| | Print
tipped money management

Danny Meyer’s dissatisfaction with tipping wasn’t a surprise to those who worked closely with him. The disparity in wages between front-of-house and back-of-house — that servers could make hundreds of dollars a night on gratuities while a line cook made less than $20 per hour — is what led the restaurateur and best-selling author to announce in 2015 that all 13 of his restaurants would ban tipping for a surcharge.

“Over time, the disparities between our culinary and service team’s wages only grew,” says Dino Lavorini, senior director of restaurant operations for Union Square Hospitality Group, which Meyer runs. “Tipping is a way for guests to provide feedback, but it’s a one-way communication, rather than a dialogue.”

It was an audacious plan, sparking headlines and debates inside restaurants across the country. But the debate isn’t only about USHG’s “hospitality-included” movement; it concerns the very concept of tipping in general.

The debate over whether tipping is unfair and outdated or a cultural institution that gives workers and customers independence is pervasive. Many restaurants have adopted the hospitality-included model, some with success while others reverted back after backlash from customers and even employees. Meanwhile, arguments over pooling tips have reached as high as the White House even as new surcharges on guest receipts have raised eyebrows.

Tipping in restaurants is clearly near a tipping point. Which way restaurant owners will ultimately go is less clear.

 

Tipping Gets Scrutinized

Ask a restaurant owner why they might drop tipping, and you’re likely to hear about the inequality it creates between back- and front-of-house employees. Put simply, tipping is a variable from of payment, dependent on the whims of the customer, the size of the check and the volume of diners.

Even still, front-of-house staff can often receive more money than back-of-house, which are typically not able to receive or participate in tips. That’s created issues with employee retention.

Whether employees or guests are comfortable with banning tipping is another matter. According to research by Michael Lynn, professor of consumer behavior and markets at the Cornell University School of Hotel Administration, most people tip because they feel obligated, and 53 percent of customers prefer the idea of eliminating tipping and dealing with higher menu prices.

But other research suggests that diners in the U.S. may not be so accepting as our neighbors to the north, for instance. One Canadian survey found that 40% of customers there were open to banning tipping, but a separate survey in the U.S. found adopting a surcharge rather than tipping only found favor with 15% of respondents.

That culture clash worries restaurateurs who would like to move off of tipping.

James Beard Award-winner Bobby Stuckey, a master sommelier and owner/wine director at Frasca Food & Wine in Boulder, Colorado, endorsed USHG’s decision to abandon tipping, even hiring a consultant to look into foregoing tips at his restaurant.

  53 percent of customers prefer the idea of eliminating tipping and dealing with higher menu prices.

“I commend, applaud, respect and envy Union Square Hospitality Group for their incredible dedication for going to a service-included model,” Stuckey says. “I’m hoping one day I’m brave enough to do it.”

However, timing, geography and culture all feed into the success stories that follow — or not. Even though Stuckey says he knows the new model is “the right thing,” he knows he might be up for a fight in Colorado. “Boulder is such a casual town, and I’m so worried of the backlash,” he says.

Backlash for New Model

That backlash is exactly what some restaurants saw when they banned tipping, either from guests, employees or guests.

Chef Cara Stadler’s trial with a no-tipping model concluded only five months after putting it into effect in her Maine restaurants Bao Bao Dumpling House in Portland, and Tao Yuan in Brunswick. She had planned to pay servers based on experience, starting at $15 an hour, while giving cooks a pay increase from $12 an hour to $13 or $14. The higher wages, plus benefits that included paid vacation and health care, were set to be covered by a service charge system allowed by federal law that would charge patrons 18 percent of their pre-tax bill.

Stadler announced the transition in October 2016, just before Maine voters approved a December increase to the state’s minimum wage. Also, the state of Maine’s interpretation of the law does not allow for the service charge Stadler had in mind, only for banquets and special events.

Plenty of restaurants are experimenting with surcharges as an adaptation for rising minimum wage costs. But these types of surcharges are not without controversy, as some diners object to paying a surcharge rather than a tip.

For Stadler, blocked from implementing a surcharge, swollen menu prices made up the difference. But sales slumped by around 25 percent shortly thereafter.

