delivery charges, respectively, stacked on top of it, transparently and non-reciprocal.

Real estate dynamics have experienced a sea of ​​change in the recent past, particularly in metro cities and main streets. It’s rare these days for restaurants to pay a fixed rent. They often have “revenue share” clauses built into their leases. The service fee, understandably, is kept outside the jurisdiction of common revenue because property operators rightly recognize that this is not revenue for the restaurant as it is distributed among workers. Restaurants are uncomfortable with the much-touted solution of increasing menu prices to account for service charges due to this butterfly effect – meaning they will now have to renegotiate leases at their expense, since service charges are not a separate item. on books.

The way service charges are denigrated reeks of discrimination stemming from a mixture of half-truths, ignorance and unwillingness to listen. It goes against the economic freedoms that the restaurant industry should enjoy on an equal basis with others; We are still the only industry that cannot claim tax inputs under the GST system.

I am sure I do not stand alone in the fraternity of the restaurant, when I say that I would fail as both an employer and a colleague if the financial well-being and stability of the employees depended on the magnanimity of the supposed average customer. So, it’s time to raise the conversation about service charges and move it toward how to actually help the restaurant worker earn their fair share and improve operations for the business owner.

(The writer is a partner at Mahabelly and a member of the NRAI Managing Committee)

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