IRS begins enforcing mandatory gratuity rules Jan. 1

Beginning January 1, 2014, the Internal Revenue Service (IRS) will classify an automatic gratuity--the policy of adding an automatic tip to the bills of large parties of diners--as a service charge instead of a tip. The IRS regards service charges as regular wages, which must be reported for payroll tax withholding. 

The IRS ruling on automatic gratuities isn't actually new, having been issued in June 2012 as part of an effort to update earlier tax policies on tips. Implementation was delayed up to now, however, so that restaurants and related businesses had more time to comply. 

Mandatory gratuities are considered income to the restaurant. Most operators are familiar with this tax treatment when assessing a labor charge for banquets, but some are not aware that this concept extends to a mandatory tip amount or service charge.

A service charge is an amount automatically added to a customer’s bill by management. The IRS lists four factors, all of which must be present in order for the customer’s extra payment to be deemed a tip and not a service charge:

1.      The customer’s payment must be made free from compulsion;

2.      The customer must have the unrestricted right to determine the amount;

3.      The payment should not be the subject of negotiation or dictated by the employer policy; and

4.      Generally, the customer has the right to determine who receives the payment.

IRS gives the following examples to distinguish when a gratuity left by the customer will be considered a tip or service charge:

EXAMPLE 1: A restaurant’s menu specifies that an 18 percent gratuity will be added to all customer bills. A customer’s bill for food and beverages includes an amount on the “tip line” equal to 18 percent of the price for food and beverages and the total includes this amount. The restaurant distributes this amount to the servers and bus-persons. Under these circumstances, the customer did not have the unrestricted right to determine the amount of the payment because it was dictated by employer policy and the customer did not make the payment free from compulsion. The amount included on the tip line is a service charge dictated by the restaurant.

EXAMPLE 2: A restaurant includes sample calculations of tip amounts beneath the signature line on its charge receipts for food and beverages provided to customers. The actual tip line is left blank. A customer’s charge receipt shows sample tip calculations of 15 percent, 18 percent and 20 percent of the price of food and beverages. The customer inserts the amount calculated at 15 percent on the tip line and adds this amount to the price of food and beverages to compute the total. Under these circumstances, the customer was free to enter any amount on the tip line or leave it blank; thus, the customer entered the 15 percent amount free from compulsion. The customer and the restaurant did not negotiate the amount nor did the restaurant dictate the amount. The customer generally determined who would get the amount. The amount the customer entered on the tip line is not considered a service charge.

If the gratuity is deemed to be a service charge rather than a tip, under federal law, service charges:

1.      belong to the establishment

2.      become a part of the establishment’s gross receipts

3.      must be considered as income to the employer, and

4.      may be retained entirely by management or distributed to employees in any amount management chooses.

Service charges that get distributed to employees are treated as wages under federal law. Distributed service charges may be used to help employers meet their obligation to pay employees the minimum wage. However, a compulsory service charge cannot be counted towards the tip credit.

Under the DOL regulations restaurants that automatically add a gratuity, for example, for large parties or catered events, cannot take a tip credit for the mandatory gratuity the establishment receives, even if management passes the gratuity on to employees. Instead, the mandatory-gratuity receipts are considered part of the employer’s receipts. The money paid from those receipts to employees is considered wages rather than tips.

Any portion of a mandatory gratuity charge that is retained by the employer is subject to sales tax.

It is important to note that restaurants should clearly inform guests of service charges and the amount of the charge before the guest orders, either by a conspicuous notice on the menu or by some other means.

LRA SIF Members to receive more than $2 million in dividends next year

Amount brings total returned since 1988 to more than $100M

The Board of Trustees for the Louisiana Restaurant Association’s Self Insurer’s Fund (LRA SIF) for Workers’ Compensation has approved declaring a dividend to eligible plan participants in the amount of $2.02 million.

The LRA SIF, since 1988, will have cumulatively returned approximately $101.7 million in surplus and safety dividends to eligible members.

For the 26^th consecutive year, the Fund has declared a surplus in unused premium and interest income that will be returned to members. This surplus will include eligible participants from the fund years 2008, 2009 and 2010 and be paid in April 2014.

