The Strategic Placement of Secret Fees
Walk into any restaurant and you might think the menu price is what you’ll pay, but think again. Sometimes labeled as “hospitality fee,” “equity fee,” “service fee” or “economic impact fee,” these charges are often left off from the menu prices and can surprise customers when it’s time to pay the bill. These sneaky additions have become the restaurant industry’s latest survival tactic. So when a dish is listed on the menu as $20, a diner needs to consider that the real price actually includes an additional fee, often noted in small print at the bottom of the menu. That innocent-looking asterisk at the bottom of your favorite restaurant’s menu isn’t just decorative—it’s a financial trap waiting to spring. Last year, 15% of restaurant owners added surcharges or fees to checks because of higher costs, according to the National Restaurant Association. The fine print has become restaurants’ secret weapon for boosting profits without scaring away customers with higher menu prices.
California’s War Against Hidden Charges
Signed into law by Gov. Gavin Newsom in October and set to take effect July 1, SB 478 will prohibit hidden fees, defined by state officials as fees in which a seller uses an artificially low advertised price to attract a customer, disclosing additional required fees in fine print or tacking on unavoidable charges later in the buying process. This groundbreaking legislation represents a seismic shift in how restaurants can operate. Now, the AG’s office has made it clear: Restaurants will be prohibited from charging any additional fees, other than taxes, on top of menu prices, the San Francisco Chronicle reported. The law isn’t just about transparency—it’s about protecting consumers from being blindsided by unexpected costs. If a business violates the mandate, the law allows a consumer to seek “actual damages of at least $1,000.” For restaurants, this means they can no longer hide behind creative accounting tricks to pad their bottom line.
The Psychology of Decoy Pricing
One trick is to include an incredibly expensive item near the top of the menu, which makes everything else seem reasonably priced. Your server never expects you to actually order that $300 lobster, but it sure makes the $70 steak look positively thrifty, doesn’t it? This technique, known as “anchoring,” exploits a fundamental flaw in human psychology. In the restaurant industry, it is common practice to include some premium-priced items alongside more economical options. This technique is called “price anchoring” and serves as a frame of reference for customers when making their decisions. Think of it like a magician’s misdirection—while you’re gasping at the wagyu beef for $150, you’re more likely to justify ordering the $40 salmon that suddenly feels like a bargain. You’ll find that most customers have an extremeness aversion; they’ll never order the most expensive or least expensive items on the menu. Luckily, you can use this psychological quirk to your advantage. By highlighting the very expensive Filet Mignon, for example, the less pricey Sirloin Steak directly below it seems more reasonably priced by contrast.
The Mysterious World of Service Charges
When Galit, a Middle Eastern restaurant in Chicago, opened its doors in 2019, it tacked on an optional 2% fee to cover health-care costs for its workers. These days, the fee is 4%, plus the restaurant adds a 20% service charge to each bill for hourly workers. What started as a modest healthcare fee has evolved into a complex system of multiple charges. “Commenters expressed particular concern about the true purpose of restaurant “service” charges, which they expected would go entirely to wait staff,” the FTC’s proposed rule states. “As these comments imply, while a restaurant’s management may not keep tips received by its employees for any purposes, no such prohibition exists for service fees imposed by a restaurant,” it adds. The reality is that many diners assume these service charges go directly to their server, but that’s not always the case. Some restaurants use these fees to cover everything from kitchen staff wages to credit card processing fees. A rooftop restaurant in Downtown Los Angeles recently added a 4.5% “security fee,” citing a need to help protect team members and guests, upsetting some customers.
The Fine Art of Menu Layout Manipulation
Just like supermarkets put profitable items at eye level, restaurants design their menus to make the most of your gaze. The upper right corner is prime real estate, Rapp explains. “The upper right is where a person will go on a blank sheet of paper or in a magazine,” he says. That’s where the most profitable items usually go. Your eyes aren’t randomly scanning that menu—they’re following a carefully orchestrated path designed by menu engineers. Studies show that customers are likely to order one of the first items that draw their attention. Since guests only spend an average of 109 seconds looking at your menu, it must be designed for guests to easily find key items. This isn’t accidental; it’s the result of countless hours of research into how human eyes move across a page. The upper right-hand corner of any menu is where you want your most sought-after items. People expect appetizers, soups, and salads to be on the top left. When a patron is hungry, they will automatically gravitate towards the upper right.
