The ‘Tipping’ Tipping Point

Tipping or not tipping has been a hot topic for months. Two factors in particular have been driving this conversation. First, minimum wage increases have pushed up labor costs for restaurants. Second, a recent court ruling made it illegal for servers to split their tips with kitchen staff. The tip-splitting model had been used to increase earnings for employees in the back of house.

When Danny Meyer, restaurateur and CEO of Union Square Hospitality Group, announced that he was eliminating gratuities at 13 of his restaurants in 2015, it set off a media frenzy. Meyer reasoned that his “Hospitality Included” program, which would be supported by 20 percent higher prices, would narrow the income gap between front-of-house servers and back-of-house kitchen staff.

According to research by Cornell University and The Ohio State University, the median weekly income for front-of-house employees was 29-80 percent greater than back-of-house employees. At fine dining establishments, the median weekly wage of a server is $792 compared to the $441 kitchen workers take home each week.

West Coast restaurant owner Thad Vogler followed Meyer’s lead and made his restaurants Bar Agricole and Trou Normand tip-free. Nine months later, he reinstated tipping. Vogler said their gratuity-free restaurants couldn’t co-exist with tipping restaurants. The dishwashers, line cooks and prep chefs were happy to make more money. But the servers were unwilling to make less, and they left to take jobs at traditional tipping establishments.

Similarly, Joe’s Crab Shack tested no tipping in 18 of its locations and abandoned it when customers “voted with their feet.” Prices at the pilot restaurants increased to cover the new labor costs. However, those same restaurants lost an average of 8-10 percent of customers during the test run. While getting rid of gratuity eliminated any math at the end of the meal, customers didn’t mind the added work. The restaurant's research showed that around 60 percent of customers disliked the policy, because it took away an incentive for good service, and they didn’t necessarily trust that management was passing along the money to workers. 

While the no-tipping experiment has had mixed success, the desire to increase earnings for back of house employees has spawned innovation. Here are a few interesting examples:

  • Zach Pollack, chef and owner of Alimento in L.A., added a kitchen service line to its bills. Customers can leave an additional and separate tip for the back-of-house.
  • Le Pigeon in Portland eliminated tips, raised its prices about 20 percent, and now compensates workers with a mix of base pay and a percentage of the night's food and beverage sales. 
  • 42 Grams in Chicago sells an all-inclusive ticket online, including tax and tip, which means patrons can leave their wallets at home.
  • Northwest coast restaurant Park Kitchen cross-trained it employees and implemented a new model that eliminates traditional back- and front-of-house roles.
  • Restaurant Bestia in L.A. adds a 3 percent "Kitchen Appreciation Charge" to each check.
  • At Farm Spirit in Portland, diners purchase an all-inclusive ticket. The chefs are on salary and do double duty as servers.
  • Italian restaurant Abrusci’s in Wheat Ridge, Colorado, nixed tips and instead adds a 20 percent service charge to the bill. Servers earn $20 an hour compared to the old rate of $5.21. They also get paid vacation and sick days.

Interestingly enough, a 2015 poll on behalf of the National Restaurant Association showed that tipping appears to have the support of customers, with 65 percent of those surveyed in favor of it.

Are you trying something new in your restaurant? Let us know. Email us at talktous@adamskeegan.com.