“The LRA SIF was pleased to lower its rates once again this fall, for the third time in four years,” said LRA SIF President & CEO Stan Harris. “Our members have shown a commitment to workplace safety practices and as a result, we see lower accident rates. Our Fund is focused on best-in-class member services, combined with our complimentary loss prevention and safety training.”

For 32 years, the LRA SIF has served as one of the most respected providers of workers’ compensation insurance in Louisiana. The Fund’s management continues to focus on efficiency and timely claims handling to keep its member costs very competitive. 

To be eligible for a dividend, the member must be in good standing with the LRA and the LRA SIF and have a loss ratio that is equal to or less than 70 percent for the years declared as of March 3, 2014.

In October 2013, the LRA SIF announced a rate reduction on premiums for its Fund, which specializes in the hospitality industry.

“Our members’ positive outcomes allow us to lower their rates,” said Harris.

To learn more about how the LRA SIF can help you reduce your workers’ compensation costs and to get a quote, call Babs Schultz at (504) 454-2277 today. 

CHOP program serves as format for ProStart students to hone their presentation skills

In partnership with Ochsner Health System, the Louisiana Restaurant Association Education Foundation (LRAEF), through two Jefferson Parish ProStart schools—Bonnabel Magnet Academy and Grace King High School—are participating in the Cooking-up Healthy Optionsand Portions (CHOP) program. CHOP is an after-school cooking program designed to teach middle school students to prepare healthy meals and feel more confident in the kitchen. 

"ProStart students meet with middle schoolers for 90-minutes each week and conduct demonstrations designed to explore healthy substitutions and teach them how to prepare meals for themselves and their families," said Alice Glenn, LRAEF Executive Director. "The younger students have the opportunity to learn from our ProStart students knife skills and safety, food safety, proper measuring and calculations, meal planning, boiling, simmering, sautéing and baking."

Ochsner’s Community Outreach staff has revised and created recipes that show students they can still eat their favorite foods and be healthy at the same time, just by making a few small changes. CHOP acts as a compliment to the LSU AgCenter’s Smart Choices nutrition program and is offered to students who have already participated in that program. The program’s goal is to enable students to translate the information they learn into tangible skills that can make healthy eating a habit. 

“ProStart students serve as skilled mentors for these younger students,” said Glenn. “It is our hope that our ProStart students will inspire them to take an interest not only in eating healthy, but in the restaurant industry as a career option in the future.” 

New Orleans hospitality industry hosts event to benefit Typhoon Haiyan recovery

A collective of more than 40 New Orleans-area chefs and industry suppliers will come together, December 16 at the Hilton New Orleans Riverside, for a unique fundraising culinary experience, NOLA Chefs’ Aid for the Philippines. Designed to support the relief efforts in the Philippines following the devastating Super Typhoon Haiyan, the event will feature Philippine-inspired cuisine, dance, music and national dress.

“My grandparents were born in the areas flattened by the typhoon and I still have family and friends in the affected areas,” said Nina Camacho, event organizer. “As a local Filipina, I felt it was my responsibility to help in any way I can. The support from the culinary community, the ACF-New Orleans Chapter and the Hilton New Orleans Riverside has been overwhelmingly and incredibly generous.”

Mayor Mitch Landrieu

Event attendees will have the chance to rub elbows with Honorary Co-chairs New Orleans Mayor Mitch Landrieu, Political Commentator James Carville and the Creole Queen of New Orleans Cuisine Leah Chase during the VIP Patron Party, Dec. 16 from 5:30-6:30 p.m. VIP tickets are $100 in advance at www.NOLAChefsAid.com and $125 at the door.

Restaurateur Ralph Brennan, GW Fins Executive Chef Tenney Flynn and Brigtsen’s Executive Chef and Owner Frank Brigtsen are Chef Committee Co-Chairs and have let their support and expertise in developing the event.

Ralph Brennan

“The strength of the New Orleans hospitality industry has always been an asset in times of need, whether for another member of our industry or for an entire community,” said Ralph Brennan. “And while it is our business to serve each person that visits our restaurants, it is out of genuine concern for all people that we choose to put our business aside and serve others in situations such as what has happened in the Philippines.”

