Restaurant Industry InsightsRestaurant Law

The Restaurant Industry and Congress Come Together

From April 15-17, over 570 people from the restaurant industry met in Washington, D.C., for the National Restaurant Association’s Public Affairs conference. Besides meeting with lawmakers to discuss legislative and regulatory issues, attendees listened to leading political figures and were a part of the industry’s largest grassroots advocacy event.

This event is held annually to help educate lawmakers and raise awareness of the critical issues the restaurant industry faces. Attendees also meet with their representatives, sharing their experiences while advocating for the industry. Here, we’ll explore some of the hot topics on Capitol Hill.

The Tip Credit

In November 2022, almost 74% of Washington D.C. voters approved Initiative 82, the “District of Columbia Tip Credit Elimination Act.” This initiative phases out the tip credit over time, eliminating it by 2027. In October 2023, Chicago’s City Council voted to phase out the tipped minimum wage over five years.

This hot topic has continued to polarize the industry. On one end, we have national nonprofit organizations like One Fair Wage, which believe the tipped credit exploits women and people of color. The National Restaurant Association, on the other hand, says it will reduce employees’ pay and restaurants’ profits. 

In an interview with Eater, Sam Toia, President of the Illinois Restaurant Association, shared his belief that restaurants will reduce the number of servers and those working will make less money. The result will be a diminishing quality of service and increasing reliance on technology like mobile ordering apps. The Illinois Restaurant Association also argued that it will reduce the income of tipped workers, who currently earn a median of $28.48 an hour, while reducing restaurants’ profits by half.

One thing we can be sure of is that restaurants facing these changes will have to increase prices or add service charges, a practice that customers are growing weary of. According to One Fair Wage, the elimination of the tip credit will be on four state ballots by November 2024.

The Credit Card Competition Act

According to the National Restaurant Association, after food and labor, processing credit card transactions represents restaurants’ third largest operating cost. Our swipe fees are the highest in the world due to a Visa-Mastercard duopoly, the majority control over the market by two companies. Due to their lower volume, smaller restaurants tend to pay some of the highest swipe fee rates. 

This act seeks to open the credit card processing market to more suppliers, creating competition that will drive down the swipe fees paid on each transaction. It prohibits the largest banks from limiting the number of processing networks, enabling operators to choose the most secure and cost-effective network for their needs. If passed, it’s estimated that it will save U.S. businesses and consumers about $15 billion each year.

These processing fees have increased by over 50% since 2020.

Will it pass? While it has bipartisan sponsors in the House and the Senate, the opposition is marked by heavy hitters—banks, card networks, and other payment processors. Backers, however, remain confident in seeing this bill over the finish line.

The Federal Trade Commission’s Ban on Restaurant Surcharges

Should the FTC’s rule on “junk fees” pass, it would ban restaurants’ surcharges and fees, including delivery and large-party service fees. According to the National Restaurant Association’s brief on the FTC ban, operators will be forced to use different menus with varying prices for delivery orders, dining in, and large parties. 

The estimated implementation cost for restaurants is $3.5 billion, per the FTC. This could significantly affect small independent restaurant owners, who are unable to cover the estimated $4,800 per restaurant.

At the Public Affairs conference, restaurant attendees urged Members of Congress to contact the FTC and state their concern for the restaurant industry. The goal is to exclude the restaurant industry from the FTC ruling or permit them to continue using delivery fees, service fees, and credit card surcharges. The final rule will most likely be issued in late 2024.

As you can see, there’s a lot on the line for the restaurant industry in 2024. All of us give our thanks to those who made the journey to Washington, D.C., to advocate on the industry’s behalf.

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