Applebee’s Class Action Says Restaurant Service Charge is Disguised as a Tip

Two New York Applebee’s customers are suing over what they say is an undisclosed, mandatory service charge disguised as a tip.

Plaintiffs Kendall Ghee and Yang Shen are taking on a group of New York Applebee’s franchisees, accusing them of running a deceptive pricing scheme.

According to the plaintiffs, the Applebee’s restaurants have been making customers pay a service charge that’s separate and above the charge for the food itself and completely undisclosed on the restaurants’ menus. Failure to disclose this Applebee’s service charge violates New York consumer protection laws, they claim.

The plaintiffs say that at two of the defendants’ Applebee’s locations in New York, customers are expected to pay a surcharge that’s added to their bill to cover the cost of service. At the Times Square location, the surcharge is 18 percent; at the Broadway location, it’s 15 percent.

Applebee’s adds these surcharges to the bill in lieu of the tip that diners customarily leave for the waitstaff who served them, the plaintiffs say. But unlike a tip, these surcharges are mandatory, according to this Applebee’s class action lawsuit.

“Customers who try to pay less than the surcharge amount will be unable to close out their bill, and are forced to pay a supposedly discretionary gratuity,” the plaintiffs say.

The plaintiffs now argue this practice violates laws against false advertising. Applebee’s customers purportedly don’t get notice of the surcharge until after they’ve eaten and are presented with their bill.

Nowhere on the Applebee’s menu or in any Applebee’s advertisements is there any notification of the service surcharge, they say. Failing to disclose the surcharge makes all those representations about the price of Applebee’s food false and misleading, the plaintiffs claim.

Ghee says he ate at the defendants’ Times Square location in October 2016. He was presented with the bill on a tablet used as a table-side point of sale terminal. The tablet promoted him to select a tip amount to include with his payment, and Ghee says he accepted the default tip of 18 percent.

Ghee says he didn’t realize that the 18 percent was actually a mandatory service charge. He says he reasonably relied on the characterization of that charge as a “tip,” which he understood to mean a discretionary payment that he wasn’t absolutely required to pay.

When Ghee dined at Applebee’s again the next month, he attempted to leave a smaller tip than 18 percent. The defendants’ payment system would not allow him to do so, he claims.

Shen says he had a similar experience in February 2017 at the defendants’ Broadway location. He says he was unable to pay a tip amount lower than the default 15 percent.

Ghee and Shen propose to represent a nationwide plaintiff Class consisting of all persons in the U.S. who, during the applicable statutory limitations period, made credit or debit card purchases of Applebee’s food and drink priced under this allegedly deceptive pricing scheme.

The plaintiffs seek a court order requiring the defendants to cease this allegedly deceptive pricing scheme and to conduct a correctional advertising campaign. They also seek an award of actual, compensatory and statutory damages, restitution and disgorgement of related revenues,

Attorneys for the plaintiffs are C.K. Lee and Anne Seelig of Lee Litigation Group PLLC.

The Applebee’s Service Charge Class Action Lawsuit is Kendall Ghee and Yang Shen v. Apple-Metro Inc., et al., Case No. 1:17-cv-01554, in the U.S. District Court for the Eastern District of New York.

UPDATE: On Jan. 26, 2018, a federal judge denied New York City Applebee’s operators’ bid to dismiss a class action lawsuit alleging that two New York City locations force customers to tip servers.