Award-winning restaurant Lunar has made a bold move to ditch discretionary service charges.
From tomorrow, 1 March, diners will no longer see a 12.5 per cent discretionary service charge added to the bill for their table.
Discretionary service charges have become industry standard in recent years, but Lunar owner entrepreneur Craig Wilkinson argues that the model is losing its relevance as wage increases have increased significantly, with costs spiralling and regulations changing.
Recent legislation changes have been described as a ‘tipping point’ to making the decision.
Last year, new laws mandated that 100 per cent of tips and service charges go directly to employees. But Craig says it also shifted the burden of administration and bank processing fees adding more cost to the company – previously offset by service charge revenue – entirely onto businesses.
Since The Employment (Allocation of Tips) Act 2023 came into force in October, those fees have amounted to an increase of more than £5,000 in the costs to administer these tips at Lunar, which has been described as ‘simply unsustainable for the business’.
Craig said: “Add that to rising wages and National Insurance hikes, and you’re looking at thousands more.
“We can’t just sit still and let that cripple the hospitality industry. Not just for our company, but on a personal level I want to continue to enjoy going out to eat and drink at the great variety of hospitality options we have in our great country.”
Recent research shows there were over eight closures per day in UK hospitality industry the last three months of 2024 and a number of local businesses including The Potters Club have closed so far this year.
Lunar, based at Barlaston’s World of Wedgwood, says this new move will give it a ‘fighting chance to weather the storm’.
The business is channelling the 12.5 per cent into increasing staff salaries to ensure its team of 16 to 25 people earns above-average wages, with a remaining percentage being factored into covering the significant cost increases it faces.
Staff are expected to see their salaries increased by around five per cent.
If the move, dubbed The Lunar 25 Plan, succeeds, Craig hopes it could inspire others in the industry to rethink how they navigate these challenges.
He added: “The discretionary service charge has become a crutch for an industry under strain, and I’m not convinced it’s serving anyone well anymore – our customers, our company and least of all our staff, who deserve stability over uncertainty.
“I’ve been around long enough to know survival means adapting.
“This isn’t just about us – it’s about proving there’s a way to keep hospitality alive without compromising on what matters: our people and the folks who walk through our doors.”
- While the discretionary service charge will no longer be added to bills, customers will still be allowed to tip if they wish, and it’ll go directly to the team as always.
