What Do You Think: Should Restaurant Owners (Like, Say, Stephen Starr) Use Waiters’ Tips To Pay Some Of The Credit Card Fees?

You probably know that restaurants get hit with fees when you use a credit card. If your bill is $300, you leave a $60 tip (because you are a solid person), and pay with your Visa — their fee is around 2.5% — the restaurant is charged $9. What you might not realize is that some restaurants take a percentage out of a server’s tips to cover the fee assessed on those tips. In other words, the $60 you thought was going to your friendly waiter for a job well done has turned into $58.50. Well, not everyone is happy with this arrangement.

Yesterday, CBS 3 reported that Philadelphia Councilman-at-Large Jim Kenney intended to introduce a bill that would prohibit a restaurant (or spa or hair salon) from touching gratuities to pay for credit card fees. He told the reporter: “If I’m leaving an 18-20 percent tip, I expect that to go into the pocket of the person who waited on me, not three percent skimmed off the top to go to the owner of the restaurant.”

“The Councilman feels that it’s the choice of a restaurant to accept credit cards, and the cost of that choice is the credit card processing fee,” added a legislative aide in Kenney’s office today. “It’s unfair to the waitstaff to be penalized for the decision of the business.” Kenney’s office declined to name names but says the Councilman is aware of restaurants that take proportionate fees out of the gratuities as well as restaurants that make servers pay for the entire processing fee out of their tips. Everyone seems to agree that the latter practice is just plain wrong, if not illegal.

Stephen Starr, whose servers cover their portion of the credit card fees, directed me to his CFO, Bruce Koch. “The sharing is only fair,” insists Koch. “It puts the restaurant in exactly the same position it would be in if we were cash only. We’re not benefiting from this.” Another restaurateur, who follows Starr’s example but asked to remain nameless, says, “The people who don’t understand this simply don’t understand the math.”

Koch also remembers a study that the IRS conducted to help with audits. He says the study showed that people who pay with credit cards tend to tip two to two-and-a-half percent more than people who pay with cash. I have been unable to locate the study, though it sounds reasonable enough to me, at least based on my own experience. “We feel strongly that the servers are making some good money, and it’s even better because we accept credit cards,” explains Koch. “Some restaurants don’t accept credit cards, and I guarantee you that their servers don’t make out as well as ours do.”

As for the servers, I spoke with one this afternoon who works at a restaurant where he is required to cover his portion of the credit card fees. “It’s frustrating,” he admits. “I understand the necessity and the arrangement, but I feel like the general public doesn’t know that it’s happening. Then again, the percentage is minimal. It’s not going to hurt me in a direct route. But in the long run…”
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  • http://www.waytooshay.blogspot.com Meg

    Perhaps this is naive, but what happens if I pay the bill with a card and tip in cash?

  • Joe K

    If someone is an employee of a restaurant, it’s the restaurant’s responsibility for these fees. It’s part of operating the business. They’re not charging servers for electricity usage, or paying them commission based on food costs. It makes no sense for this cost to be passed on to the employee. And I’m surprised it’s even legal. These people aren’t independent contractors — and that’s the only situation where this type of thing should be acceptable.

  • http://www.christinastetlerphotography.wordpress.com Chris

    In no way, shape, or form do I think it’s fair that the server should have to foot the bill for a business expense. The owner decided that they would get more business by allowing customers to pay by cc. They knew going into it that there is a fee associated with the usage of ccs and as such, should be paying the administrative fee for the option. Serving staff get paid little enough as it is, taking the cc service fee out of their tips should be illegal and kudos to Councilman-at-Large Jim Kenney for taking charge and doing something about it!

  • Victor Fiorillo

    @Meg, the restaurants keep track of credit card gratuities separately, so if everything is on the up-and-up, the restaurant would pay the fee on the check amount and the server would pay nothing.

  • jtpill

    Absolutely absurd, and this coming from Stephen Starr of all the millionaire crackpot Trump wannabe’s out there, the wealthiest by far restauranteur of this city is nickle and diming his servers! I mean, little mom and pop shops don’t do this but Stephen freaking Starr! What a cheap bastard. This reeks of big oil, GE and Insurance co. profits. He’s probably already hired a lobbyist.

