When you decide how expensive a restaurant is, do you look at the final bill, which includes tax and tip, or at the price of an entrée? Or maybe the prices on the wine list? If you said the final bill, you are in the minority.
Cornell University just did a mind-boggling study that suggests that American consumers decide how expensive a restaurant might be by looking at key menu prices. Even if the price on the menu has the service charge built in (as is often the case in Europe and elsewhere overseas), and that price is less than the actual bottom line when the whole check is calculated, participants in the study perceived a restaurant with European-style inclusive prices as more expensive than those that add a specific percentage for a tip before presenting the check (or those restaurants that give you complete freedom to tip whatever you want).
The study was done online, asking participants to order three-course meals from four different imaginary restaurants. They were asked how expensive they thought the restaurants were after looking over the menus. Participants were asked again after they were presented with an itemized bill that included tax and tip. Even after they saw the bottom line, in which the inclusive price actually came out lower, a significant percentage still thought the restaurant with the inclusive price was the most expensive.
Think about that. Even when given all the information needed, i.e. the actual total, they still got it wrong. In his conclusion, the author of the report suggests that inclusive prices are only appropriate for restaurants whose patrons don't care how much they spend.
This has ramifications for us wine drinkers. If the service charge is added to the bill as a percentage of the total, that includes the cost of wine in the calculation. If it's built into the price of food, presumably it will be built into the price of wine as well.
Presumably this would raise wine prices. But maybe not. Restaurants have plenty of "play" in setting their wine prices. They can mark up the wines by different percentages at different price levels. Restaurants could choose whether including the service charge in the wine price would exaggerate the bottom line or not. It's a tricky call, if perception is that sensitive to price.
In Europe, all restaurants include tax in the menu price. Many of the high-end restaurants include service charges as well. Personally, I love the idea that what you see on the menu is what you pay, not some lesser number that will inflate on the final tally. That's fine for food, but what about wine? Wine prices are silly high in most European restaurants. Maybe not a good trade-off, after all.
John B Vlahos — Cupertino Ca. — February 12, 2007 6:22pm ET
Harvey Steiman — San Francisco, CA — February 12, 2007 6:46pm ET
Mitchell Green — Ithaca, NY — February 12, 2007 11:46pm ET
Filippo Recchi — Florence, Italy — February 13, 2007 4:43am ET
Michael Culley — February 14, 2007 10:27am ET
Filippo Recchi — Florence, Italy — February 15, 2007 3:13am ET
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