Restaurants Feel Uneasy Due to the FTC’s Junk Fee Crackdown

The Biden administration has launched an anti-junk-fee campaign specifically aimed at the restaurant sector, a move that has garnered attention. 

However, as highlighted by CNBC on Sunday, many restaurant owners are strategically navigating this issue in order to maintain their operations and profitability amidst the ongoing challenges.

15% of restaurant owners added surcharges or fees

While Square said that 3.7% of restaurant transactions in the second quarter contained a fee, more than twice the previous two years, a National Restaurant Association research indicated that 15% of restaurant owners added surcharges or fees to checks owing to increasing costs last year.

While the White House has targeted a variety of so-called “junk fees,” such as unannounced service costs for concert tickets, the Federal Trade Commission (FTC) is likely to issue a regulation prohibiting firms from “charging hidden and misleading fees” this autumn. 

However, restaurants claim that their fees and surcharges help them stay in business and appropriately compensate their employees, according to the survey.

“The challenge for the restaurants is that not all fees are junk fees”

The National Restaurant Association’s executive vice president of public affairs, Sean Kennedy, informed the network “The challenge for the restaurants is that not all fees are junk fees. … People know what they’re paying for when it comes to most fees that are on a restaurant bill,”

A Denver restaurant employee discloses that, while the employer says the fees are equitable, the restaurant retains 30% of the proceeds. This raises worries about tipflation, in which tips made at the table and for delivery increase the bill while subtracting from guests’ wallets, as noted by PYMNTS earlier this month.

Around three-quarters of consumers have noticed the impact of price increases from their favorite restaurants, both table-service and quick-service eateries, and delivery apps are also causing a dent in their wallets.

According to the PYMNTS Intelligence research “Tipflation Is Changing Spending Habits of 1 in 6 Consumers,” tips are driving up the cost of products and services, which is causing consumers in all income ranges to spend less.

PYMNTS wrote “Data showed that 29% of consumers say tipping has gotten out of hand, as it seems they are universally being prompted at the point of sale to sign off on some level of suggested tipping, A full 17% of respondents to our surveys said that they have actually cut back on spending on items — including food and delivery — because the tipping aspect makes things cost too much.”

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