  • Jenny

    This is not news. Why are people making a fuss now? This has been going on for years. I worked in restaurants 20 years ago and we had to pay out the fees on credit card tips. That is why I tip in cash regardless of how I pay for dinner.

  • JonP

    @Meg As Victor says, the server gets the full amount of the tip. That’s why I try to leave tips in cash as often as possible.

  • kbor

    I always tip cash when possible.


    Whatever, how about tipping the cook that made the food….

    • Tara

      That is why kitchen staff is paid an actual hourly wage and not $2.83 an hour (which doesnt even cover taxes) like servers are.

  • mmgth

    You can be a “solid” person tipping 18% excluding tax on the bill. Always best to leave a cash tip.

  • Waiter

    Even if you pay on a credit card and someone tips in cash, the credit card fee is STILL taken out of the server’s overall tips. Don’t let ANYONE tell you otherwise. Ask any server and they will tell you this is common practice at most “reputable” restaurants. Maybe foobooz can look into the legality of this

  • John

    From a veteran ‘lifer’, this is not common among most restaurants. I did my SRO time, and i raised hell on multiple occasions. There were times where the servers were paying $30 in TIP CREDITS a shift. My argument was if I were paying for the option of utilizing a credit card for payment, then I would opt to only accept cash, because incurring said costs I am an ‘independent contractor’ not an employee. If you are allowing credit cards to be accepted at your place of business, then YOU eat the fees, regardless how much I make on the floor.

    I’m surprised no one mentioned how some of the properties hold onto credit card tips until the pay period is over, thereby parking thousands of dollars in interest bearing accounts that the employees pay taxes on when received via check, while the cumulative amount’s interest far outweighs what the owner’s incidental taxes on those tips.

  • booberry

    Having worked for Starr for years, I can tell you that, not only was I debited for a credit card payment (regardless of whether the tip was in cash), but EVERY credit card payment. So, if a table of nine split their payment among nine credit cards (not uncommon), I was debited nine times – on one table.

    I’ve heard about that report – that elusive report – never seen it or know any other server whose ever seen it. The money a server makes can be good in a place that uses this practice, so while he might grumble & try to change it, the restauranteurs know that there’s a steady stream of other candidates ready to step in their places – so it’s actually a matter of put up or shut up (or quit).

    Kenney may or may not ever get his bill passed, but I hope that it shines a little more light on the lot of a waiter. The tip you give me does not go home with me %100 – there are busboys, food runners, bartenders, and other support staff that rely on that tip – and in some cases restauranteurs skimming from it too.

  • sassylady

    Finally! Thank you for bringing this up! This is illegal in many states, and still other chain restaurants have voluntarily stopped this practice because it was cheap and made for bad PR. How can I help get this bill passed here? You have no idea how this can add up!

  • sassylady

    Also, having worked at a cash-only BYO, the idea that people tip more on credit cards rings untrue to me… and not all restaurants do this-(thank you Standard Tap!)

  • pj

    first of all a big thank you goes out to Kenney and victor for bringing attention to this issue. at the very least the practice is unethical. when customers give a waiter a tip it’s with the expectation that the money belongs to the waiter and support staff from that point forward. for an employer to take that money and redistribute it later is shady.

  • Server4Life

    @Victor. You gave Meg bad info. Restaurants who do this do not discriminate. Servers take the credit card hit on any sale, whether the tip is cash or card. Computer companies such as aloha, digital dining, and micros have the option to deduct the percent built into the software.
    @John. You must have been very lucky because I have never worked at a place that doesn’t do this.

  • foodie77077

    As a BOH person I had no idea this even went on. It sounds shady to me. Credit cards allow us, as customers, to spend more to a point of saying “just put it on the card”. This is good for the restaurant and the server.

    Servers are sales people. Good ones know how and what to sell to make everyone happy. i doubt joe Somebody down at the Audi dealership as to pay the credit check on any car he is selling. Or the Uber-nerd has to pay any few part of the CC charge(3-5%) on the TV he sold at Best buy, although he may receive commission.

