The Pros and Cons of Adding a Built-in Gratuity to Each Check

Tipping can be a contentious topic. Could adding built-in gratuities to your restaurant checks ease the burden and make life and business easier?

On the one hand, built-in gratuities seem like a pretty simple solution. They take the guesswork out of the process for customers and help ensure that your staff is adequately compensated.

However, there can be complications involved with built-in gratuities, not least of which include legal gray areas and potential customer and staff pushback.

Not sure if built-in gratuities are right for you? This post could help inform your decision. Keep reading for a detailed look at the pros and cons of adding automatic tips to your restaurant checks:

What is a Built-In Gratuity?

Before going any further, let’s talk about what a built-in gratuity is (and what it isn’t).

A built-in gratuity is a charge that is included in each check at your restaurant. Typically, it’s 18-20%, though that can vary depending on the establishment.

Restaurants that include an automatic gratuity typically let customers know that it's part of the charge, through signage, a note or QR code on your menu, or a note on the check itself.

A built-in gratuity is standard for large parties in restaurants. It’s a means of ensuring that the server will be paid appropriately even if the customers split the bill or pay separately.

In recent years, automatic or built-in gratuities have been catching on as a restaurant trend even for smaller bills. But is it really as simple as locking in a fair tip? Not always. Let’s dig into the pros and cons.

Pros and Cons of Adding a Built-In Gratuity to Each Check

Is it a good idea to add a built-in gratuity to your restaurant checks? That depends on what works best for you and your restaurant.

Generally speaking, the best policy is to consult your staff before implementing a new system like this. Not only does it help build a stronger sense of trust and community between you and your staff, but it can also alert you to the potential pitfalls before you make a business-altering change!

Here are some of the biggest pros and cons of built-in gratuities:

Pros of Adding a Built-in Gratuity to Each Check

No math required. Well, at least for your customers. An automatic gratuity means they don’t have to ask themselves, “How much should I tip?” or break out the tip calculator. It’s all figured out for them. 

Easier for splitting checks. Splitting the bill can be a hassle, and it can often result in forgotten tips or low tips. A built-in gratuity can help balance that by including the gratuity in each person’s portion of the bill.

The money is accounted for. Tips can fall into a gray area when it comes to taxes. When a gratuity is built in to the bill, it makes accounting a lot easier.

Cons of Adding a Built-in Gratuity to Each Check

Wage requirements. In the eyes of the law, what most people call built-in gratuities are actually service fees. They’re not technically counted as staff tips but as restaurant income. As such, restaurants are obligated to pay their staff the state minimum wage if they adopt this system. Obviously, the gratuities collected can help balance that out, but it can be a big change to the way you do business.

Customer pushback. Some customers don’t like being told what to pay. This 2013 automatic gratuity debacle at Applebee’s is a powerful example of what can happen when customers push back—it’s not always pretty. To avoid potential misunderstandings and pushback, be sure to disclose built-in gratuities on your menu or on signage.

Staff pushback. Not all servers or staffers like the idea of the restaurant collecting and distributing built-in gratuities. They may feel it takes away their motivation to provide top-notch service, or they may not trust that they are receiving an adequate portion of the profits.

Are There Alternatives to Built-In Gratuities?

It’s important to share that built-in gratuities are not the only solution for restaurants. Here are just a few other options:

1. Tip Sharing

Tip sharing is a method of pooling together tips so that they can be distributed between tipped employees such as servers and bartenders, and non-tipped employees such as dishwashers and the kitchen staff.

But take note: Tip sharing is not permitted in every state, and the rules around it may vary—for instance, you may need to pay your staff minimum wage to be eligible for tip sharing. So be sure to take a good hard look at your state’s rules on the matter.

2. Service Charges or Service Fees

Technically, most built-in gratuities are actually service fees. So this is mainly a matter of marketing. Rather than charging an automatic or built-in gratuity, restaurants simply charge a service charge or fee, typically ranging from 15-20%, that is considered restaurant income that the owner can distribute as they see fit. In this scenario, adding a tip on top is often optional.

In many cases, this type of distribution can benefit the entire staff. For instance, Martha, a restaurant and bar in Philadelphia, abolished tipping in favor of a service fee in 2020 so that they could offer their staff health insurance and other benefits.

3. Increase Your Prices

Also referred to as a “service-included” model, the concept here is simple: instead of adding a built-in gratuity or following a tip model, you can ditch the whole system and simply increase your prices. This practice is commonplace in many countries outside of the U.S., where tipping is not always customary.

However, this model does require charging enough so that you can pay your employees a living wage. Even if the amounts you charge equal out to the same amount that would be charged for a meal plus tip, the initial sticker shock can scare customers off and could make you less competitive in your local market. However, on the flip side, it could also give you a powerful marketing opportunity to demonstrate your commitment to providing for your staff.

Tipping Point….

As you can see, built-in gratuities have plenty of pros and cons. Are they right for you and your business? Ultimately, it depends on your staff, the local market, and your customers’ preferences. While there isn’t a right or wrong answer, it’s a topic that deserves careful consideration as it can have a big impact on your business.


Mark Plumlee works as the Sr. Editor for MustHaveMenus, a DIY design and marketing service for restaurants with the largest collection of restaurant templates in the world. He covers marketing and design trends within the bar and restaurant industry. His writing has been published in Food Safety News, Full Service Restaurant, Restaurant Technology Guys, Cheers Online, Social Hospitality, Modern Restaurant Management, Quick Service Restaurant, Hospitality Tech, Bar Business Magazine, PMQ, That Oregon Life, The San Francisco Examiner, and Blazersedge.


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