In addition, the Philippine American United Council of Louisiana; Filipino American Lions Club of Louisiana; and Robert Romero, Honorary Consul General of the Philippines are supporting this endeavor. Jazz Trumpeter Duke Heitger and Friends will provide entertainment throughout the evening, while guests enjoy cultural dance and costumes by local Filipinos.

“If you are excited by adventurous cuisine like Lapu-Lapu Kinilaw, Oxtail Adobo, Tokwa’t Baboy, Lumpia or Dinuguan with Mini Puto or Lechon Baboy, you won’t want to miss this event,” said Camacho.

The main event will be held from 6:30 to 9 p.m. Tickets are $50 in advance and can be purchased at www.NOLAChefsAid.com. Tickets are $75 at the door.

100 percent of the proceeds benefits the National Alliance for Filipino Concerns (NAFCON) and its Typhoon Haiyan fund. 

Participating restaurants, chefs and suppliers are: ACME Oyster House, Brigtsen’s, Broussard’s, café B, Café NOMA, Chef CK’s Hot Shoppe, Chef Ron’s Gumbo Stop, Charley G’s, Coca-Cola, Commander’s Palace, Community Coffee, Cook Me Somethin’ Mister, Cowbell, Deanie’s/The Red Maple, Drago’s Restaurant, Happy Kajun, Hilton New Orleans Riverside, Hyatt Regency, Jubilee Restaurant, JW Marriott, Kid Chef Eliana, Kingfish, LaBella’s Catering, Luke, Milkfish, Mizado, MoPho, Restaurant Cotton, R’evolution, Southern Eagle, The Fairgrounds, The Happy Italian, The Irish House, The Salty Swine, Three Muses, Trey Yuen, Tulane/Loyola Soxedo, Upperline, Vega Tapas, Viva La Waffle/Tsunami Sushi and Ye Olde College Inn.

Serving customers with food allergies good for business, restaurateurs say

For celebrity chef Ming Tsai, the birth of his son David propelled his interest in food allergens and accommodating customers with dietary restrictions.

“David is 13 years old,” Tsai told attendees at last month’s AllergyEats conference in Boston. “When he was born, he had allergies to soy, wheat, dairy, shellfish, tree nuts and eggs. I like to say it was an unfunny joke from upstairs that the first son of a chef had food allergies.”

Tsai, owner-operator of Blue Ginger and Blue Dragon, two upscale casual Asian restaurants in the Boston area, had allergen protocols in place two years before his son was born. But since then, he has become even more involved in the movement, ensuring his establishments can successfully cater to the needs of his customers with food allergies.

“Our goal is for the guest to leave delighted,” he said. “In a competitive market, the more concerned you are, the more likely you’ll get your fair share [of business]. I strongly believe it is smart business practice to know what is in the food you serve, period. Repeat business is key. If you can serve delicious food with great service safely, you’ve got them for life.”

Tsai and fellow panelists Kevin Harron, president and CEO of Burtons Grill Restaurants, and Michael Moomjiam, director of quality assurance and food safety for PF Chang’s China Bistro, parent of the PF Chang’s and Pei Wei Asian chains, addressed the issue of food allergies and restaurants during a session called “Restaurants That Get it Right.” The National Restaurant Association served as one of the conference’s sponsors.

When people head out to a restaurant, Tsai says, “The person with the food allergy is going to make the restaurant decision because it doesn’t matter to the others. To them, it’s just food, but for the one with the food allergy, it’s life or death.”

Tsai added that at Blue Ginger on a Saturday night, it is not uncommon for 20 tables to be dealing with food-allergy issues. He said at least 50 percent of them are gluten-related. To avoid mistakes, he has established a food allergy reference book where all recipes featuring wheat, dairy and eggs have been highlighted and listed out by dish, garnish, sauce, protein and marinade.

“It is so important to have a system in place,” he said. “That will greatly reduce human error. With this manual, you can easily know what is in the dish. With this and training, training, training, you can make your restaurant even safer than it is today.”

