Credit Card Processing Surcharges
Small business owners like Gene-Christian Baca of Walter’s Hot Dogs now pay approximately $50,000 annually in credit card processing costs, with roughly 3% of all sales being consumed by these fees. Many establishments have started passing these costs directly to customers through surcharges that appear only at payment time.
Service fees charged by payment processors typically range from 0.1% to 0.5% of each transaction amount, while some restaurants like Patz Deli charge customers a 4% convenience fee specifically to cover credit card processing and equipment costs. The practice has become so common that state laws in Kansas allow merchants to add surcharge fees as long as they post clear notice at the point of sale.
New York regulations mandate that restaurants can only pass along the actual amount of processing fees, prohibiting additional charges for the time and labor involved in processing payments. However, many diners remain unaware of these fees until they see their final receipt.
U.S. swipe fees rank among the highest globally because just two companies control 80% of the credit card processing market, with these fees more than doubling over the past decade. For most restaurants, processing credit card transactions represents the third largest operating expense, trailing only food and labor costs.
Automatic Gratuities Disguised as Service Charges
Many restaurants are reportedly implementing automatic gratuity and service fees incorrectly, creating confusion for both diners and staff. The IRS classifies automatic gratuities as service charges rather than tips, fundamentally changing how this money is taxed and distributed.
What once started as rare automatic gratuities for large restaurant groups has quickly spread to parties of any size, along with related charges like bottle service fees and room service charges. Auto-gratuities are not actually tips or gratuities but service charges in disguise, with the money going directly to the restaurant rather than servers.
Automatic gratuities for large parties typically hover around 18% of the total bill, but many customers don’t realize this charge replaces voluntary tipping. Customers splitting bills often miss these fees and end up tipping additional amounts on top of the gratuity.
While guests should still tip on top of most service fees since these charges often aren’t meant to replace tips, the exception is automatic gratuity where customers shouldn’t be expected to tip more.
Delivery and Takeout Service Fees
Mandated delivery fees for online orders typically range between $2-$5 and importantly, these charges don’t go to the delivery driver as tips. Even pizza and food delivery businesses charge mandatory delivery service fees, despite many drivers never seeing a penny of these charges while incurring all delivery-related costs.
About 65% of consumers now choose to pick up takeout orders themselves versus 35% who use delivery, potentially to avoid these additional delivery fees which can be quicker and more cost-effective. Despite this preference, one in five consumers reported ordering restaurant delivery more frequently in 2025 than the previous year.
Many customers assume delivery fees compensate drivers fairly, but this misconception leaves delivery personnel dependent on separate tips while restaurants collect substantial additional revenue. The practice has become so widespread that customers often pay more in combined fees and tips than the actual food costs.
The National Restaurant Association has found that off-premises sales now make up a larger proportion of restaurants’ total sales compared to pre-pandemic levels in 2019, making these sales an increasingly significant revenue source for establishments.
Kitchen Appreciation and Back-of-House Fees
A growing number of establishments now add “kitchen appreciation” or “culinary team” fees ranging from 3% to 6% of the total bill. These charges supposedly compensate cooks and dishwashers who traditionally don’t receive tips from the standard front-of-house tip structure.
Service charge money goes directly to the restaurant to be used as they see fit, can help create pay equity among staff for employee retention, and can offset business costs or pay overhead bills to generate more revenue. However, there’s no guarantee these “appreciation” fees actually reach kitchen staff.
Many diners support the concept of compensating kitchen workers fairly but remain skeptical about whether these fees achieve that goal. Without transparency about fee distribution, customers have no way to ensure their extra payments benefit the intended recipients.
Service charges go directly back to the restaurant and are used according to company policy, while tips are given directly to servers and taxed as gratuities.
Technology and Ordering Platform Fees
Digital ordering platforms and restaurant apps frequently add processing fees that weren’t clearly disclosed during the ordering process. These charges can include “convenience fees,” “technology fees,” or “platform maintenance” costs that only appear at checkout.
Third-party delivery services layer multiple fees onto orders, including service fees separate from delivery charges, small order fees for purchases below certain thresholds, and regulatory response fees in some markets. These costs can add several dollars to even simple orders.