    On a side note-if Bartenders are tipped out then the Kitchen SHOULD be tipped out as well. That is a law in many states. It makes the entire operation run smoother. If table six needs to modify the hell out of a chicken sandwich, let them, the increased sales/tip helps everyone.

    • http://www.facebook.com/terri.lohnes Terri Lohnes

      Bartenders in most states only make 2.13 an hr like the server whereas the cooks make a lil more than minumun wage depending on experience. Servers already have to tip each supporting staff 1percent of tgeir sales, so if we have to tip out bartender, hostess, food runner, and busser and also credit card fee, we are tipping out 5percent of our sales and making 2.13 an hr which we dont even get a check.

  • Joe K

    Is anyone absolutely sure this is legal? I can’t imagine it is.

    As for people suggesting the BOH should get tipped out — that’s just ridiculous. It’s an entirely different pay structure. Servers and Bartenders are (usually) paid much lower hourly wages (what is it? $2.35/hr or something?), and so rely on tips. The back of the house is (again, usually) paid a much higher regular hourly wage, so there is no reliance on tips here. Now, if an establishment wants to lower their food prices and start paying their BOH $2.35 and somehow make the customers aware and hope they tip more, then sure, the BOH can start getting tipped out. Until then, it’s absurd.

  • Server4Life

    @Foodie. If the server staff was tipping out the Bartenders, bussers, runners, AND BOH the tip pool would be so diminished and kitchen would only get the $2.83 hourly like everyone else. I’d love to see you guys clean and scrub like you do when it is slow knowing you were only getting $2.83. I’m not hating on the kitchen staff, I know I couldn’t do what I do without them, but tipping them out wouldn’t work. (we can all buy them a beer once in a while!)

  • Disgusted

    How can Starr or any other restaurant do something like that to their employees? I agree with the poster who said servers should be able to decline credit card sales then. I’m also appalled that people are “voting” on anything other than “I want my server to get my tip.” 3% is on top of the city wage tax for the privilege of working in Philly and now they are paying another 3% for the “privilege” of being able to accept credit cards? I, for one, will stop my frequent visits to Starr and go spend CASH, and less cash, at other more reputable establishments.

  • Erin

    Servers/bartenders hourly wage is between $2.30-$3.00…. out of that wage…. a percentage of the tips they make are claimed…and taken directly out of the total amount. This means that the ending paycheck is usually close to nothing. I think that a huge restauranteur such as Steven Starr has enough money to be able to cover these credit card processing fees, rather than take them from the people who work for only the tips people leave….and who take care of the customers that make his restaurants so successful. ridiculous!

  • sassylady

    I might add that some restaurants use tip portions as a “credit” against paying the minimum wage, thereby actually payer servers LESS than $2.83 per hour.

  • Jen

    Not only do they make the servers pay the fee, but the owners sit on the credit card tips for 2 weeks gaining interest… The whole thing is disgusting…. Seriously $2.83 an hour… The owners aren’t even paying the servers enough to cover their taxes, most pay checks are void. In what other profession does this happen? Yes, profession… The majority of servers in higher end restaurants in Philadelphia support their families with the tips they make. No benefits, no union, and now because Stephen Starr things he can dick his staff out if what is rightfully theirs, other owners are following suit. It’s a joke.

  • Jen

    Not only do they make the servers pay the fee, but the owners sit on the credit card tips for 2 weeks gaining interest… The whole thing is disgusting…. Seriously $2.83 an hour… The owners aren’t even paying the servers enough to cover their taxes, most pay checks are void. In what other profession does this happen? Yes, profession… The majority of servers in higher end restaurants in Philadelphia support their families with the tips they make. No benefits, no union, and now because Stephen Starr thinks he can dick his staff out if what is rightfully theirs, other owners are following suit. It’s a joke.

  • Anna

    If these restaurant owners feel that there is nothing wrong with this, it should be mentioned on the check or menu. Then I will be sure to leave cash tip.