At PF Chang’s, creating a loyal customer base starts with ensuring guests with allergies will be taken care of, Moomjiam said.

“It starts with the message, ‘We’re truly glad you’re here,’ and we will do everything to make you want to come back,” he said. “Our goal is to have loyal guests know we will take care of them, and taking care of those who have dietary restrictions is part of that.”

The company started its food allergens program in 2001 and had a dedicated gluten-free menu by 2003. The chain’s restaurants currently have 25 gluten-free choices on the menu.

“We’ve gotten a lot of good PR on how we go above and beyond,” he said. “Being allergen-friendly has definitely increased our business. Right now 5 percent of all checks are food-allergen related and 90 percent of those are gluten-free [requests].”

He added that allergen information collected from guests is entered into a database and cross-checked against menu items and ingredients that are updated every two weeks.

“If a guest tells the manager of his or her sensitivities, the manager can go to the back of the house, type in the information and check off the items the guests cannot have. With this, we can create a custom menu for the guest.”

He also said each restaurant has separate woks set aside for allergen dishes that are cleaned and sanitized between each use. The company also audits ingredients as well as random products for gluten levels.

Harron, who’s had celiac disease for 43 years, said dealing with food allergies can be challenging for restaurants, but it is necessary.

“As the leader of your organization, you need to make the decision to raise your baseline performance,” he said. “I think everyone in our organization recognizes there is value to this and it’s the right thing to do.”

The National Restaurant Association offers restaurateurs a ServSafe Allergens Online Course designed to help front- and back-of-the-house employees better accommodate the growing number of guests with food allergies.

Chefs say 'Recipe Challenge' a great platform for healthful kids' meals

Creating great tasting, healthful meals for kids can be challenging, but more chefs are saying the rewards are great.

The National Restaurant Association is collecting entries for its second annual Kids LiveWell Recipe Challenge. The competition is open to chefs and restaurateurs committed to providing healthful children’s menu items.

Finalists will be announced this spring and the winners will be feted at an awards ceremony during NRA Show 2014 in Chicago in May. Chefs interested in showcasing their healthful kids’ menu options can apply here. Deadline for submissions is Dec. 15.

"We encourage Louisiana Restaurant Association members to get creative a submit a recipe to the challenge. Eating healthy at Louisiana restaurants, regardless of age, is possible and several members participate in the Eat Fit NOLA program with Ochsner to raise awareness of steps they are taking to offer lower calorie meals for their guests," said Wendy Waren, VP of Communications, LRA. 

Created by the NRA in partnership with McCormick for Chefs, the Kids LiveWell Recipe Challenge follows the criteria of the Association’s Kids LiveWell initiative. The program was developed in partnership with nutrition consultant Healthy Dining Inc. To qualify, menu items must consist of 600 or fewer calories and include such ingredients as low-fat dairy, fruits, vegetables, lean protein and whole grains.

The contest involves an “industry-tested, kid-approved” approach. A panel of industry professionals selects finalists in four categories and 30 kid judges choose the winners at a cook-off event at McCormick’s flagship World of Flavors store in Baltimore’s Inner Harbor.

Keith Esbin, corporate executive chef for Orlando, Fla.-based Boston Lobster Feast Restaurants and a winner of the inaugural Kids LiveWell Recipe Challenge last year, said the contest showcases the potential for good, healthful kids’ meals at restaurants.

“Kids are being exposed to things that are healthy for them and that they are really excited about it,” he said. For operators, he noted, this is “the socially responsible thing to do. Not only that, kids today tend to dictate what and where their families and parents are going to eat. They are open to more healthful suggestions, which gives parents an opportunity to try different things and dine at different restaurants.”

Esbin, whose chicken Parmesan with spaghetti squash won last year in the category for independent restaurants or companies with fewer than 20 units, said the item was featured as a kids’ menu option at four of the company’s restaurants.

“Some of our adult customers ordered the dish, too,” he said. “We went through about 50 of them a month at each of the units, which is pretty good when you consider that this [concept] is an all-you-can-eat, buffet-style restaurant with 150 different offerings. Most people don’t come here to eat just one item, so to have them [choose] this one thing [represents] a pretty good performance.”