Many restaurants also charge different prices for the same items depending on whether customers order through their direct website, third-party apps, or in-person. This price manipulation effectively creates hidden fees for customers who choose convenient ordering methods.
Payment processing fees are typically charged per transaction through hidden fees and monthly charges, with services like Square charging 2.6% + 15¢ per swipe for in-person transactions and higher rates for online or keyed-in purchases.
Large Party and Event Surcharges
Large party gratuities of at least 18% are routinely added to groups of six or more people, but restaurants often implement additional event-related fees beyond these automatic gratuities. Administrative fees commonly range from 3% to 5% and typically go to catering or special event salespeople who handled the contract.
Banquet event fees or catering service charges for large-scale events typically range from 18-25% depending on the size, nature, and location of the event. Room rental fees may be charged when restaurants close off sections of their dining room to accommodate private parties, covering additional expenses these events can incur.
Many establishments don’t clearly explain these charges when customers make reservations, leading to surprise fees that can significantly increase the total cost of special occasions. Groups celebrating birthdays, anniversaries, or business events often discover multiple unexpected charges only when receiving their final bill.
The combination of automatic gratuities, administrative fees, and room charges can add 25-30% to the base cost of group dining experiences, turning what seemed like a reasonable per-person price into a much more expensive celebration.
Packaging and Environmental Fees
Takeout and delivery orders increasingly include packaging fees or “environmental impact” charges that weren’t part of the original menu pricing. These fees supposedly cover the cost of eco-friendly containers, utensils, and bags, though the actual expenses often don’t justify the charges.
Some restaurants add separate fees for extras that were once included, such as condiment packets, napkins, or plastic utensils. What used to be standard service elements now generate additional revenue through itemized charges.
Consumers are increasingly concerned with how food is sourced and packaged, with sustainability emerging as a key consideration in dining choices for Americans, especially younger generations who are willing to adjust their habits to support sustainable restaurants.
While environmental consciousness drives some legitimate costs, many packaging fees appear designed more to boost profits than fund genuine sustainability initiatives. Customers who care about environmental impact often pay these charges willingly, unaware they may be subsidizing general operational costs rather than meaningful green programs.
Seasonal and Holiday Surcharges
Holiday service fees are commonly added during busy seasons to cover increased labor costs, but these temporary surcharges often catch diners off guard during special occasions when they’re already spending more than usual.
Peak dining periods like Valentine’s Day, Mother’s Day, and New Year’s Eve frequently trigger additional fees ranging from 10% to 25% of the total bill. Restaurants justify these charges by citing higher operational costs during busy periods, but customers rarely know about them until after ordering.
Some establishments implement “demand pricing” similar to ride-sharing services, adjusting both menu prices and adding surcharges during high-traffic times. Weekend brunches, game day specials, and holiday celebrations may all trigger premium pricing that significantly exceeds regular costs.
Consumer research shows that just one in five people feel ready to absorb price increases, with 91% already making tradeoffs to manage rising prices. Nearly half of surveyed consumers are cooking at home more often and ordering less takeout in response to increasing costs.
Regulatory and Compliance Fees
Some restaurants add fees labeled as covering regulatory compliance, minimum wage adjustments, or local ordinance requirements. These charges can include “Fair Workweek” fees, “minimum wage adjustment” surcharges, or “compliance fees” that supposedly offset the cost of following local labor laws.
California began enforcing a ban on hidden fees on July 1, 2024, through legislation authored by Senators Nancy Skinner and Bill Dodd, making it illegal for businesses to advertise prices that don’t include all required fees. The state’s new guidelines indicate that initial enforcement efforts did not focus on fees paid directly and entirely to restaurant workers, such as automatic gratuities, though businesses may still face private legal action.
Many of these regulatory fees represent legitimate business costs, but their presentation as separate line items can mislead customers into believing they’re paying for specific government requirements rather than general operational expenses that should be built into menu pricing.
Operators have embraced add-on charges as a way of protecting margins without presenting customers with menu prices that might scare patrons away. The Federal Trade Commission has been collecting feedback on curbing restaurant surcharges as part of an effort to eliminate what the White House terms “junk fees,” initially focused on other industries but expanding to include restaurant service fees.