  • sassylady

    Servers are charged on credit card sales-not tip only. All credit card transactions. Granted, if you pay by card and tip in cash, the amount of the transaction is less-but the server is still charged.

  • Mike

    The practice seems like theft to me.

  • Tim

    I have been in the industry for a decade and a half in both Philadelphia, the burbs and New York State. I cant remember the last time I got a paycheck that was not voided due to fees and taxes. Here is another point, if you have a slow night, or week, by law the owners are supposed to garuntee you make minimum wage, which they do not. Just one other way owners screw there FOH staff

  • JustAnotherExStarrEmployee

    If you really want to teach Starr a lesson about his bs ways just walk out. All if his employees should just take a Saturday night off. That will show him how much he really needs good employees. He can’t fire everyone. All of his FOH and BOH staff should just not show up for one night. I really think that would put the ball in the employees court. Almost everyone in the city has worked for him at least one time or another. By doing this it might be a real wake up call for fair wages and at least some say in his business practices.

  • Trevor

    I have worked at cuba libre in olde city, where there is no minimum on the cards and we had to cover all the credit card fees. So about 15 to 20 times during a party or late night where I would run a card for 7$ get no tip and still have to pay the fees. It depends on the place, if Im getting tipped I dont care if the fee comes out. But if Im getting stiffed on the bill, its not fair to me.

  • Joe

    confusing reading all of your arguments. They make no sense. no one is stealing any money. If a bill is $100 with an 8% tax and a 20% tip and they pay on a credit card, the restaurant pays the cc fee on the amount that they made plus the tax, and the server pays the cc fee on the money that they made. No one takes fees out of cash, thats absurd. It would be stealing money. Your arguments make no sense. Employers take fed and state tax out of checks…should they pay that too? Confusing.

    • http://www.facebook.com/terri.lohnes Terri Lohnes

      No, we have to pay the fee on ALL our credit card sales, not just on our credit card tips. If our sales are $1000, we pay anywhere from $10 to $25 depending on the restaurant we work in.
      This is in addition to tipping out our support staff 1percent each, so if I have to tip out bartender, busser, food runner, and hostess I would be tipping out $10 to each of them which would be $40 plus the credit card fee equals $50. If I made 20percent of my sales, my tips would be $200-$40 tip out- $10 credit card fee=$150 take home.If I only get tipped 14 percent, then my take home would be $100.

  • sassylady

    Joe-servers are charged a percentage on credit card sales. Servers pay the credit processing fee for the total transaction. Simple as that.

  • Joe

    you are completely wrong and misinformed. It just doesn’t work like that. 100% false information. Servers pay cc fee on their tip ONLY, not tax, not the sale.

  • Waiter

    You have NO idea what you are talking about. It is ON Transaction. It is an option IN the computer system that allows the restaurants to charge ANY percentage they choose to charge.

  • Waiter

    @Victor. Call Micros, Digital Dining, Reliance (Aloha) and verify that there is an option to turn this on and off. You will find that it is something that the POS systems offer to the owner to activate. Please check the facts and let us know!!!!

  • Joe

    Check the facts, you’re wrong. If a server makes $200 in a night and for the sake of discussion they are all credit card tips the restaurant takes out approx 2.5% or $5. (more if its american express) Those are the facts. POS systems have nothing to do with it.

  • pj

    unionize the hospitality workers in philly.

  • booberry

    @Joe I can personally tell you that I am looking at the option right now to adjust the “tip refund” taken from a server on my manager screen on Aloha – a POS system. Mine currently says 0.0000% and I hope to never see it change. Each restaurant currently has the choice to take a percentage from the FOH. Check YOUR facts & try to be a little more informed before you embarrass yourself.

