Nothing is worse than going out to eat and ending up with a big surprise when you get the final bill. More and more diners are seeing the prices on the menu and assuming that is the price.

That is not always entirely the case. That is where automatic gratuities and service fees come in.

The restaurants that survived the Covid ordeal often struggle in the so-called "new reality." Food costs, labor costs, energy costs, and the costs of renting restaurant space are forcing prices higher for restaurant customers.

Trying to keep reliable employees is one of the big problems for restaurant owners. Customers, feeling the squeeze, are often unwilling or unable to afford to tip as they should.

Texas law is specific about the requirements for businesses that charge these fees.

Texas law requires that restaurants that charge service fees or mandatory tips must clearly disclose the fee to customers before they place their order or receive their bill. The notification should be in writing and easily visible, such as on the menu or posted prominently in the restaurant.

The notification must include the following information:

1. The amount of the mandatory tip or service fee

2. The notification must disclose the reason for the fee. For example, is it to compensate employees or cover additional restaurant expenses?

3. Any other relevant details, such as is the fee a flat rate or a percentage of the check.

According to Eat This, Not That!, 13% of fast food restaurants are now charging service fees, and it's even higher overall in higher-priced restaurants, like fine dining. The National Restaurant Association's State of the Industry Report for 2023 put the numbers higher at 15%, with 17% of fine-dining restaurants charging the fee.

Texas law requires that the reason for a service fee needs to be clearly stated. They aren't always. Most of us have few qualms about seeing restaurant employees fairly compensated.  In many cases, the fees aren't helping to do that.

In Texas, the first time a customer is informed of a service fee should not be when they look at their bill and find the charge. Usually, the fee is added to the taxes and tips at the bottom labeled service fees. It should always be listed as a separate line if it's not already accounted for in menu prices.

If there is no previous notification on the menu or clearly placed in signage in the restaurant, then, according to the Texas Attorney General's Office, customers may be able to dispute the charge and refuse to pay it.

You can find this in the Consumer Protection Handbook on the Texas Attorney General's website, pages 66-67.

It is important to note that customers must make their objection to the fee known to the restaurant before paying the bill.

If you pay the bill without objecting to the fee and later dispute it, you may find it impossible to remove the charge. If you cannot find where on the menu or the restaurant's signage does not make clear the service fee or mandatory gratuity charge, then you have the right to ask the restaurant to show you where it is located before you pay the fee.

Whether a restaurant is justified in charging a service fee or automatic gratuity is not questioned.  What can be questioned is whether a restaurant or any other business levying a service charge properly notifies the customer in advance. In cases where that happens, the Attorney General says you are justified in not paying up.

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