Today, tipping seems to be everywhere. Whether it be restaurants, coffee shops or convenience stores, the tip screen boxes featuring gratuity options for “18%,” “20%” and “22%” or more are fresh in the minds of many consumers.
“Yesterday I ordered a pizza online at Pizza Hut and got to the counter to get it,” said RevoDaniel on Reddit. “After I paid with the credit card, the cashier gives me the receipt and asks, ‘Do you want to tip?’ And I’m like, ‘For what, picking up my pizza?’ Tipping culture is indeed insane.”
Another Denver resident who asked to stay anonymous told Bucket List it was an exploitative practice. “It is a subsidization of revenue by customers so employers are able to pay their employees less,” he said. “Cute girls and white people get tipped more. Also, I shouldn’t have to tip a barista. Plus, people tip on top of taxes, which makes no sense. The whole system is borked and I’m supposed to accept it?”
The past few years have also seen the rise of another tipping-adjacent practice—the service fee. These fees can range from “back of house appreciation” fees, typically 1 to 5% of the total tab, to full-blown service fees ranging from the 15% “service charge” at Casa Bonita or a 22% “Creating Happy People” fee at most Bonanno Concepts restaurants.
While many restaurants include information about these charges on their menus, they are not required by law to communicate it to customers. California recently passed the “Honest Pricing Law” this July to combat this, but Colorado has nothing in place to ensure transparency.
This service fee is equally opaque to both customers and restaurant employees. Unlike tips, which in Colorado are legally designated solely for employees and support staff who serve customers directly, service fees legally count as restaurant revenue and can be disbursed however the restaurant owner chooses.
To Ryan Meyers, a server who has worked in the restaurant industry for 13 years, these fees are just another way for restaurant owners to “pat themselves on the back” for raising wages while using the funds to cover other operational costs.
“So many people on the other end of receiving service fees aren’t always aware that that money’s not 100% [going] to the staff,” Meyers said. “I think transparency is a big thing right now.”
Meyers, 31, currently works at Temaki Den. Between 2019 and 2022, he worked at a different upscale Japanese restaurant, which he declined to name due to concerns of backlash. That restaurant implemented a 20% service fee during the pandemic; however, the owners never shared the specifics of the fee breakdown with employees, leading some employees to believe that part of the fee was used to cover the cost of to-go materials and building renovations instead of going towards COVID-19 protection equipment and pay.
Frank Bonanno, the owner of Bonanno Concepts, has also faced criticism on social media for pocketing a portion of the “Creating Happy People” fee and diverting funds from employee pay. Bonanno Concepts did not respond to repeated requests for comments.
Colin Larson, director of government affairs for the Colorado Restaurant Association (CRA), a trade organization whose stated mission is to protect restaurant businesses in the state, said restaurants have no reason to lie. “I don’t know why you’d call it a back-of-house appreciation fee if you’re really using it to pay credit card surcharges,” Larson said.
Larson went on to say that service fees are a way for restaurants to close the pay gap between front-of-house employees, who earn the tipped minimum wage plus tips, and back-of-house employees, who make at least the minimum wage.
“As those minimums have gone up, it has required restaurants to put more money every year into the paychecks of the folks that are at the front-of-house,” Larson said. “It’s created, over the years, this massive disparity between what the back-of-house employees are able to make and what the front-of-house employees are able to make.”
Professor Jeffrey Zax, who teaches labor economics at CU Boulder, disagreed. “You can declare that employers are forced to pay someone a minimum wage, but you can’t force them to hire at that wage,” Zax said. If the minimum wage did not reflect natural economic conditions of supply and demand, employers would reduce hiring and increase the workload on current employees. “The employers could well say, ‘They are not worth it to me at that price, and I am not going to hire them,'” Zax said.
Another way restaurants have approached disparities between front- and back-of-house pay is by implementing “back-of-house appreciation fees,” which Larson says produces different tipping habits.
“For those models that are more of the three to five percent back-of-house appreciation service charges…you still see typically the full tip applied on the bill,” Larson said. “In instances [of a 20% service fee], you tend to see people obviously not tipping on top of that or, if they do tip, they’ll tip a very small amount in additional gratuity.”