  • Tim

    To industry people, if you know of a place that takes part in this terrible woulde you mind posting it? I will gladly spread through the industry to pay cash only at these establishments. I have worked over the years all through center city, south philly and soon will be in Northern liberties working. This is also one of the reasons that I only work at independant establishments and not chains, “mini” chains or conglomerates. It is too easy for them to pull stunts such as this and many others

  • Joe

    boob, my facts are straight. just because you work as a server in a restaurant doesn’t mean you have any idea of what goes on when the managers do the sales. It would be completely illegal to take the cc percentage off of the entire bill. There is no restaurateur involved in this kind of nonsense. CC tips and cash tips are broken out, cc tips are taken out of the cc tip percentage and nothing is taken out of the cash tips. Then they are distributed. Plain and simple. Do you really think an owner wants to steal $5 from a server to line their pockets. The whole argument is ridiculous. And yes, cash tips are always preferred at all establishments. Less work for everyone

  • Jeff

    Joe is 100% correct.

    The options that you see in those software programs will only adjust the amount of the tip portion of the credit card charge.

    If you doubt that, all you need to do is look at the ending daily receipt page from within that software and you will see the restaurant’s and the server’s charges are seperated out. The server’s charge is a fraction of the restaurant’s charge.

    Assuming a 3% fee, if the bill is $100 and the tip is $20, the restaurant pays $3 and the server pays 60 cents.

    In the “big picture” say a restaurant does $10,000 in sales in a given night. Assume all of it is credit card based and there are 10 serevrs on each doing $1000 in sales and getting 20% credit card tips. The restaurant will pay $300 in credit card fees. Each server will pay $6 out of the $200 they made that night. The server will take home $194.

    Push those fees out yearly. The restaurant is paying $109,500 in fees. If you eliminate the severs paying the percentage thr will tack on an additional $21,900 each year to the restaurants expenses. Do you think the restaurant in going to just eat that? They won’t. That $21,900 is going to wind up with increased prices to the guests.

  • Edward

    Jeff and Joe are 100% correct, the amount only comes out of a tip. If you can show otherwise call PA L&I.
    A server making $200 tips with $25 hourly rate for eight hours makes $30 hour or $60k a year. For waiting tables that is very good money. They have no invested capital at risk either. Often they don’t even declare all their cash tips so they are probably making the after tax equivalent of $75k. I am not crying a tear, and I do the intelligent thing and tip in cash. Kenney needs to fix some of the city’s real problems if he hopes to get reelected

  • Joe

    Finally!!! Some intelligent life out there!!!

  • Businessman

    Kenney has no business nor political intelligence. Every month he proposes a bill based on whatever insignificant distraction is in the news.

    Let’s see if you can run all restaurants into the financial ground like your campaign Jim. Brilliant!

    “Councilman Jim Kenney has raised nearly $139,000 and spent most of it, leaving him less than $27,000 for the final run to Election Day.” Inky May 7

  • Trevor

    It doesn’t really matter if you tip in cash. In my case it was taken out of my check. If you tipped cash or not.

  • Businessman

    Trevor, I don’t believe you but I will explain what a responsible adult would do if such an error occured:
    1. Write an email to the company informing them such a thing is happening and ask them to correct it.
    2. If 1. is not successful forward that email and proof to the PA Labor & Industry people for results.
    That’s how adults do it. And professional politicians research issues with facts before doing stupid knee jerk reactions and legislation, the opposite of sideshow Kenney

  • Victor Fiorillo

    So far, I have looked into a couple of places that have been rumored to make servers pay all credit card fees on a check out of their tips, as opposed to just the proportionate fees, and it turns out that they are not doing that. But if you work somewhere that takes all fees out, please let me know and I will try to get more details. It’s victor at philly mag dot com.

  • Karenleepa

    This one of the reasons why I suggest to my friends that they charge the bill, but leave cash for the tip.

  • http://twitter.com/alexrolfe alex

    What would happen if you, say, bought a starr card with a credit card and then used that? What if you bought the starr card with cash?

  • Joe K

    Regardless of which amount the fee is applying to, the point is that servers shouldn’t be responsible for ANY of this. It’s a business expense that the owner should incur. These are NOT independent contractors. If they are, pay them as such, and then you can take the fees out of that. But until then, this is still an absurd practice and should really be seen as completely immoral, if not illegal.

  • Matt

    I agree that this practice should not take place. Unless businesses are willing to share profits with their employees, they should not share expenses.

  • Vanessa

    My tip reflects the food, atmosphere and service. I want my tip shared with all employees including ownership.

