I’ve noticed a ton of press recently about restaurants going moving to an all inclusive menu or no tipping policy. Back in February we posted a blog, Time to End Tips?, on the topic and it got heated to say the least in the comments and on our social media channels. Click here to read that blog.
It’s now 7 months later and a lot of the changes mentioned in the original blog are starting to happen. ie minimum wage increases are being implemented in cities all over the country. The Affordable Care Act isn’t going anywhere either.
It seems that most of the restaurants that are testing out the no tipping policies tend to be on the higher end as far as price. Haven’t seen anything on a low to mid tier full service restaurant trying it out yet. This is probably due to the fact that a price increase can be absorbed easier at the higher end establishments.
There are a couple of different scenarios I’ve read about:
- Just a blatant price increase and explaining that the gratuity is included in the price
- An added service charge of 18-20% added to the bill. This is essentially an auto gratuity that in the past was typically reserved for large parties
- In both those scenarios they are paying their servers anywhere from $15-$25/hr
Some of the feedback from the restaurant owners/managers seem to be similar:
- Most would like to do away with tipping because of the government mandated paperwork that is required for reporting. Would certainly make their lives easier from a bookkeeping standpoint.
- They feel they can more “fairly” distribute money between the BOH and FOH if a “service charge” were added to every check
- I saw one scenario where they added an 18% service charge, but that wasn’t enough so they bumped it up to 20% and still had to dip into owners profits to cover the additional costs for labor
- A few tried it, but the backlash from the customers forced them to change back. The perception was that they were too expensive even though when you include a tip at the end it would be the same. But when you go to your favorite restaurant and the filet was $35 last time and now it’s $42, in your mind that’s a big jump and I don’t think you automatically make the connection that you aren’t tipping.
- In one scenario they had to keep the tip line on the check even though they explained that tip was included because some customers complained that they couldn’t leave a tip even if they wanted to, unless it was cash of course.
In the near term it’s going to hit the industry pretty hard, but over time the market will correct itself this new way will become the norm. A big issue with the no tipping policy is that server goals and the operator goals are not aligned.
When servers make basically all their money on tips it’s in their best interest to provide great service and serve as many guests as possible while doing so. This aligns perfectly with the operators goals. But when the server is paid a straight hourly wage regardless of how many guests they serve or how good/bad the service there’s no incentive to do otherwise.
Why try to get another table turn in before your shift ends? It’s a lot easier if your tables camp and all you have to do is stay on top of water and coffee refills. If a guest is complaining that the food is taking too long there’s no reason to go to the kitchen and hound the expo for their food. Why deal with it? This does not align well with the operators goals at all.
Now that is assuming that the industry shifts in this new direction while management keeps managing to the old way. There’s going to have to be fundamental changes to managing restaurants to align the staff with the overall goals of the owner/operator. But there’s going to be a learning curve and I think that’s going to be a tough time for the industry.
Would love to hear any comments, concerns, ideas, etc.