Should Taxes, Tips & Delivery Fees Figure in the Restaurant Industry’s Inflation Calculation?

Jul 8, 2024 | Finconomics 101, No Bull Economics

The Effect of Tip & Taxes on Consumers' Overall Bill Post Banner

While there has been quite a bit of attention paid to the negative impact of menu price increases on restaurant traffic, perhaps there has been an insufficient focus on the impact of higher taxes, tips & delivery fees on the consumer’s wallet share…    

  • The poor consumer! Not only must they absorb the restaurant industry’s increased food & labor costs, but they are on the hook for higher tax & tip requirements as well.
  • Notably, the USDA reports that a full quarter of a consumer’s average bill at a sit-down restaurant is consumed by tips & taxes. As evident by the chart below, this burden has steadily increased since the turn of the century.
  • Of course, this analysis is incomplete without including the impact from the substantial & incremental fees incurred by delivery customers who can find their bill doubling for the convenience of a DoorDash delivery.
  • Taken together, restaurant consumers have been forced to dish out substantially more for their dine-out meals over time – a point operators would do well to consider when establishing their menu pricing strategies.

FSR Taxes & Tips as % of Sales Graph

Source: USDA ERS – Food Expenditure Series

Marketing Consumer Research Weekly Banner

Nobull consumer research weekly

No Bull Economics

Get Corporate & Market Insights in your inbox