October 15, 2015
Restaurants say no more tips
Do tips result in better performance by restaurant workers, or is it a dehumanizing tradition whereby the earnings of hardworking people are determined by customers whose personal agendas get in the way? Perhaps it is some of both, and that has led some restaurants to end the practice tipping altogether.
The most recent example is famous restaurateur Danny Meyer’s Union Square Hospitality Group (USHG), which announced it will end tipping at its 13 restaurants beginning next month.
"We believe hospitality is a team sport, and that it takes an entire team to provide you with the experiences you have come to expect from us," Mr. Meyer wrote in a letter posted online. "Unfortunately, many of our colleagues — our cooks, reservationists, and dishwashers to name a few — aren’t able to share in our guests’ generosity, even though their contributions are just as vital to the outcome of your experience at one of our restaurants."
Photo: Union Square Hospitality Group
To pay for the end of tips, USHG will raise prices in its restaurants so that it can pay its workers more equitably. A piece on The New York Eater speculates that the action is intended, in part, to address a shortage in cooks (who are left out when tips are shared) by paying them more.
The big question is whether the industry will follow the lead of Mr. Meyer and others who have ended the practice of tipping in their establishments.
"Danny has a lot of trust out there with his customer base," celebrity chef and restaurateur Tom Colicchio told The New York Times, "and if they’re willing to pay higher prices, it’s going to make it easier for everybody else. That’s still my biggest concern: whether the dining public is up for it."
- A Letter From Danny Meyer – Union Square Hospitality Group
- Danny Meyer is eliminating all tipping at his restaurants and significantly raising prices to make up the difference, a move that will raise wages, save the hospitality industry, and forever change how diners dine. – The New York Eater
- Danny Meyer Abolishes Tipping – The Atlantic
- Danny Meyer Restaurants to Eliminate Tipping – The New York Times (tiered sub.)
Discussion Questions
Do you think most consumers today would prefer to pay more for their meal to avoid tipping or keep the system as-is? What will restaurants need to do to overcome skepticism that consumers may have about the change in practice?
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If Mr. Meyer raises prices by, say, 20 percent but no longer expects customers to leave a 20 percent tip, will they see any big difference in the tab? Probably not. But American diners are trained to acknowledge good or excellent service and may find it hard not to leave some extra cash on the table. Even in European restaurants where a service charge is included, I usually “round up” anyway.
The economics are interesting, because it’s clear that the “back of the house” workers — from chefs to dishwashers — are short-changed by the current system. At the same time, Meyer may need to raise “front of the house” wages significantly to offset the loss of servers’ tip income. I’m sure there will be a shakedown cruise at USHG restaurants before the new model is widely adopted.
It should remain the way it is with tipping being part of the practice. Many great waitstaff do make a great deal of money based on tips and I think would leave the industry if they were only to get a salary. I also think that restaurant owners would suffer as well were they to reduce the number of waitstaff to reduce payroll when the restaurant is slow. The consumers would not like the increase in prices either and may only eat where there is the practice of tipping. Will tipping doorpersons, cab drivers and bellpersons also stop? I think not. Tipping is an American tradition that will continue.
Simple equation here: consumers in America prefer more food at less cost. Tipping is so well established it will be as hard to change as say a high-low retailer going to every day pricing. Unless a lot of restaurants follow suit, which given the risk they take by raising wages and hoping, I doubt there will be many brave souls who try this. As to the consumer, I think they want the lower prices and the control over how much to tip.
Hooray for no tipping. That annoying, anxiety-producing practice that accompanies every dining experience. It’s better for consumers and for restaurant staff. As consumers see that their restaurant experiences are not compromised by the promise of a tip, they will come to accept higher prices for food and drink. It’s incumbent on restaurant owners to thoroughly explain the practice to customers. Transparency is going to be important towards generating support for this new practice.
I’ve been to Australia and New Zealand where tipping has been replaced by a huge minimum wage. Believe me, service is not the same. I know a lot of servers who bring home a nice paycheck because they are really, really good at getting customers to tip well. A higher wage would be a big pay cut. We are all pretty much aware that tips given in cash never get reported to the IRS so it’s an extra bonus for the server. I can see if you go to some quick serve sterile national chain that hires warm bodies, it won’t make much of a difference. However at upscale restaurants or your local independent, developing a good business relationship with your server is a business relationship of value. I don’t want to see our system change. I usually tip in $2 bills and half dollars. The servers remember me, know they will be tipped well and I get good service. That would disappear immediately if we stopped tipping. Most likely those servers would move on to some other vocation.
I would agree that the current system of tipping results in those visible to the customer getting compensation that was earned not only by them but the cooks, etc., in the back of the house. An alternative system might have been just to force sharing of the tips on some formula that ensured everyone shares in the rewards for a great meal. I do agree any system that impacts the income of the waitstaff is likely to result in those used to a higher level of total compensation to consider alternative employment.
I am a tipper. I believe in tipping well for good service and tipping less for less-than-good service. I have trained myself this way and am comfortable with it. However, I never took the “back of house” into consideration. Yes, they play an important role from the chef to the barback to the hostess. Some are considered for the tip pool at a limited number of establishments; but not many. Maybe the European model has some strong points we here in America can follow? This is truly thinking “outside the box.” We should let it play out before making a judgment.
I do understand the equity issue. The European model includes a service charge, although the use of these funds vary by establishment. Some use it to offer better wages to waitstaff, kitchen help, etc. Others use this to pay for linens, place settings, etc. In these environments, diners are free to leave something extra for the waitstaff, normally it is in the form of loose change.