  • hungrythirsty

    In effect a server is an independent contractor that uses the space the restaurant provides and sells a product that they buy from the restaurant and makes a little bit (hopefully 20%) markup on the product (food and Drink) the restuarant provides the server with credit card processing to make transactions and charges for usage of said tool. This is like any business. Just like wawa charging for using an ATM.

  • Joe

    Business do share profits…it’s called a 401k.

    Joe K, have no response for you, you just don’t get it

  • Joe K

    @Joe – What exactly “don’t I get”? That’s a pretty half-assed way to back out of the discussion. You’re suggesting, then, that it’s perfectly fine for a business to pass along it’s costs to it’s employees? That’s completely absurd. Let’s put this in perspective: In a company with a sales department that works largely on commission, is the cost of the accounting software taken out of any sales they make before they are paid out their commission? Of course not. No one would think that would be fair. Are the salesman charged for the cost of printing a bill and mailing it to the client? No way. And this is, essentially, the same thing. I don’t care about how that amount is calculated and applied — whether it’s based on the percentage they are paid out or whatever, which is what you seem to be in a huff about. You’re the one missing the point here.

  • mike

    I don’t see the big deal. It isn’t unreasonable to me for the servers to pay some part of the service fee. Sure, maybe a restaurant owner who pays the fee for their staff is nicer, but I don’t think it is terrible to make them pay.

    What gets me more mad is when servers round up my change in their favor.

  • eldondre

    there’s nothing wrong or unethical about applying the proportional share of the credit card commissions to a server’s tip. if people are really upset, it’s probably not because they thought the server was getting the whole tip but because they never thought about it at all. if you did think about it, you’d probably assume they were getting the gross tip less commissions. the solution is downright foolish. forcing businesses to absorb yet another cost in the city with the highest business taxes in the nation is the reason why our city has the region’s highest unemployment rate and is the nation’s poorest big city. the heart of the problem is the bank fees themselves. restaurants should either offer a cash discount or a credit surcharge so cash users don’t have to subsidize credit users.
    “In October, the Federal Reserve sued credit card companies before reaching a deal with Visa and Mastercard so they would no longer restrict retailers from promoting discounted prices for customers paying in cash or with cards that have lower fees

    Read more: Some businesses offer discounts for not using credit cards – Pittsburgh Tribune-Review http://pittsburghlive.com/x/pittsburghtrib/business/s_736201.html#ixzz1LxcQPoRY

  • Sara

    Using CC is not “convenient” for owners. They have to wait 3-7 days for the deposit and they have to pay 3-5% on the daily ring (including tips and taxes). It’s done to bring in a better clientelle. We’ve all been to cash only places, and you know why they are cash only.

    Servers pay a small % for their CC TIPS, not on the bill. If you get all your tips in cash you do not pay anything, ever. If you don’t realize this, you need to talk to your manager/owner so it can be shown to you.

    So lets do the math: You get $500.00 in tips on a Friday night, you pay $10.00 in CC fees. The guy saying he pays $30 per shift is claiming to make $1500 in tips. I’ll take that job!

    But let me ask you this, when was the last time you accurately claimed your tips? I’ve been in restaurants for over 20 years and have yet to meet a server or bartender who claimed their tips in full. Watch where you throw those stones!

  • Willie

    I think all the comments on this thread should be deleted leaving only the two previous to this one – they sum it up perfectly. And especially thank you Sara for an honest appraisal from a server’s POV.

  • !

    @eldondre you should really re-check your facts. They are false, misleading, and at worst, lies. Philadelphia does not have the highest unemployment rate in a Metro area, and it’s not even close at around 8.5 %. Also, For the major, big cities, Philadelphia has the lowest business taxes (along with Atlanta), with the highest being Chicago and NYC. Behind them, San Fran, Seattle, Houston, and Dallas. Check your facts before spouting misinformation.

