India joins the debate on forking out extra at restaurants

By Anoothi Vishal

I don’t understand why it has become such a big deal,” shrugs Gauri Devidayal, partner, The Table, Mumbai. She is talking about service charge, the issue that is being contentiously debated these days. This month, The Table will arguably become the first high-profile restaurant in the country to take the much-reviled extra out of the equation. Instead, “we will have to raise our prices to meet higher wages and other costs,” says Devidayal, “but we will explain the restructuring to guests and the staff in a transparent way”.

Adding a service charge of 5-10% to the bill is a fairly established practice in Indian restaurants, although some, especially in hotels, have a policy against it. Most customers pay unquestioningly, believing that this is in lieu of a tip they are expected to leave, and that the money is meant for the servers. In a way, this is a system less fraught with uncertainties and social embarrassment than tipping, especially in places such as America.

If you have been to Manhattan, for instance, you may have realised that you have to be careful and generous while tipping. This is not just a culture-specific convention; it is also dictated by the needs of the restaurant staff in the US, most of whom are inadequately paid and earn more in tips than in wages. Since late last year, however, celebrity restaurateurs and chefs have come out strongly against the practice.

In November, Danny Meyer, who is behind some of New York’s famous restaurants, announced he was axing tips across all his establishments and raising prices to meet the increased wage cost. In January this year, Momofuku’s David Chang became the latest celebrity to go anti-tipping at his new venture, Nishi.

What’s So Special?
This has had a ripple effect in India, with the talk heating up around tipping and service charge, which is seen as a variant of it. In a service economy, where everyone is doing their job, why should restaurant staff have to be specially incentivised, that too by consumers? It is a question being asked by a number of millennials, who are far from the feudal culture of doling out baksheesh. “I have paid service charge even on a takeaway from a coffee chain. It is unfair,” says Alok Wadhwa, a blogger who runs the popular Gurgaon Foodie online community.

If this is so controversial, then why do restaurants charge it? Most restaurateurs say that while service charge is optional, it is a way of structuring the cost of bringing food to your table. “We get taxed on it along with the rest of the earnings,” says Riyaaz Amlani, president, National Restaurant Association of India. In Amlani’s restaurants, service charge earnings are distributed to the staff and a certain percentage is kept aside for their welfare and medical needs. “In India, where finding the right service staff is a problem, this also works as an incentive,” he says.

First-time restaurateur Vimi Singh, who runs a café in Delhi’s Me -herchand Market, agrees. “Initially, I used to tell people who wanted to be hired that I would pay them higher salaries but they only seemed interested in service charge and how much would come to them,” she says.

Most restaurant-goers assume that service charge means giving something extra to the staff. If the service is exceptionally bad, you could ask for it to be taken off the bill. Shivani Sondhi Maitra, who works with Deloitte in London and who travels the world to eat, says she has done this sometimes.

The reality is more complex than merely rewarding good service. These earnings are distributed among the staff through a complicated point system governed by seniority, etc. It is not just the front-end staff who gets paid but also those at the backend like cooks and washers. Many restaurants keep aside a percentage of service charge to take care of breakages and maintenance, among others. These vary from restaurant to restaurant. The earnings thus go towards the overall cost of running a restaurant.

So why can’t restaurants increase their menu prices to reflect the true cost of eating out along the lines of those New York restaurants and The Table in Mumbai?

In India, especially in the mid-market segment where restaurants operate on thin margins and there is oversupply, price wars are common. There is a reluctance to raise menu prices: it is deemed to psychologically discourage customers, for instance, if the price of a drink or starters went up from Rs 470 to Rs 520. However, it may be more transparent if restaurants begin to do so.

To tip or not to tip? A tip in cash—although this too is shared—is more likely to reach your charming waiter or bartender than the service charge. But it also promotes an atmosphere of unequal service, where some guests are treated better: a feudal culture. It’s your choice.


(The writer looks at restaurant trends, food history and culinary cultures)