Ledger

For Matt O’Neil, chef/owner of Ledger, an upscale restaurant in Salem, Massachusetts, the 3 percent fee he tacks onto every bill is about nothing less than the fate of the American dining scene. As kitchen staffs scrape by to make ends meet, working long hours for little pay, O’Neil says it’s no wonder that they jump ship quickly from one restaurant to another for a promotion and a few more bucks an hour. Trouble is, this creates a deficit where cooks can’t afford to linger, coming up through the ranks and gaining the skills they need to be truly exceptional.

Ledger Salem Massachusetts
Ledger in Salem, Massachusetts

“If we stunt the growth to a level where everyone is just playing chess and jumping from place to place, we will never get more great chefs,” says O’Neil, who also owns The Blue Ox in Lynn, Massachusetts. “The most important thing is to develop great chefs for our kids and grandkids and for the future of American cuisine.”

Ledger Salem Massachusetts
Ledger in Salem, Massachusetts

To hang onto his talented cooks, O’Neil used the big stage of Ledger—a hotly anticipated restaurant that opened last year—to introduce that 3 percent charge, known as a “kitchen appreciation fee,” boosting back-of-house wages with the proceeds. His fee was the first one in the suburbs north of Boston, although they have been popping up in the city for a few years, and comes with its fair share of drama, complete with a two-page menu insert that lays out the logistics for skeptical diners.

As restaurateurs struggle to close the gap between front-of-house and back-of-house pay, a charge known variously as an administrative fee, hospitality fee or kitchen service fee, has been gaining ground as one solution, with the proceeds going directly to the paychecks of non-tipped employees—everyone from dishwashers to chefs.

Highway Inn
Highway Inn in Oahu, Hawaii

“It solves a very real problem of wait staff’s pay (including tips) being about double that of the kitchen staff and being unable to share/pool tips,” says Russell Ryan, owner of Highway Inn Companies, a trio of Hawaiian restaurants on Oahu. At Highway Inn, the 5 percent kitchen service fee charged at two of his three popular spots amounts to as much as $3 or $4 an hour extra for skilled workers at their main location, aiding in retention and narrowing the gap.

In Boston’s Jamaica Plain neighborhood, David Doyle and Maricely Pérez-Alers were pioneers of the kitchen service fee, implementing what is now a flat 3.75 percent “hospitality administration fee” at their trio of restaurants, Tres Gatos, Casa Verde and the newly opened Little Dipper. In an open letter to the hospitality community published on each restaurant’s web site, they explain the rationale:

How can we as owners tolerate a scenario whereby half of our team’s compensation is about 60 percent lower than the other half’s? We’re tired of feeling like our kitchen staff are second class citizens. We’re tired of knowing that they would be financially better off bussing tables or working at a chain restaurant. We need to hitch (at least part of) their star to top line revenue if we want to correct the disparity.

Doyle says in the two years since implementing the fee, they are happy with the results, though it hasn’t been without trials. On average, the charge has boosted back-of-house hourly pay between $2 and $3.80 per hour. “We believe it has helped improve BOH retention,” Doyle says. “In addition, it has not adversely affected FOH income, and we feel overall it has improved relations between FOH and BOH (a perennial restaurant issue), and team morale overall.”

Little Dipper
Little Dipper in Boston, MA

That’s not surprising, says Ledger’s O’Neil. “It’s almost profit-sharing,” he says. “Before, whether [back-of-house staff] were slow or slammed, they got paid the same. Now, it levels the playing field. Everyone is working for the customer.”

While Rick Camac, dean of restaurant and hospitality management at the Institute of Culinary Education in New York, admits the disparity between front-of-house and back-of-house is very serious, he is skeptical that the kitchen fee is the answer. “For most people, it’s really just not a solution,” Camac says, positing that any restaurant that adds a fee, when peers do not, is putting itself at a competitive disadvantage.  “I don’t see it really becoming a widespread thing.”

Doyle disagrees, noting that the success depends more on how well each restaurant team explains the reasoning behind their policy, both internally and to guests, than what other eateries are choosing to do. “While we received some push-back in online forums when we announced the policy and tried—at times exhaustively—to explain why we chose this route as opposed to others, such as simply raising menu prices, we have experienced very little push back from actual guests,” Doyle says. “I believe individual restaurants will have an easier time implementing the policy the more widely adopted it is (and our hope is that it will become widely adopted), but as one of the pioneers in the effort to close the wage gap in the Boston area, we have been incredibly pleased with how well the policy has worked to date.”

 

Getting servers on board, as they are the front-line in terms of explaining the policy, is critical, Doyle says. “If a server or manager is not able to explain the policy gracefully to a guest, especially one inclined to dislike the fee, then its chance of success is much lower.”

Front-of-house staff will likely express concern that their tips will be reduced as a result of the fees, but restaurateurs haven’t seen that to be the case. Ryan says Highway Inn, which operates on a tip-pooling system, hasn’t seen much change in front-of-house pay, but those spots without tip-pooling may run into trouble. “Other restaurants have had a lot of resistance/sabotage from servers who think their tips will be reduced when compared to a tip sharing/pooling system,” he says. “We were operating a sharing system prior to this change so we believe our transition was easier.”

Highway Inn
Highway Inn in Oahu, Hawaii

Customers, of course, are generally not excited to see an additional fee, Ryan admits.  “Be prepared for illogical arguments from customers who can’t get their heads around it, or think they are being ripped off,” he says. “The reality it allows is to keep menu prices lower, so their overall tip is lower.”

And really, says Ledger’s O’Neil, it is about retaining the best chefs to prepare the best food—from scratch. Everyone wins. “If you’re a diner, you are investing in your own future.”

How can you train and retain your restaurant staff? Learn everything from training to compensation to engagement with this comprehensive guide. The best part? Performance will improve with this process.

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Jeanne O’Brien Coffey comes from a long line of New England foodies – her dad once traded an old car for a dozen lobsters and her grandmother’s whoopie pie recipe is a closely guarded secret. She is contributing food editor at Northshore magazine, blogs on food, wine and travel for ForbesLife and is a contributing writer at Naturally, Danny Seo magazine. Oh, and she was obsessed with Negronis way before they were cool.