tipping in a restaurant under a drink

Few issues facing the restaurant industry have been as divisive as tipping. But whether restaurateurs are in favor of the traditional tipping model present in the U.S. or interested in trying something different, the truth remains that change takes time. And every day they take to sort it out, guests are still walking through the door and leaving cash on the table.

At the 40- to 50-minute mark, gratuities hit a tipping point…and at 110 minutes, the average tip is only $3 more than it was at 50.

 

The Data Behind Restaurant Tips

Restaurant management platform Upserve compiled actionable insights on tipping behavior, and its relationship with table turn times, in its inaugural industry report that analyzed millions of transactions from thousands of restaurants across the U.S. The findings can prove profitable for restaurateurs and servers alike:

tip as percentage turntime

A 45-minute meal is the sweet spot.

Across all regions, the average tip increased with time spent at the table, up until about the 40- to 50-minute mark. (Likewise, meal cost tended to flatline around 30-40 minutes at the table.)

average check cost over turntime

“Campers” offer the biggest checks and tips, but they’re not always worth the wait.

At the 40- to 50-minute mark, gratuities hit a tipping point. At 110 minutes, the average tip is only $3 more than it was at 50. A server working that table may wish they had worked more tables at half the time by then.

Along the same lines, while average check size grew regularly for every 10 minutes at the table, topping out between 40 and 60 minutes, it began to flatten out afterwards. Spikes occurred at 80 minutes and 100 minutes, but the actual revenue for each minute at the table began to decline. Longer times at a table mean higher checks, but less productivity from the staff.

average tips by region

The average restaurant tip is 15 percent.

All around the country, servers can expect an average 15 percent gratuity – and slightly higher if they live the Northeast (16.24 percent) or the South (16.27 percent). Seems like Americans still take the “10 to 20 percent” guideline to the letter.

Interested in the data behind these tipping statistics? Download the free industry report here.

A History of Restaurant Tipping

Paying a gratuity to a server isn’t as old a practice as you may think, especially in the U.S. Although there is no hard, documented evidence that gives us a concrete beginning to the practice, the common belief among historians is that it began in 16th-century England as a practice by patrons “to insure promptitude” (T.I.P.). Or, in other words, to make sure that they got the attention they thought they deserved from their server.

This didn’t find its way to the U.S. until after the American Civil War, in the late 1800s, when travelers picked up on the habit in Europe and brought it back with them. Shortly after it began taking hold in society here, there was a powerful movement to ban it. The arguments then had nothing to do with taxes or the economy at all. Instead, opponents of tipping claimed that it was contrary to the founding values of the country. In their opinions, tipping a server was a way of differentiating between them and the patron in a way that was far too reminiscent of the British aristocracy for their tastes. America was supposed to be a country that didn’t create upper and lower classes, but where “all men are created equal.” They viewed the whole tipping system as demeaning to the server.

Later, tipping was used to drive up profits during Prohibition, when law-abiding restaurants (read: not speakeasies) lost one of their highest profit margins: booze.

So what changed our attitudes and why do wages remain the way they are? The Temperance Movement. Less profit from alcohol sales meant lower sales per cover and restaurateurs had to make up for it by encouraging tipping, not higher wages. Six states made tipping illegal during Prohibition, but that was repealed by 1926. In 1966, the federal minimum wage was adjusted to allow tipped workers to be paid half that of the federal minimum wage, and in 1991, tipped wages and the minimum wage were separated and the wage was set at $2.13 per hour. And as minimum wage continues to be a hot topic in the U.S., tipping is right alongside it.

Regardless of its origins, the tradition of tipping has been well-ingrained in our culture. But restaurants still find themselves in one of two camps: tipping or no-tipping.

Waiter writing down the order of customer at the restaurant

The Argument for a Standard Restaurant Tipping Method

Employees Prefer Earning Tips in a Traditional Way

Chris Coombs, chef/owner of Boston restaurant Deuxave, prefers the traditional tipping model for his restaurants, and prices dishes and drinks appropriately so his employees can earn livable wages, as opposed to minimum restaurant wages.

“We really try and build in livable wages for all of our employees, both in the kitchen and in the front of the house, with our equation,” Coombs says. I do not understand how in some restaurants they don’t like to have the hidden costs of the 20-percent tip added on, and they sort of fold that into the mix of the overall experience. For me personally, I think our equation is currently functioning quite well and we’re very proud of it.”

Guests Don’t Mind Relying on Their Restaurant Tip Calculator

According to the National Restaurant Association, 65 percent of guests favor tipping. They appreciate the freedom of spending their cash as they see fit, especially if it means providing a hefty tip for a job well done. While many would not consider tipping voluntary, it’s still a matter of choice that many Americans are not comfortable giving up.

Why Restaurants Opt for No-Tipping Policies

Some restaurants have financial reasons for eliminating tipping: The current IRS regulations for reporting tips allows restaurateurs to report up to 8 percent of an employee’s tips as tips on your behalf. It is practically impossible for an employer to know exactly how much their employees receive in tips, even if they require the employees to report daily on how much they take in. Cash will always slip away into pockets unreported. Tips that are added to a credit or debit card receipt are the owner’s best friend when it come to tracking tips, but you can’t require your patrons to pay with cards.

And more than just financial reasons, many restaurants want to make sure a back-of-house employee is compensated fairly. As restaurateur Alethia Mariotta explains, “One of our base philosophies as a hospitality company is just that it takes the entire team to bring that plate to the table, and we wanted to recognize everybody’s part in that, everybody’s skill that they’re bring to the work that they do. We thought that one way to do that would be to eliminate tipping. We definitely needed to change our menu, we needed to obviously up the prices.”

