Its normal here in the tourist areas as Nashville has a lot of group gatherings (bachelorette parties, girls/boys weekends, etc) so it is very common for large groups to be seated together and each person wanting a separate check. I think that is the intended audience for automatic gratuities for large groups. It seems to me that a standard large group tip of 18% would probably be in response to groups leaving less than that on average.

Some venues (like brunch restaurants downtown) are almost exclusively groups on weekends, so I imagine making sure the servers get tipped for the extra work of dealing with groups ordering lots of things on separate checks is behind the policy. Although I wouldn't want them to count kids towards that automatic tip. Its also very common for servers to remind folks the gratuity is already in there and they can add more if they want. I don't think it does any business any good to have their customers feel 'tricked'.