Jennifer Brower, regional executive chef for Compass Group’s Chartwells School Dining Services, said winning last year’s Kids Recipe Challenge in the managed-foodservice category made her feel like a celebrity.

“We got some really great PR out of this, and a lot of my schools have been running the recipe,” said Brower, who represents the Great Lakes region. “The whole experience has really put some new air in the tires. People may not realize this, but school systems hire a lot of chefs, and more than anything they have to learn all the rules and regulations we have to follow. You have to find ways to make it work.”

Brower, who won for her Chix-N-Cheddar Snappy Jalapeño Wrap, said she is most proud that Chartwells submitted the recipe into the company’s national database and more than 180 schools in her area are now using the recipe in their schools.

“I really wanted to make something I knew my grandchildren would like,” she said. “When you create recipes, you have to find ways to make them healthy and great tasting. People think the food [at contract companies] is cookie-cutter-like, but it’s not. We always make sure the food tastes great.”

Brower said that after she won last year’s Challenge, Chartwells sent her to several schools to sign autographs. Those schools used the recipe on their menus for the day.

“I got to talk with the kids, and that was really fun,” she said. “I got to be a celebrity for a few days. With all the cooking shows on TV today, the kids … look at chefs as rock stars and want to be one, too. I say, ride the ride.”

How to find the right host for your restaurant

Having the right host or hostess is important in every restaurant.

The host is the first person customers meet and the last person they’ll cross paths with before heading off. Hosts play a major role in establishing a friendly atmosphere at your restaurant—one that will entice the customer to return repeatedly.

Here are a few qualities you should look for in potential hosts:

Willingness to go above and beyond for guests. Part of a host’s responsibility is to make life easier for each guest. In addition to meeting standard needs, hosts should consider special requests as opportunities to make lasting impressions.

For example, a guest drove to Villa Christina in Atlanta from St. Petersburg, Fla., to surprise his mom for Mother’s Day. He arrived before the rest of his family, realized that he forgot to purchase a Mother's Day card and asked where the nearest store was. The host asked him to wait a minute, went to the sales office and scanned a drawer full of thank-you, birthday, wedding and anniversary cards before finding a Mother's Day card. The host presented the card to the guest, who was incredibly appreciative,says Terri Harof, vice president of marketing.

Genuinely care about the success of the restaurant. Hosts generally are salaried and unlike servers, they don’t rely heavily on tips. So they must be motivated to act in the best interest of the restaurant, even though their pay won’t necessarily be affected either way.

“I have, unfortunately, encountered hosts in the past who just want a cushy summer job, aware that it doesn't matter how slow or busy the restaurant is -- he or she is still getting paid the same,” says Dennis Friedman, executive chef/owner of Newton's Table and Newton's Noodles in Washington, D.C.

“Choosing not to be aggressive with capturing sales, acting indifferent to their impact on the kitchen, being ignorant to the success or failure of the servers -- all of these qualities are a recipe for failure, flavored with mediocrity.”

Ability to always be polite to guests, no matter what. The guest is always right. Regardless of how a customer treats the host, he or she must resist the urge to return the poor attitude. Instead, they must stay calm and try to please the customer as best he or she can.

When David Bakke was a restaurant general manager, he worked with a hostess who often snapped at guests. “I received numerous complaints about her, and the restaurant lost business as a result,” says Bakke, a restaurant expert at Money Crasher Personal.

Outgoing personality. Naturally shy people usually don’t make good hosts. Hosts must go out of their way to be friendly to customers.

Strong organizational skills. Hosts frequently have several responsibilities, such as taking reservations, maintaining wait lists, assigning seating and scheduling employee duties. So strong organizational and time-management skills are a must.

Team player.  Hosts must have a sense of table progression. To do so, he or she should communicate constantly with wait staff to know which guests are on dessert, which have paid their checks and which are still eating their meals. Everyone on staff plays for the same team.

Professional appearance. Appearance is important when greeting customers, so hosts and hostesses should dress in attire appropriate for the restaurant setting. Any stains or wrinkles on clothes convey a dirty atmosphere.

This content was provided by National Restaurant Association partner CareerBuilder.