Monday, November 30, 2009

What is a Catering Service Charge?

To answer a client's question, I was trying to find a formal description of the 18-22% service charge that venues and caterers add onto proposals and man were there some inaccurate answers out there in Googleland. (*cough* Yahoo Answers *cough*)

This is going to blow some minds when I say this, but bear with me: the service charge is NOT in any way shape or form a gratuity! Again, the service charge is not a gratuity. Nor is it part of mandatory state taxes.

The service charge is a fee (usually 18-22% around the Los Angeles area) that is added by the venue or independent catering company to act as an operating cost for things such as insurance, advertising, admin staff, trucks maintenance, fuel to get to events, cocktail napkins, and various sundries.

To get an even better answer for this question, I asked two of my favorite caterers to give me their answer to the question "what is the service charge?".

Nathaniel "Nace" Neubauer, the Owner/Operator of Contemporary Catering, specializes in "off-site" catering (meaning: they don't have a specific venue that they work at, they can cater anytime, anywhere). I asked Nace what this service charge is, and this is what he said:   

"We get asked all the time what our “service charge” is.   Some caterers call it “coordination-administration”, some call it “event production fee.”  We now call it event production fee.   The event production fee is not a gratuity for staff.  It covers all of the back end costs that go into the event aside from  the food itself.   We do not charge for tastings, walk-throughs, meetings, CAD diagrams, insurance certificates, etc. This fee offsets all of these costs to insure our clients aren’t worrying about asking for help in these areas, as many of our clients have had, or heard of others’ experience in which they are billed for these things.  We like to insure that the planning process is as easy as possible with nothing to worry about once you have us on board.  As far as actual gratuities go, we pay our staff very well!  Our staff’s motto is that gratuities are “never necessary, never expected, and always appreciated.”

Melissa Allen, fabulous Catering Director of the gorgeous historic Ebell of Los Angeles, an all-inclusive venue (meaning, they provide everything but the linens)  answered my question with:

"The service charge helps cover the costs of doing business: office staff, utilities, office supplies, day to day operations, etc.  So while a catering contract may show a break down of the event elements and their costs, the service charge helps cover the cost of the hours needed to prep and plan the event." 

So a tip for those of you planning a wedding and getting quotes: ask for the all inclusive amount that includes venue rental, food & beverage, labor, staff, tax, and service charge. Many times a venue will leave out the tax and service charge in order to hook you in to booking with them. When the bill comes to you, it's 30% higher than you were originally budgeting for. OUCH. 


Eva said...

That's what I loved about our caterer - no service charge! (And yummy to boot)

wedding bridal hair and makeup said...

I've just come across to your blog finding that it is a very interesting blog!

Anonymous said...

The lady that responded originally is actually incorrect. The "service fee" originated years ago as a mandatory gratuity. Just like the ones you see occasionally when you go to a restaurant and have a big party. The restaurant will put a mandatory 18% if you have a party of 10 more. But then but then you do not have to tip. After a while a lot of new caterers and hotels started adding this on to their bills and in my opinion abuse it. Old school food providers and caterers priced the utilities, and admin basic labor in the price of the food. The only additional fees that you would see as add on's would be a delivery fee ( for fuel and other misc expenses ) if the catering was off premise and even that would get waived if the party was big enough. It originally had always been that way and that's why some caterers do not charge the silly fee. But these days caterers get away with it and claim its an industry standard. I use to charge a flat rate per person. That mark up would cover all my expenses ( labor, insurance, utilities etc) and we made good money and had a lot of business. However some caterers are just greedy and try to justify so I suggest you just refuse to pay the service fee and caterers will start getting the message.

Amber Events said...

@Anonymous, are you still a caterer? The caterers that I work with definitely aren't greedy people and they sometimes share with me their profit margins, which aren't much. They're not driving Mercedes and BMW's! I believe them when they tell me that the service fee goes towards their operating expenses of advertising, insurance, staff, office overhead, tastings, walk-throughs, and time.

Anonymous said...

I don't mind a service fee charged on the food but I really resent when it's applied to fees for room set-up,rental of A/V equipment and linens. I am using a catering hall not an off site caterer. I feel like it's just a way to pad the bottom line.

Anonymous said...

This is a really helpful blog post. Can I ask Amber one much should one then include for gratuity over this 20% service charge? Is it per server? We are planning on a buffet as of now :)

Amber Events said...

Hi! I recommend looking at the proposal to see how many servers/bartenders/chefs there are and prepping a tip envelope with a certain $ amount for each staff member. $20-40 per person is a nice gesture.

CoriLynn said...

I love this! Being that I work in an event center myself, I get asked all the time about the service charge and you hit the nail on the head with explaining it! Great blog piece!

Anonymous said...

I could understand if the catering company charged only for direct cost and then wanted to add 20% for overhead and profit. Then asking for a 20% tip in addition would be expected if the service was good. They are obviously marking up the cost of food and labor as should be expected to run a business and then in my opinion double dipping and adding a service fee.

Broke Dad

Amber Events said...

@Broke Dad, while I understand your frustration, I definitely don't believe that this is double dipping as the term "double dipping" has an unethical insinuation. A company will charge what the market will handle. There are cheap caterers out there as well as expensive ones just like there are engagement rings from the diamond district and engagement rings from Tiffany's. Does that make Tiffany's unethical because they're charging more? Not in my opinion because they've established their profit margin and they are getting it.

Lisa Hedrick said...

Amber. Your responses are right on. I am a caterer in the Houston area. This is exactly what I tell my clients with these exact questions. Thank you for giving out the correct information.
Lisa Hedrick
Hedricks Catering & Events