The End of Service Fees: What’s It Mean to Minnesota Diners?

You guys hated service fees. From confusion about the “this is not a gratuity under Minnesota law,” to servers explaining that the fee doesn’t go to them (even if their base pay was $25/hour instead of minimum wage), to skepticism that employers were actually using the fee money to increase the wages of employees—there were lots of reasons to dislike the fee. I never minded the 5% health and wellness surcharge to help cover the cost of insurance, but I didn’t like that the final moment at many restaurants became a crappy-feeling morality math equation: 10% fee, do I still tip 20%? 18% fee, am I a jerk to not tip? 15% fee on takeout—do I want to come back?

The backstory no longer matters. As of Jan. 1, 2025, the Minnesota legislature has banned “junk fees”—which includes pretty much everything other than a mandatory gratuity (a real tip that goes directly to your server) or a credit card processing fee. So, what are restaurants doing?

RAISING PRICES AND BRINGING BACK TIPPING

Estelle in St. Paul is replacing its 20% service charge with higher prices and returning to a traditional tipping model. Owner Jason Hansen liked how it worked, said the entire amount went directly to staff, but now they’ve raised “a lot” of their prices “slightly” and raised wages for “non-tipped staff to align with what they were being paid in the service charge model,” he told me.

How’s it going? “Feedback so far from guests has been positive or neutral. Some are happy to not have a service charge. Those that were pro-service charge are satisfied to know that our kitchen team is still being compensated at a higher level,” Hansen said.

Some of the other high-profile spots in town have had large service fees as well. Spoon and Stable and Demi were adding 21% service charges to the bills. All a spokesperson would tell me is that “Soigne restaurants are following the law as it is stated. Changes were implemented in advance.” Looks like they’ve returned to standard tipping. New Scenic Cafe in Duluth is closed this week, and told me they’re still figuring out exactly what changes they’ll make to replace the 20% fee.

Photo by Libby Anderson

Oro by Nixta had an 18% fee and a tip line on the bill, and they are moving into a traditional tipping model. Owner Gustavo Romero isn’t thrilled about it. “We trust that the front of the house will share the cake, but we believe we are going back to a model that creates a culture different from what we had,” Romero told me.

The Bungalow Club is also getting rid of it’s 20% fee and returning to tipping, owner Andrew Kraft called it “a significant step backward for our mission and for the industry as a whole.” Kraft used the fee for health insurance stipends, PTO policies, and more.

Courtesy of Meet Minneapolis

RAISING PRICES BUT NO TIPPING

The Buttered Tin is not going back to tipping, but prices are up. Owner Alicia Hinze tells me, “We will never bring back tipping. It has worked so well for us as an organization.” She had a 20% surcharge that kept the sticker price competitive with other bakeries and allowed her to pay people competitive wages without the tip jar. Her “Damn Good Egg Sandwich” was $14 and is now $18. That’s more than recouping her 20% service fee, but that’s because the building blocks of her whole business cost way more.

“A case of brown farm eggs was about $55/case two months ago, and now even white non-organic eggs are $100/case due to avian flu,” she said. So, first she raised prices based on food cost, then for the fee. It didn’t always work: “There were just some dishes that we couldn’t put the full 20% in because the prices got way too high.”

At Bûcheron, they are replacing the 18% hospitality charge by raising prices. “For example, instead of the Venison Tartare costing $15, it will now read as $18 on the menu, but there will not be an expectation to tip on top of that,” co-owner Jeanie Janas Ritter explained. Why? She wants to keep paying cooks and dishwashers what she was paying before and also keep the teamwork that has her small but mighty crew working together. “This model makes the most sense for our business and helps to reduce the massive pay disparity between back and front of the house,” said Ritter.

Photo by Kevin Kramer

JUST FOLD THE FEE INTO HIGHER PRICES

This is the most common solution: Red Cow and Red Rabbit removed their 4.9% “mandate compliance fee” (sidenote, I am amused by this language) and “took a small price increase,” said owner Luke Shimp. Margie’s in Andover took some “minor price hikes,” according to owner Justin Ahlstrom, “to pretty much align with Grackle where we never had fees.”

Pink Ivy in Hopkins had a 3% surcharge which the menu said “goes to support a higher livable wage for our kitchen staff.” Owner Mike Shaughnessy tells me he’s “raising menu prices and giving back of house a bump in pay.”

Photo by Megan Stezka

“I’d be lying if I said I wasn’t concerned about the new law,” said Tommy Begnaud, owner of Mr. Paul’s Supper Club, where they’ve raised menu prices “across the board” to include the former health and wellness fee. “Our guests will pay the same price, it will just be reflected in the menu price. I hope that the new legislation will look further into making adjustments to support our industry in the coming months,” he added.

ADD A NEW CREDIT CARD FEE

The law does allow for a credit card processing fee, so many places are experimenting with this, including the Craft & Crew group of restaurants. “We did have a health and wellness fee, and now we’re moving to a credit card charge as of today. This fee will be a lower fee at 3% ONLY on credit cards, not cash or debit cards,” co-owner Luke Derheim told me. “The service charge change is a big deal for the industry as prices for everything has gone up so much over the last year. It’s limiting the options restaurants have to recoup rising costs. Raising menu prices is not an option for a lot of restaurants and there is a limit,” he said, hoping “there are some changes or carveouts for the restaurant industry in the future.”

Jester Concepts had a 5% health and wellness fee, and now restaurants like Parlour and P.S. Steak will have a 3% credit card fee. Bleu Duck Kitchen in Rochester has implemented a 3% fee, as well. Saint Dinette is adding a 3.5% fee.

UP-FRONT TICKETED PRICING

The multicourse tasting menus that you buy in advance will see a bigger sticker price up front. At Myriel, instead of $185 on Tock for the tasting menu, it will now include the mandatory gratuity and tax, $226. “Hopefully this won’t be too confusing as prices have never been listed that way in restaurants here,” owner Karyn Tomlinson told me.

Myriel doesn’t have any fees for a la carte or bar dining, but Tomlinson said they’re still nervous about the dollars. “The math is still hard. As with everyone, we will need to be smart with our programming and keep our pricing up as much as possible to help with growing wages and insurance, etc. What we do takes a lot of dedicated skilled people, and that’s just what it is,” she said.

Demi is now charging $50 up front as a deposit to hold a reservation, and is returning to traditional tipping at the end of the meal instead of having you pay up-front inclusive of 21% service charge and tax.

NO CHANGES

At Vinai, the pricing model was built anticipating this change in the law. So, nothing changes. Many restaurants made changes ahead of this: Blue Plate Restaurants (Freehouse, Groveland Tap) had a wellness fee but removed it last summer. Centro had a mandatory service charge; when they opened in Roseville, they set up the place without that, now the same model will roll out to their other locations. At A Bar of Their Own, owner Jillian Hiscock told me “there’s a cost to doing business and I think paying credit card fees and paying your employees well is the responsibility of the business owner—not the customers.”

Photo by Kevin Kramer