I believe if it is properly communicated and the amount charged is reasonable, consumers will not balk. Remember TIPS is an acronym “to insure proper (prompt, professional) service.” If service can be enhanced and all restaurant workers provide the same and share the same, this concept could gain traction.
I am all for getting rid of tips and maybe leaving “a little bit extra” for really great service. Tips have become standard, now pushing 20 percent. They are not based on quality of service, they are an expectation. If so standard, why not just add them to the price? I travel in Europe frequently and I see no difference in service there from here. While we are at it, I would like to have taxes built into the price as well.
Sorry but this no tipping will create problems for one huge reason. As in any business, there are standout salespeople who are rewarded for their efforts in higher incomes for their work. Now with the new system being installed in these restaurants, it will reward everyone the same, and the best wait staff will quit to find greener pastures where tipping is still allowed.
I waited tables at a BBQ joint in Columbus Ohio when I was 32 and made excellent money on tips, with repeat customers asking for my table as they got great service, and if this system was in place I would have lost a lot of income, where others who just showed up would make the same money.
This system will not reward the better servers and will overpay the slackers, and I’m 100 percent against anything that destroys incentive to be great.
Here is my solution for the restaurant problem.
The restaurant and catering business is really hard work, as competition for the food dollar is fierce, so why risk losing your best servers? It makes no sense, and I’ll gladly tip servers well for their efforts all day long. I don’t want a 30 percent increase to make it seem right, as I would find another place to eat, as many others would too. That is my 2 cents worth today.
I do not want to pay more and get so-so or bad service. I tip based on their attentiveness and the type of restaurant it is … a hole-in-the-wall vs. Capitol Grill, how busy the place is (cut some slack if jammed), how well they know the menu to answer questions and if they remembered to tell the kitchen no onions.
Will be curious to hear what waitstaff and bar-staff have to say about this, I think for the really good ones this could be a pay cut.
Tipping is an interesting tradition. Around the world, local tipping customs vary significantly. Here in the U.S., we started tipping when servers earned less than minimum wage. Recently QSRs and coffee shops started putting out tip jars at the POS terminals. I still question that practice. Why don’t apparel stores have tip jars, as they definitely vary widely in each staffer’s service levels?
Bottom line, I think U.S. restaurant consumers will continue to “take care of” servers whom deserve it by slipping them some cash if they do a really great job. I know I will.
it is a tough sell in the US given the tipping culture in a broad scale for sit-down dining. Works better for higher-end restaurants, where the table revenue is high enough to generate a good wage for servers.
I have been to restaurants in which they basically say “the tip is built in” and communicated that the front and back of the house is paid off the tip pool. Then if you get exceptional service you can leave extra if you want. The challenge is, diners don’t actually know that the money is going to the waiter and the overall staff. Takes a lot of communication up front to make it work.
You also need very tight management and measure to make sure that low performers get removed. Fact is, many places pool the tips per shift up front anyway, so there is some mechanism in place for performance management other than tips.
There are many countries where tipping is not practiced and I found that the level of service is more dependent on their culture. Tipping seems like it’s more about keeping the perception of cost to the end customer low. Would this make people eat out less or go to lower-cost restaurants? Perhaps. I don’t think it will affect customer service.
There are good arguments on both sides of this one. I for one am in the middle. There are certain establishments where I think the elimination of tipping would be just fine. Mostly on the low to moderate priced restaurants. Places we go for a pretty standard meal with no wow expectations.
Tipping is part of our culture and also a part of delivering higher service levels. The more we tip, the better we get treated and that is big part of some dinning experiences.
I’ll be interested to see how USHG fares on this one. Good to have one take the plunge.
And that’s my 2 cents.
Danny Meyer is a successful and forward thinking business man and restaurateur. While the no-tipping concept has been around a bit, he’s given a clear explanation, beyond the kitchen staff being left out, that makes sense. It is summed up best by his comment, “…hospitality is a team sport.” Everyone is involved. So he’s taken this concept to heart and is creating a business model that allows the kitchen staff to share in the success of the restaurant.
As for how the guests will perceive it? The guest check average may increase a bit, but it will be negated (or close to negated) with the no-tipping policy. Guests won’t feel any obligation to tip or not to tip. One of the customer benefits of Uber is to just go. No tipping—the price is the price. The other benefit may be even bigger, as the team at Danny Meyer’s restaurants will have to up their game to keep their jobs. In other words, they staff isn’t working for a bigger tip. They are working to stay employed at a top hospitality venue that treats their staff well.
Tipping must stay. I like going into a restaurant and being treated better than other customers because the staff knows I tip well. We take away tipping it will be like going to McDonald’s.
Raising wages or service charges and eliminating tipping would mean bailing out bad employees and telling the high tip earners they need to stop working so hard. In the USA those earnings are taxable income which goes against things like qualifying for an ACA subsidy. Tips, you fudge on your income more and look poorer than you are. If I was a server, I want the tip system. I like helping them out, and like helping even more when they are working hard for me.
Customers will pay more for a better experience, meaning if the traditional “tip” is included, the service better be top notch. This is easier for USHG than for many others but even USHG has had their missteps and this is where consumers may (rightly) be skeptical.
I think most restaurant goers appreciate the ability to evaluate and reward servers accordingly.
I dislike it when we make a reservation for 8 folks and the restaurant automatically adds 18% to the bill. Often times I feel the wait staff relaxes because they have their tip made.
Maybe it is old school, but keep it as it is!