At Florida’s six-location Choices Cafe, customer feedback was positive when the restaurant made the switch to no-tipping. Choices president Lori Zito says staff feel a sense of ownership over the business. “It does take a much greater effort on the part of management to keep the team motivated and engaged in this way, but it’s worth it,” she says. “It creates a feeling of unity and empowerment.”

What is the Best Restaurant Tipping Method?

The best tipping policy will likely always depend upon the type of restaurant and employment structure. What works for one may never work for another. So while restaurants have operated with standard tipping policies for decades, more recent attempts to move away from tipping have hit some stumbling blocks. Regardless of what method restaurants pursue, be aware of the challenges a no-tipping model faces today.

Servers Want Tips

While the idea of a service included model was to rectify the pay gap between front- and back-of-house staff, all restaurant employees have not responded favorably.

Upserve’s own survey of more than 1,000 restaurant employees found the vast majority (97 percent) preferred the sense of control over their income they get by receiving an hourly wage plus tips.

In one instance, restaurateur Thad Vogler eliminated tipping at his two San Francisco restaurants, and raised prices by 20 percent to make up the difference. Initially, staff responded favorably, he tells CNN, but sentiment shifted quickly.

Vogler says he lost 70 percent of his staff in 10 months because of the change:

  • Salaries fell: Tipped employees had been making between $35 and $45 per hour. With tipping eliminated, that dropped to $20 to $35.
  • Costs couldn’t be maintained: To cover raises for BOH staff and maintain such a high hourly rate for FOH staff, prices on the menu would have needed to increase more than the 20 percent anticipated (as high as 40 percent, in fact).

Beyond the response of the staff, which ultimately led Vogler to revoke the no-tipping policy, he cited an increase in workers’ compensation and payroll taxes as a reason to back out of his initial decision.

Waiter credit card reader EMV

No-Tipping Policies Can Negatively Impact Guest Experience

After becoming the first national chain to implement a no-tipping policy, Joe’s Crab Shack ended up revoking it after backlash from guests and staff. As a whole, no-tipping restaurants reportedly saw a drop off as high as 10 percent in guests.

In Rhode Island, restaurateurs Alethia and Max Mariotta tried to eliminate tipping in their restaurants, Vinya and Rosmarin. Staff was on board, but guests weren’t. They ended up reverting back after just five months. “It was interrupting the guest experience because before we were even serving them a drink, we were talking about politics about whether or not we should be tip-free,” Alethia explains.

Even with explanation, guests were still unhappy, Max says.

“A lot of our guests were still tipping, and they were tipping on top and then complaining about the higher price, but still tipping on top as a reaction to something they thought was unfair. They thought we treat our servers unfairly, giving them more pay, but not putting the tip. It was a complete monster, basically, created by us,” he says. “We had a few guests really upset, who left saying, ‘I’m not coming here anymore.’”

He says that even though he believes in the no-tipping model, the decision came down to what made most sense for his business: “At the end of the day, the business needs to be able to run smoothly, and it was not running smoothly at that point.”

Young Women Placing Order To A Waiter At Cafe

Four Ways to Invest in Employees Beyond Tipping

Employee satisfaction is a major reason many restaurants explore tipping alternatives. They want to reduce high turnover rates, but can’t always offer traditional types of benefits like a 401(k) or paid time off. Whatever tipping decision a restaurateur makes, there is still room to show employee appreciation outside of what guests write on the tip line. Here are a few options to explore:

1. Goal Rewards

Being able to reward your employees for exceeding expectations goes a long way in showing them you notice when they’re working hard. Think of ways you can reward them and inspire them to help you hit your bigger goals.

  • Do you have revenue or guest-related goals you’re trying to hit each shift? Create a reward for the server who brings in the most revenue that shift or gets the most table requests.
  • Are you trying to increase upsells on appetizers or desserts, or increase the amount of wine you’re selling during dinner? Reward whoever is bringing in the most orders.

Rewards don’t always have to be cash. Think about offering a gift certificate to another restaurant or shop in the neighborhood, or points they can accrue for a paid day off.

2. Additional Training

Show your employees that their long term success is important to you by investing in additional training for them. Employees that show real promise may benefit from a local management training program, and bartenders may benefit from a wine certification. Keep an open flow of communication so that your employees feel comfortable telling you some of their larger goals. If those goals can also help your business, it’s a win-win to invest in additional training.

3. Long-Term Savings

A lot of Americans aren’t saving enough for retirement, and that’s especially true of part-time workers. You may not be able to offer them a 401(k) plan, but can you incorporate some kind of long-term savings options into your existing payroll system? This may be something as simple as offering direct deposit to a checking and savings account, or a Simple IRA. Even being able to offer something as small as a 2 percent match to a Simple IRA could reap a lot of benefits by having more loyal employees.

4. Paid Time Off

Everyone needs some time off to recharge. When employees are able to take time off, it can have a positive effect on their performance. Being able to offer some type of paid time off to part-time employees can make your restaurant the type of place people want to be. This can also be something offered to employees after they’ve been with you for a certain period time, as a benefit for their loyalty over time.

breadcrumb

Finally, a POS your staff will love. See why thousands of restaurant owners and the staff they hire love Upserve POS.

Schedule a Demo
Written by   |  
Meghan is an award-winning journalist and content marketing manager who lives to tell stories. Her favorites include highlighting all things restaurants, from front-of-house hospitality to back-of-house grit. When she's not writing about them, you can find her eating her way through Providence and Boston searching for inspiration with a rye Old Fashioned in hand.