Service Charge: What It Actually Means for F&B Brands

So here’s a quick recap,

• The Delhi High Court has reaffirmed that a service charge must be voluntary and not a hidden or automatic cost. Many restaurants, however, use this charge to support their teams, from waitstaff to cleaners, ensuring a fair share of revenue beyond salaries.

• With that charge now optional, restaurants are left to balance two equally important priorities: transparency for guests and motivation for staff.

• So here’s where it matters, tipping is becoming a thing of the past, and the backbone of the service industry is getting affected by it. The restaurant you eat at needs to work like a well-oiled machine, from answering the phone to filling your water glass on time, it all plays like an orchestra. Service charge rewards consistency, encourages accountability, and keeps service standards high across every table.

• Many restaurants treat “service charge” as a pool for staff rewards. When that charge becomes optional (or subject to customer choice), the quantum & predictability of that staff income may change. This means your staff could feel less secure in their service incentives, which can erode service quality, enthusiasm, or loyalty.

• A way to eradicate these issues is clarity and culture. Be transparent with guests about what the service charge covers. And if you choose to remove it, consider internal systems that keep your team rewarded and engaged. After all, great service isn’t accidental; it’s built on motivation, fairness, and pride.

• Perhaps if you're a guest who has enjoyed a night out, you have the right to choose whether or not to pay a service charge. But when someone makes your experience a bit more memorable, the small gesture of appreciation goes a long way.