  • phl_restaurant

    I own a restaurant. And, I have been a busboy and server. I’ve been in the biz for over 20 years.
    I think it’s give and take. A restaurant is a bear to run and the margins are small (8-12%). Most lose money for a good 6-18 months (Starr or otherwise). It’s the hospitality business. So, you have to deal with an enormous amount of bullshit – from all sides. Guest to server to cooks to dishwashers, etc. In short, it’s hard to get everyone on the same page, working together and keeping the guests happy. Most guests are great to have. Many are total assholes and many tip badly. FYI a decent tip is 20% of the gross amount of your check. Don’t do the math. Just tip that. If you don’t, you’re doing your server a tremendous disservice. If service was bad – SAY SO. If the food was bad, SAY SO. But, tip appropriately.

    If Kenney wants to play it by the book, then the restaurant owner will be forced to keep the staff from grazing, push their productivity (limit breaks), eliminate staff meals, decrease support staff, have the wait staff clean the restaurant (instead of paying a cleaning service, etc.) So, no more coffee/bread, etc. during your shift, etc. This is such a tough business already. Why would a councilman want to shoot US in the foot? Does he want us to close? I think so. Then, where does that leave the server?
    It’s true that most servers declare zero ($0) of their cash tips. Is that Kenney’s next battle? Will he then force servers to declare 100% of their tips? And hold the restaurant responsible for enforcing that? Whom is he helping?? Makes you wonder. Doesn’t it?
    Bring it on Kenney! Help us to close our doors.
    What a moron.

  • phl_restaurant

    Oh, btw, I’m going to say it again…
    A standard tip is 20% of your gross check.

  • http://www.HollyEats.com Holly Moore

    Back in the day I maintained that I ran a restaurant so servers could earn 20% of my sales while I was lucky to break even. But I also realized how important servers were to my success and was smart enough not to nickle/dime them by deducting credit card fees from their gross tips.

    Perhaps those restaurants that do keep a percentage of tips should also hold back similar percentages from the PA Dept of Revenue for the credit card fee on collected sales taxes.

  • http://www.HollyEats.com Holly Moore

    Also, credit card fees are a legitimate business expense. Any fees paid, including those on server’s tips are tax deductible reducing the actual cost of the fees to the restaurant.

  • phl_restaurant

    @Holly That’s a great idea! I’ll ask my accountant if I can do the math and deduct the fees on the sales taxes! I think that’s a totally legitimate argument.

    Did you own that restaurant? Why did it close? What were your margins? Did you offer a staff meal? If you owned it, did you ever feel like staff was taking advantage of your generosity?
    Obviously, these are questions related to a small business trying to stay open – and not a multi-million dollar corporate enterprise netting millions of dollars…

    I’m not trying to start a fight. I’m really interested to know your answers.

  • http://www.HollyEats.com Holly Moore


    Yes, I owned Holly Moore’s Upstairs Cafe for three years during the original restaurant renaissance. It was at 18th and Sansom, on the 2nd and 3rd floors – above where Tria is now. We received great reviews and a few Best of Philadelphia’s and other awards. I sold it to someone who didn’t understand our concept and it closed a year and a half later.

    Yes we offered staff meals. We made a profit, but it was small. We only had forty five seats and ran a moderate check average. I wasn’t going to get rich off it and received a good enough offer to sell it.

    Interestingly, while the kitchen staff turned constantly, most of my floor staff was with me most of the time I owned the business. Occasionally someone would take advantage of me – but it was the exception. I was the host and worked the floor as such. When we were short handed I’d take some tables. When that happened the tips went in the pool – I never kept them or took a cut.

    One thing I have learned both in the restaurant business and other businesses I owned or managed – the employee always wins. If a server feels he/she is being short-changed, the server will most always come up with a way to balance things out.

  • phl_restaurant

    Thanks for your response. I totally agree. The server always wins and they absolutely “balance things out.”
    Maybe we should only take cash?? Then, this would be a moot point.

  • Jihed Chehimi

    It’s common practice. In some place in Europe, the waiter can’t even get the tip if paid with credit card. Personally, I always, always leave the well deserved tip in cash

  • chef

    The servers are the ones that are doing better in this economy. Wash state pay $9.04 and hour to servers.
    To cover this cost the restaurant has to raise menu
    prices so the servers make more in tips.

