Two years after Danny Meyer’s declaration, the no-tipping model remains a source of industry debate and curiosity.

To restaurant industry insiders and consumers alike, the headlines were jarring.

Danny Meyer Restaurants to Eliminate Tipping,” The New York Times relayed in October 2015, while NPR blared “Danny Meyer to Banish Tipping And Raise Prices At His N.Y. Restaurants.”

The news that one of the nation’s most heralded restaurateurs was eradicating server gratuities captured widespread attention and ignited intense debate. Meyer, head of New York City’s revered Union Square Hospitality Group (USHG), explained his decision as an attempt to create a fair compensation model benefiting the entire restaurant team, particularly hourly workers in the kitchen attempting to build a sustainable career.

MORE: FSR readers weigh in on Danny Meyer’s no-tipping decision. 

“Who wrote the rule that you have to [use] the tipping system? Not us,” Meyer told Fast Company in 2016.

Some called Meyer’s decision shrewd, smart, and savvy—a time-has-come concept amid minimum-wage hikes, paid-sick-leave legislation, Affordable Care Act mandates, and talent-acquisition challenges. 

“We are facing a hiring crisis for back-of-the-house positions, and we think USHG’s bold move will attract more passionate, hospitality-driven people to work in kitchens where their passion is appropriately rewarded,” Chad Smyser, director of operations at New York City’s acclaimed North Square, told FSR in 2015. “We hope that USHG is willing to share its experience moving to a tip-free paradigm so the rest of us have an example of how it works.”

Others, however, called Union Square’s move a misdirected solution, even a socialist ploy. There was also significant concern that eliminating gratuities would remove a prime motivation for servers to deliver the type of high-quality customer service that builds a positive dining experience and inspires repeat visits.

Two years after Meyer’s declaration, the no-tipping model remains a source of industry debate and curiosity.

According to the 2017 American Express Restaurant Trade Survey, 15 percent of restaurants have already adopted or plan to adopt a no-tipping policy, while 14 percent say they might eliminate tipping if their competitors do. Those numbers suggest that the vast majority of U.S. restaurants hold little interest in ditching a longstanding element of the nation’s restaurant experience.

Count Alberto Lombardi in that camp; he is the founder of Lombardi Family Concepts, a Dallas-based restaurant company running 14 full-service restaurants. An Italian native, Lombardi says his home nation’s abolishment of tipping “ruined restaurant service” and he has no plans to do so in his eateries.

“The more attentive and service-oriented you are as a server, then the more money you get in your pocket,” says Lombardi, who has also worked in restaurants across European nations where the no-tipping practice is commonplace. “Without tipping, there is no incentive to be better than anyone else, and [in Italy] no one smiles anymore or takes those important extra steps to ensure hospitality.”

As Lombardi operates restaurants in California, where servers make at least $10 per hour, and Texas, where the minimum hourly rate for servers is $2.13, he says he has witnessed firsthand how a higher hourly rate diminishes server motivation. He maintains that service is better in the Dallas area, as servers have more incentive to earn tips by being attuned to each table’s needs.

Others have trialed tip-free dining and have their own stories to share. In April 2015—months before Meyer’s announcement—Seattle-based Ivar’s moved all hourly employees at its three full-service restaurants to at least $15 an hour and instituted a revenue-sharing program for those employees, the first restaurant in Seattle to enact a no-tipping policy. “We told our customers that they no longer needed to tip their servers or bartenders, as service was now included in [menu] pricing,” says Ivar’s president Bob Donegan. 

The subsequent two years served as a learning experience for Ivar’s leadership, who found that customers, both locals as well as those from afar, weren’t quite ready to embrace the unfamiliar concept. In March of this year, the company restructured its menu pricing and reinstated tipping.

Union Square did not respond to FSR’s requests for comment, but numerous public comments from the company indicate that Meyer’s enterprise is sticking with its “hospitality included” model.

So what’s the future hold for tipping? Odds are, as with many other things, the market will ultimately dictate.

The American Express survey found that 63 percent of consumers prefer the practice of tipping—a rather strong consumer sentiment that certainly informs restaurant leaders. 

Yet younger consumers are open to change, with approximately half of millennials and one-third of the up-and-coming Gen Z amenable to tip-free dining.

It’s a sign that the no-tipping debate remains fresh, with plenty of experimentation and education yet to come.

Feature, Finance