“We tried and failed,” Stadler says, noting that she ended up returning to the original tip-as-you-go model in her restaurants.

Her story is not uncommon.

When small plates-focused Vinya in Providence, Rhode Island, attempted a tip ban, they were labeled “un-American” by some guests. Adam Hebert’s Radler in Chicago went tip-free for a year before reversing their decision, and Gabe Stulman, a New York City restaurateur who joined the no-gratuities campaign, announced he would reinstate the tipping policy at Fedora in 2015. Joe’s Crab Shack, the first major chain in the country to take tips off the table with 18 of its 100-plus nationwide locations participating in 2015, returned to the former model after employees and customers expressed displeasure.

Some Successes for Tip Ban

The early stumbles with the hospitality-included model doesn’t mean others won’t continue to try, or that every effort has met with failure. USHG continues to implement the model. David Boynton, a restaurant owner in Dover, New Hampshire, has begun sharing regular updates on his staff’s transition to ban tipping and the customer education required to pull it off.

 “We don’t get the martyrs or the jaded bartenders who just want to bound around. Inherently, we get more applicants who are interested in steady team work.”

The owners of Mexican restaurant Comal in Berkeley, California, prepared employees and customers for a hospitality-included system by instituting a 20-percent service charge to the menu before eliminating tipping for good. Once the charge was in place, the tip line disappeared from the bill.

Comal owner Andrew Hoffman promised his front-of-house staff they’d make as much, if not more, money as they were making in the tip pool, all while managing to give the back-of-house staff a $2 hourly raise.

Two years later, the system “self-selects,” Hoffman says. “We don’t get the martyrs or the jaded bartenders who just want to bound around. Inherently, we get more applicants who are interested in steady team work.”

Hoffman says thanks to a focus on transparency, he hasn’t lost any employees through the transition.

“Whenever I get asked the question, ‘Why do I think this worked,’” Hoffman says, “I say, ‘It’s possible that Comal, in 2014, in Berkeley, was an easy place to do this.”

Whether successes like Comal’s can become mainstream has still yet to be decided. But it’s become increasingly obvious that it won’t be easy. And it’s not the only challenge restaurateurs face when it comes to tipping.

Regulation Headaches

Why restaurants consider doing away with tips is little wonder when you consider how labor laws limit how owners and operators can pay employees, much less raise back-of-house or waiter and waitress salaries.

Outside of banning tips, there are few options for dealing with the inequality between front- and back-of-house staff. The old standby, pooling tips, is not without its own controversy with some states choosing to outright outlaw the practice.

In early 2016, a court ruling determined that employers within ninth circuit states – including Washington, Oregon and California – could no longer require employees to share their tips with the back of the house in a tip pool. Moreover, Oregon is one of only seven states that doesn’t have a tip credit, requiring employees to use a portion of their tips to offset minimum wage.

 “Over the past three years, we’ve seen an increase in awareness and diversity of narratives that is resulting in a richer dialogue than we’ve ever seen before.”

Paloma Sparks, legislative director with the Oregon Bureau of Labor and Industries, says that the Restaurant and Lodging Association has always pushed for a tip credit, but “no such effort has been successful to date.”

The tipping pool conversation has reached as far as the White House. Recently, the administration of President Donald Trump has planned to kill the previous administration’s rule against tip-pooling, so long as all the employees sharing in the tip pool earn the full minimum wage. But this new regulation isn’t fully enacted and likely open to a legal fight.

Until then, restaurants are attempting to keep employees and guests happy while trying to break down inequities and deal with longstanding cultural expectations.

“Employees, employers, diners, and lawmakers are working to understand each other’s perspectives,” Lavorini says. “Over the past three years, we’ve seen an increase in awareness and diversity of narratives that is resulting in a richer dialogue than we’ve ever seen before.”

As the dialogue continues more people are aware of exactly what it means to tip your server. Still, for now, that state of tipping is in flux.

Where do you stand? Chime in here.

Written by   |  
Gigi Sukin is a writer-editor in Denver, Colorado. Covering subject matter from businesspeople to urban development, arts and culture, sports and social issues, Gigi works as Associate Editor at ColoradoBiz magazine. Gigi also aims to shape the conversation around food and dining and in her fair city.