Sausage, Beer & good times

Why We Charge a Service Charge

I never fully understood why some restaurants added a mandatory 20% service charge to my bill. If I’m being honest, it also upsets me when they have the nerve to ask for an additional tip on top of the 20% they already tipped for me. Well, recently we made the decision to do both of those things at Banger’s, so we want to provide you with a little more context to better understand the motivation behind these decisions. 

Simply put, in an effort to move our whole team towards a more stable income stream, we use the service charge to help pay a fixed hourly wage that meets or exceeds a true “living wage". Moving away from a classic tip model is a path toward a more sustainable restaurant model, a more stable and healthier work environment for our team, and an opportunity to create a blueprint for other hospitality businesses to follow. The 20% gets us close to this goal and we are grateful for it, but the fact is, it still falls short of where we’d ideally like to be. This is why we prompt you with the opportunity to add an additional tip on top of the service charge when you go to pay. This is never expected, and if you ever feel pressured to do so, please ask to speak with a manager because that is not our intent. Our intent is simply to allow our guests the opportunity to tip more if they feel their experience warranted it.

So that’s the summary, here’s the details. Part of the reason why we can do this is because we choose to look at the wage expense that results from this on a longer time scale. In other words, we are much more interested in quarterly and annual numbers than monthly or weekly metrics. You’ve gotta understand, part of what we are trying to solve for is the “feast and famine” nature baked into the tip-based payment system. The fact that during the busy season a good server can earn or even surpasses a true living wage, and in the slow season can often struggle to pay their bills is a big problem. How does one plan for the future? How do you create a safe and stable quality of life if that’s your reality?

The same is true for the 20% service charge we collect - it’s just a function of our sales. Since this is what we are using to offset our out-of-pocket expense, if only looked at on a monthly basis, it often doesn’t pencil out. But, viewed on a longer time scale, the slow months average out with the busy months and, according to our projections, the model makes sense. It just requires us to shift our perspective and outlay the cash necessary to smooth out the volatility. With more resources at our disposal, this is obviously more feasible for the company than it is for the individual members of our team. 

Shifting the pay is just the beginning. It is one part of a bigger vision that’s essence can be found in this quote:

“Yesterday I was clever, so I wanted to change the world. Today I am wise, so I am changing myself.” 

  • Rumi

  • We firmly believe most people, if given the opportunity, desire to make the world a “better” place, and we are no different. From the beginning we wanted to create an organization that was driven by a real purpose. While the meaning of the word purpose has evolved over time it has rooted in a deep belief that change has to start at the individual level. That we are all on our own journeys and as an organization we have the ability to help people move along their path. Like Rumi said above, if you want to change the world, then you gotta change yourself. To us the real change Rumi is talking about comes back to fear and where fear leads us when it guides our decisions. 

    So, our big vision is to do good in the world by creating a financially viable organization with a culture rooted in helping people change themselves by understanding and releasing their fears. 

    While that’s all well and good, Maslow’s Hierarchy exists whether you like it or not, which brings us back to the service charge. As Maslow proved, it’s very difficult for someone to work at the self-actualization level of releasing their internal fears if they can’t meet the basic, physiological need of paying their bills, or the stress that comes from such a volatile income stream. That is why we are striving to pay everyone on our team a true living wage as defined by this MIT Database. At $22 an hour for our lowest paid Front of House positions to $37 an hour for our highest paid Front of House positions, we meet that standard for much of our team, and it likely puts us at the high end of our industry. With that said, depending on a number of factors, for some of our team, it’s still not enough to meet our goal of our entire organization making a true living wage. That gap is the primary reason why we prompt you with an option to leave an additional tip on top of the 20% service charge when you go to pay. 

    The other reason we give you the option to tip more is, we firmly believe we have the best service team in the business and that they deserve as much as people are willing to give them. So, if we blew you away with our hospitality and created a memorable experience for you and your family and friends, feel free to extend them your generosity. It goes directly to the people who made your experience memorable today. 

    Once again though, I’d like to stress that an additional tip is not expected. We are very grateful for the 20% service charge and all it allows us to do. If you ever feel pressured in any way; whether by a team member, the way we have worded something, or how you are prompted, please let any member of our team know so we can try to understand your perspective and take the appropriate action. 

    We very much appreciate your business and your help in moving the organization closer to our purpose. 

    Thank you,

    Ben Siegel, Owner