These added fees have been met with a mix of reactions from those in the industry. Servers like Cesar Cano, 25, feel it takes away the ability to “earn their tip.” Cano, who began working in restaurants when he was 13, now works at Corinne Restaurant and the Hungry Goat, neither of which use service fees. He said he would not consider working somewhere with such a fee because he wouldn’t be motivated to provide good service, especially if the fee didn’t just go to front-of-house staff.
“[The way] I see serving, it makes my job really fun…you have to read the table, accommodate guests’ needs, find out what they like,” Cano said. “When I see 25%, that means I did a good job.”
Willow Kirisits, 23, has worked as a barista at Buzz Cafe for the past three years. Instead of a tablet, Buzz customers who pay with a card have the opportunity to tip when they sign a paper receipt. Kirisits said she’d be open to working at an establishment that incorporated income from tips into a regular hourly wage. This way, “the business is held responsible,” Kirisits said. “If they cut tips entirely, then everything else has to be accommodated for living [costs].”
On the other hand, Pierce McKenna, owner of First Draft Taproom and Kitchen, implemented a 20% service charge during the pandemic to stabilize his employees’ paychecks but later removed the fee due to customer backlash. Unlike many other Denver restaurants, he said all of the service fees went directly to the staff.
“It was really starting to leave a bad taste in some of our guests’ mouths,” said McKenna, who is 32. Today, McKenna said, the tip pool at First Draft brings in between 18 and 22% of total sales each week.
“We really want to encourage our staff to be working for that gratuity,” Mckenn said. “I personally am a big believer in tipping based on service, and that’s why we push our staff to provide that great service.”
Meyers’ principal issue with this model is the lack of transparency. “I just don’t believe that that money is being given back to the staff,” Meyers said, shaking his head. He advocated for better communication between front- and back-of-house staff and restaurant owners but emphasized the importance of making employees feel comfortable enough to discuss these fees openly.
While service charges remain relatively rare, they are becoming more common. According to data from Square, a popular point-of-sale system, 3.7% of all restaurant transactions in Q2 2024 included some type of service fee, up from 0.92% in 2020.
Data from Toast, another restaurant point-of-sale system, showed that Coloradans tipped an average of 19.5% across all Toast transactions at quick- and full-service restaurants between April and June 2024, down slightly from the fourth quarter of 2023.
To Meyers, McKenna and Cano, this “tipping fatigue” feels personal. Meyers felt morally conflicted over whether to tip people who are not directly providing customer service. McKenna expressed frustration at being asked to tip his auto mechanic, calling the practice “faceless tipping.” Cano said he’d tip at a local coffee shop, but he wouldn’t tip at bigger chains, especially if he wasn’t receiving customer service.
Even Kirisits, who, as a barista, is frequently on the other end of this conundrum, noticed differences between roles with extended customer interactions and those with shorter guest interactions, such as at a convenience store or café.
“[For servers], the whole being paid is entirely reliant on how you act,” Kirisits said. “If you don’t have the energy or if you don’t have the mental capacity, it’s like, ‘Am I going to get tipped well?’” Even with a higher minimum tipped and non-tipped wage than other cities, the cost of living in Denver is hard to keep up with for baristas and servers alike.
“That’s the thing, is that service workers live off tips,” Kirisits said. McKenna also reflected on higher costs, emphasizing that inflation and rising prices have deeply affected small businesses, like First Draft, as well as their staff.
“Most Americans, including our staff, are feeling that squeeze,” Mckenna said. “Service charges were implemented during a very tough time for restaurants and were implemented to take care of staff. [They] have now maybe been absorbed by folks who weren’t even thinking about this before.”
So what are restaurants to do? Larson believes the industry will figure out the best mix of service charges and appreciation fees on its own; he notes that some restaurants have seen front-of-house staff walk out over service fees, while others have embraced them.
Zax agreed, stating that employees will eventually leave restaurants if they are not paid enough. Meyer and McKenna believe the future of tipping could go either way, while Kirisits doesn’t know how the culture can be changed equitably.
Only Cano seems certain of the future. He is confident that, with the spread of the tipping to other venues and industries, the decades-old custom is finally on its way out.
“I see tipping going away in probably five to ten years,” Cano said. “That’s the day I’m going to hang up my apron.”