The Paradox of Too Many Choices
The best menus account for the psychological theory known as the “paradox of choice,” which says that the more options we have, the more anxiety we feel. The golden number? Seven options per food category, tops (seven appetizers, seven entrees, etc.). “When we include over seven items, a guest will be overwhelmed and confused, and when they get confused they’ll typically default to an item they’ve had before,” says menu engineer Gregg Rapp. It’s the classic case of “less is more” taken to scientific extremes. The “paradox of choice” states that the more options we have, the more anxiety we feel. Psychologists suggest that restaurateurs limit options per category to around 7 items. Think about your last visit to The Cheesecake Factory with its phone book–sized menu versus a trendy gastropub with a single-page offering. Which experience felt more satisfying? For example, McDonald’s initially served just a few items but now offers more than 140. Yet the chain’s revenue fell by 11 percent in the first quarter of 2015. “As we complicate menus, what we’re actually doing is tormenting the guest,” says restaurant consultant Aaron Allen.
The Secret Language of Dollar Signs
One way to encourage you to spend more money is by making price tags as inconspicuous as possible. “We get rid of dollar signs because that’s a pain point,” says Allen. “They remind people they’re spending money.” Instead of $12.00 for that club sandwich, you’re likely to see it listed as 12.00, or even just 12. This subtle psychological manipulation works because dollar signs trigger our “loss aversion”—the painful feeling of spending money. One Cornell University study found that written-out prices (“twelve dollars”) also encourage guests to spend more. The absence of that little symbol can mean the difference between ordering the chicken and splurging on the lobster. Dotted lines leading from the menu item to its price are a cardinal sin of menu design. “That menu was introduced before modern typesetting,” says Allen. “It was a way of keeping the page looking properly formatted, but what happens is the guest reads down the right side of the menu and then looks to the left to see what the lower price point can afford them.” The solution? “Nested” pricing, or listing the price discretely after the meal description in the same size font, so your eyes just glide right over it.
The Emotional Manipulation of Menu Descriptions
Words can have an enormous impact in how a customer perceives a dining experience. Chocolate cake described as “Velvet Chocolate Cake” automatically increases desire for the item. A popular psychological trick is to invoke feelings of nostalgia when naming an item on the menu. Menu writers are essentially storytellers, crafting narratives that make your mouth water and your wallet open. Invoke nostalgia or humanize dishes. These menu items are attractive because customers feel like they’re ordering something special, and they induce happy memories of childhood or feelings of comfort and closeness. Examples: “Grandma’s Chocolate Chip Cookie,” “Campfire Hot Chocolate,” or references to the chef or restaurant owner, such as “Chef Mike’s Charbroiled Steak.” These aren’t just descriptions—they’re emotional triggers designed to bypass your rational decision-making process. The difference between “Fried Chicken” and “Farm-Fresh Buttermilk Fried Chicken with Herbs from Our Garden” isn’t just words; it’s the difference between a $12 dish and an $18 experience. The better a restaurant describes an item, the better guests report the food tasting. Words can have an enormous impact in how a customer perceives a dining experience. Chocolate cake described as “Velvet Chocolate Cake” automatically increases desire for the item.
The Hidden Cost of Fine Dining
The global median cost of the priciest tasting menu is $179 USD (€167) per person, excluding drinks, government charges and tips. Additionally, each additional star adds $100 to the price, with one-starred restaurants averaging $165, two-starred at $256, and three-starred at $356. But here’s what the fine print doesn’t tell you: those prices are just the beginning. The United States ranks 5th worldwide among the most expensive countries to dine out at a Michelin restaurant with the tasting menu priced on average at $227 per person. San Francisco, New York, Atlanta and Los Angeles all count among the 15th most expensive cities for fine dining. The real shock comes when you realize that “excluding drinks, government charges and tips” can easily double your final bill. A $200 tasting menu can become a $400 evening once you factor in wine pairings, tax, and the expected 20% gratuity. Oftentimes, these hidden dishes are left off the menu because they’re complicated or require seasonal foods. They may even require advance notice – from a couple of days to several weeks for recipes with intensive preparations or super limited or hard-to-source ingredients.
The Future of Menu Transparency
In 2024, restaurant traffic slowed while price sensitivity grew. While October showed signs of hope (YOY quick-service restaurant (QSR) traffic was positive for the first time in two years), we expect consumers will be cautious in 2025. Revenue Management Solutions’ (RMS) Q3 survey revealed that 36 percent of respondents said they plan to dine out less, and a higher percentage reported a decline in dining out across all restaurant segments. Moreover, three out of four respondents believe restaurant prices are higher and high prices are the primary reason for cutting back on restaurant spending. This shift in consumer behavior is forcing restaurants to reconsider their hidden fee strategies. Lawmakers want to crack down on “junk fees,” but restaurants are trying to stay out of the fight. The industry is at a crossroads—continue with deceptive practices and risk customer backlash, or embrace transparency and potentially face higher menu prices. In short, success in 2025 will depend on balancing quality, value, and experience. The restaurants that survive will be those that build trust through honest pricing rather than tricks and hidden charges.
