Should Restaurants Really Charge For Water? | Talking Point | Full Episode

Key Concepts

• Tap Water Charging: Restaurants charging customers for tap water, which is increasingly common.
• Petition for Free Tap Water: A consumer-led initiative in Singapore to mandate free tap water in F&B establishments.
• Service Charge: A mandatory charge in Singaporean restaurants (typically 10%) intended to cover operating costs, staff expenses, and sometimes supplement wages.
• Cakeage: A charge levied by restaurants for bringing in an external cake.
• Operating Costs of Water Service: Expenses associated with providing water, including filtration systems, gas tanks for sparkling water, maintenance, storage, and manpower.
• Profit Margins in F&B: The financial viability of restaurants, with varying profit margins influencing their ability to offer free services.
• Mandatory Free Water Laws: Regulations in some countries (e.g., UK, New Zealand, parts of Australia) requiring licensed establishments serving alcohol to provide free tap water.
• Opportunity Cost: The potential revenue lost by a restaurant by providing free water to customers who might otherwise purchase more profitable beverages.
• Business Sustainability: The ability of restaurants to remain operational and profitable in the face of rising costs.

Consumer Sentiment and Petition

The video highlights a growing consumer dissatisfaction with restaurants charging for tap water. A survey indicated that 38% of respondents are "almost always" charged for water, while 45% are charged "sometimes," suggesting it's no longer uncommon to pay for it. Prices range from 80 cents to $3 per person.

Yu Thai initiated a petition calling for tap water to be served free at restaurants in Singapore. His motivation stemmed from a personal experience at a barbecue buffet where he paid nearly $40 per adult and was then asked to purchase a $5 free-flow beverage to get water, despite the food being salty and requiring hydration. He feels a "sense of injustice" and believes that basic necessities like tap water should be free. His petition has garnered over 4,000 signatures, indicating widespread consumer sentiment.

The Cost of Water and Service Charge

Yu Thai argues that the cost of tap water is negligible. He cites PUB (Singapore's national water agency) data stating that 1 cubic meter (1,000 liters) of potable water costs $3.24 (with GST). This amount is sufficient for approximately 5,000 glasses of water, making the cost per glass around $0.07 cents. He believes this minimal cost should be covered by the existing 10% service charge.

The service charge in Singapore is typically 10% and is meant to cover operating costs like table setup, cleaning, kitchen prep, and staff expenses. However, its application and distribution are at the discretion of each restaurant. Food blogger Leslie Tay expresses frustration that the service charge's coverage is unclear, citing an instance where a restaurant charged "cakeage" for a birthday cake, a concept he found unusual for a casual establishment. He also notes that in Singapore, the service charge is paid regardless of service quality, unlike in countries like the US where tipping is expected and can be adjusted based on service.

Restaurant Perspectives and Operating Costs

The video explores the operational realities of restaurants. Angela, a restaurant manager, explains that providing water, even filtered water, involves significant costs.

Solo Restaurant Case Study

At Solo, a restaurant that charges $3 per person for water (approximately $3.50 with taxes and service charge), the operating costs include:

• Initial Filtration System Cost: $6,000 to $7,000.
• Monthly Gas Tank Replenishment (for sparkling water): Approximately $150.
• Maintenance Fee: An additional $200 if the system requires repairs.
• Logistics: Costs associated with a cellar to store bottled water.
• Manpower: While not solely dedicated to water service, staff time is involved in refilling bottles, serving, and responding to customer requests for different water types (still, sparkling, warm).

Solo switched to filtered water to provide a "better quality" experience, aligning with their Michelin Guide recognition. They believe the filtered water offers a better taste and contributes to the overall dining ambiance. While they acknowledge that tap water is drinkable in Singapore, they see the filtered water service as a way to generate a "little profit margin" that helps sustain the business, especially given the challenging F&B landscape. They do not offer free tap water as an alternative, stating that once they've moved to filtered water, they will stick with it.

Pub Perspective

A pub owner explains that after the pandemic, they stopped offering free tap water. They observed customers ordering only one drink and then consuming free water for extended periods (2-3 hours), turning tables into an "opportunity cost" where they could have served new, paying customers. They believe that implementing mandatory free tap water laws, as seen in the UK and parts of Australia (where establishments serving alcohol must provide free tap water), would be difficult to sustain in Singapore due to high rental and labor costs. They suggest that if such a law were implemented, they would likely increase menu prices to build the cost of free water into their offerings.

Expert Analysis on Profitability and Cost Efficiency

Professor Quan Hui Lee from the Singapore Institute of Technology provides insights into restaurant profitability and cost management.

• High-End Restaurants: These establishments can often afford to offer free water because their substantial profit margins from food sales can absorb these costs. A "good" profit margin in Singapore is considered 10%, while in other countries, it can range from 10% to 30%. Many independent or small restaurants may operate with profit margins as low as 1%.
• Cost Efficiency Mechanisms: Restaurants that offer free water despite lower margins may implement cost-saving measures. These can include:
  • Self-Service Water Stations: Customers can get their own water, reducing manpower needs.
  • QR Code Ordering: Streamlining the ordering process and potentially reducing front-of-house staff.
  • Subsidizing Water Costs: Finding cost efficiencies elsewhere in their operations to cover the expense of providing free water.

Professor Lee also notes that some restaurants may be hesitant to offer free tap water because it could reduce their profits from selling more lucrative beverages.

Conclusion and Takeaways

The video concludes that while some consumers feel strongly about receiving free tap water as a basic service, especially given its low cost and the existence of a service charge, restaurants face genuine challenges with rising operating costs. The decision to charge for water is often a business strategy to ensure sustainability and profitability. While some countries have laws mandating free tap water in licensed establishments, Singapore does not. The trend of charging for water, or offering only paid alternatives like bottled or filtered water, is likely to continue as restaurants navigate economic pressures. Ultimately, consumers may need to accept that paying for water is becoming an integrated part of the dining experience in many establishments.