What Exactly is a Service Charge?

Posted by mallen on Feb 11, 2010

I’m frequently asked about the 20% service charge applied to catering contracts.  Its commonly assumed that a service charge is a gratuity.  However, that’s not the case.


Caterers and venues commonly add an service charge (15-25%, varies by region) to help cover the costs of operating a business: office staff, utilities, supplies, insurance, advertising, etc.  While a catering contract may show a break down of the specific event elements and their costs, the service charge helps cover the cost of the hours needed to prepare and plan the event.  Often, a caterer or venue will offer services – tastings, room layouts, meetings, walk throughs – that are not included as a line item cost on the contract.  The costs need to be covered as business expenses, and thus the service charge allows for such services.

As for gratuity, you might see that as an additional line item, though the spirit and tradition of gratuity is at the client’s discretion.  A gratuity is never expected but always appreciated: if you wish to extend your thanks to the service and kitchen staff, your event planner can give you guidelines and help facilitate the distribution.

“Happy Planning!”