    They LOVE to whine and obsess about their tips but the cheat you and all workers because the DO NOT
    pay their fair share of taxes !! They are hypocrites.
    and VERY selfish. They never think about how hard
    it is to keep the restaurant open the only thing they
    think about is themselves.

    • http://www.facebook.com/terri.lohnes Terri Lohnes

      Wow, jealous much, Chef?? We all know that the cooks are jealous of the wait staff but thats no reason to tell blatant lies! We have to tip out the hostess, busser, food runner, and bartender 4percent of our sales and then 1percent to credit card fee. So even though we made $100 does not mean we are walking with $100. If our sales was $500, thats $25 in tip out and credit card fee, so we walk with $75 and most of us work in the other 48 states that pay servers $2.13 an hr so after reporting our tips, I never get a check and end up paying in at tge end of yr. If we only get tipped 15percent on $500 sales, that $75 tips then subtract $25 in tip outs and credit card fees which leaves us $50.
      Also we have to come in an hr bc dinner service to set up on 2.13 an hr and we stay an hour after dinner service closing down and doing silverware.
      Most of us report 100percent tips in order to get mortgage, car, and other loans which we wont get on 2.13 an hr wage!

  • Jane

    I agree with @Chef. It seems fair to me that they pay a portion of the credit card fee seeings as how they are all tax cheats and don’t pay their fair share of federal, state, and local taxes on their tips, which go mostly unreported to the taxing agencies. And, 20% is way too high of a percentage. I never tip more than 15% which is plenty, especially since most of the 15% I leave you will go unreported to the tax authorities and hense be earned by the server, tax free, which is probably worth 20% in the end.

    • http://www.facebook.com/terri.lohnes Terri Lohnes

      How do you know that we are all tax cheats?? Thats very ASSuming of you! Do you pay your plumber less also bc theyre known to be tax cheats??
      I report 100 percent of my tips and most servers, especially the career servers do also. The reason we do report all of our tips is bc it would be hard getting a mortgage, car, or any other loan on the $2.13 an hour we make in almost all states. Not only do I not get a check, but I also pay in quite a bit on tax day.
      20 percent is quite fair bc 1percent each of our sales go to busser, hostess, bartender, and food runner. Thats 4percent right there then add in 1percent of sales for credit card fee and that 5percent out of that 15percent tip you left leaving us only 10percent!
      Pls dont assume that all servers are tax cheats. Thats like assuming any self employed or rich person is a tax cheat. And alot of us are afraid of being audited by tge IRS and being thrown in jail!

  • BAP

    Definition of Tip:
    (noun) “A sum of money given to someone as a way of rewarding them for their services.”

    When I leave a tip I expect the full amount to go to my server. If an establishment is losing money and would like to attach a fee for my meal to cover credit card transactions that is fine by me as long as I am informed about it before I order my food. I also expect the establishment to post these practices where their patrons can view them. There is no other reason not to, except for the fact that it is better to keep this kind of business practice under the rug so to say. I know these are hard times but in my opinion you are pulling one over on your patrons.

  • Nick

    Instead of charging their waiters why don’t the restaurants go after the credit card companies? It is they who are the real bandits here, they get money from the restaurant, they get money from the user in the form of interest and they also get that 2.5% fee. This sounds to me like double and triple dipping. I don’t think it’s right for the restaurant owner to charge this fee to their wait staff but I also don’t think it’s fair for the restaurant to be charged this fee either especially since it’s for the customer’s convenience. Instead of assigning a “fee” or “tax” if you will, to the little people, why don’t we go after these financial giants who think they have the right to levy more fees so they don’t have to feel the sting of inflation like everyone else.

  • Omar F. Perez

    Credit card companies double dip in charging one to costumer who paying with cc and the restaurants who using there systems…mmmm now we the servers has to pay the cc feeds!!!! really is an extortion and a lot of servers do not know this….

  • Heath James Cadriel

    But its not the best in the world quite honestly servers average more than management in most busy rest. And still bitch when the make 80 bucks in five hours. While i have to work nine to take that home after taxes.