Three Out Of Four Consumers Not Ready To Pay Service Charge In Restaurants: Survey

The majority of consumers have shown displeasure with the Delhi High Court’s stay on the recent guidelines issued by the Central Consumer Protection Authority (CCPA) prohibiting restaurants and hotels from levying service charge on food bills, a survey by LocalCircles said.

Asked about their approach when visiting any restaurant, 70 per cent respondents revealed plans to either refuse paying it or avoiding restaurants which will levy the service charge on the food bill.

The recent decision by the high court has reopened the contentious issue of levying of service charge on food bills in the restaurants. LocalCircles conducted a national survey which received over 21,000 responses from consumers located in 291 districts of India. 66 per cent of the respondents were men while 34 per cent were women. 44 per cent respondents were from tier 1, 33 per cent from tier 2 and 23 per cent respondents were from tier 3, 4 and rural districts.

In the first poll consumers were asked about their input on the Delhi High Court Stay on CCPA order and the approach they will undertake when visiting restaurants. “Out of 10,244 respondents to the poll, 70 per cent respondents revealed plans to either refuse paying it or avoiding restaurants which will levy it. The contention of consumers is that most diners in air-conditioned restaurants tend to tip the staff in the normal course according to the service quality,” the survey said.

Breakup

A breakup of those opposed to service charges shows, 20 per cent plan to put up a fight and not pay the additional charges, 37 per cent respondents plan to avoid restaurants that levy service charges, while 13 per cent were planning to avoid restaurant eating. In the remaining cases, 28 per cent expressed willingness to pay service charge if it was part of the bill while 2 per cent respondents were undecided on their course of action. The consumer mood seems to have clearly soured.

Most restaurant associations maintain the position that service charge helps employees and also the consumers. However, the consumers collectively have been clear since 2017 that the biggest issue is paying service charge in situations where the service experience has not been good. Some restaurant owners maintain that these situations are rare.

Consumer Experiences

To understand how frequent such consumer experiences were, LocalCircles asked consumers if they had one or more experiences like this in the last five years where service charge by an air-conditioned restaurant was levied in the bill but the service was below expectations.

71 per cent respondents revealed having undergone such an experience in the last five years. Among those with poor or mediocre service experiences, 23 per cent stated it had happened once or twice, 18 per cent said it happened three to five times and even worse, 24 per cent respondents revealed it had happened as many as 6-10 times, while 6 per cent were among those who had undergone a bad service experience despite service charge being levied in the bill, more than 10 times. The sample survey reflects why majority of the consumers are so opposed to a forced service charge.

Conclusion

The survey clearly indicates that consumers at large are not happy with the Delhi high court stay on CCPA guidelines that restricted levying of service charge by restaurants. 20 per cent consumers are likely to put up a fight at the restaurant to get it reversed while 37 per cent will avoid visiting any restaurants that levy service charge. Another 13 per cent are likely to just stop going to restaurants to avoid the dilemma and uncertainty of embarrassment. Also, the survey found that poor or mediocre service experiences were not that rare with 71 per cent consumer surveyed saying they had one or more such experiences in the last five years and they were levied a service charge.

All in all, the survey indicates that the writing is on the wall for the restaurant owners: Get rid of service charge and if the economics are not working, increase food prices but ensure that consumers have a high certainty, good quality experience with food and service so they keep coming back.