Service charge is off menu, but not from your final bill

The ban on service charge won't make eating out cheaper—leading restaurant chains are looking to raise prices to compensate for the loss.

- Varuni Khosla & Suneera Tandon

The ban on service charge won't make eating out cheaper—leading restaurant chains are looking to raise prices to compensate for the loss. Some customers feel the final charges may be even higher than before, including tips for the waiting staff.

After the Delhi High Court barred restaurants from levying the 10% optional fee, many outlets and chains are incorporating an equivalent hike into their menu prices. The increase could be higher in malls or premium areas, where rent agreements are tied to revenues. Usually, most eateries take about a 5% annual hike to offset rising input costs.

"Ideally, restaurants would have liked to increase prices by around 15-20% this year to account for both food inflation and the removal of the service charge. But that's not feasible right now—customers won't pay that much more, especially when demand has slowed and the industry is already seeing a bit of a slump," said Sagar J Daryani, president of the National Restaurant Association of India (NRAI) and co-founder of quick service chain Wow! Momo. The association represents about 500,000 restaurants in the country.