A 200-year history in America has made gratuity a given, but recent moves from restaurateurs nationwide are causing things to change. Why now?
As restaurateurs are faced with mandated rising costs in a low-margin business, they’re looking for solutions to keep their labor pool and their customers. As a result, consumers face rising menu prices and changing tipping policies. Danny Meyer, New York restaurateur and president of Union Square Hospitality, created a national conversation by eliminating the practice of tipping gradually with plans to raise menu prices at his restaurants by 18 to 20 percent in order to make up the difference. He intends to put the extra funds towards higher staff wages in lieu of tips.
A Little Explanation
Currently, most servers make below the legal minimum wage, a “tipped minimum,” with the expectation that tips will make up the difference. This practice is called “tip crediting” and not legal in every state. Depending on the restaurant, shift, and more, tips can add up to servers making twenty dollars per hour—a major disparity between front and back-of-house when most line cooks make a base minimum.
With minimum wages across the country scheduled to rise over the next few years, the “tipped minimum” could be on its way out. If waiters make the same base wage as cooks and still receive their tips, which are legally their property and under no obligation to be split with back-of-house staff, the gap will widen.
Side 1: Tipping Practices Need to Change
Those who believe that tipping practices need to change propose eliminating tipping altogether, either adding a service charge or raising menu prices. Why? They believe tipping is unfair based on the race, gender, size of server, you name it. Cornell has even done studies in the past few years to prove the disparity.
The second key, and maybe even more critical, reason that many want to change the custom is the front-of-house/back-of-house wage disparity. This is particularly true in states where there is a standard minimum wage and no tipped wage credit, meaning servers earn tips on top of the wage earned by back-of-house-staff. The argument is that if they eliminate tipping, restaurateurs can distribute a service charge to all staff, including the kitchen.
Side 2: Tipping Practices Should Stay the Same
On the other side of the coin, plenty believe that tipping practices should either stay the same or evolve slowly. The first reason, of course, is habit. The American tipping system is unique to our country but is deeply ingrained, and a big change can mean a big turnoff for customers. Some consumers may still tip regardless of higher menu prices or an included service charge.
It also becomes unfair to good serverswho go above and beyond the call of duty to ensure that restaurant patrons have an exceptional experience. After all, shouldn’t their hard work be rewarded over a server who doesn’t keep water glasses full, offer samples of new tap beers, or answer menu questions with ease and expertise?
Another issue is that while a model that increases prices may work for finer-dining restaurants, it’s harder for mid-level establishments to implement—and that level comprises the majority of eateries in the country. Higher guest checks can absorb price changes more easily due to overall costs and guest perception, but Andy Cohen, owner of Minneapolis restaurant The Bad Waitress, notes that the lower the guest check, the more apparent higher prices become. “For higher-end establishments, it is much more of a seamless move to add 20 percent to the menu price and eliminate tipping,” he explains. “At a 10 dollar price point, going to12 dollars is a pretty big deal.”
Is there a way to solve it?
Solve? No. Evolve? Yes.
The easiest way to even out the disparity and meet business needs is to raise prices. But in most markets, you’ll lose guests if your prices aren’t competitive. Danny Meyer is popular enough in New York that guests will keep coming to his hotspots despite an increase. But Eric Hall, COO of Juice So Good in Minneapolis, suggests some markets just aren’t ready to be trailblazers. “Until the no-tipping movement becomes the norm and there are across the board increases in restaurants and cafes,” Hall says, “it will be difficult to impossible for individual establishments to make the change.”
The second way to solve the disparity is to employ a service charge for customers in lieu of their leaving a tip.Lenny Russo, James Beard-nominated chef and owner of St. Paul’s Heartland restaurant, believes that he has found a model that will work. “Applying a 20 percent hospitality surcharge to all of the checks that is collected by the house and redistributed in a more equitable fashion is the best model and best solution for correcting these issues,” he explains. Russo is considering making this switch in his traditional policy this summer.
The third solution is for servers themselves to take responsibility to resolve the disparity between front and back-of-house. Abby Jimenez, owner of national cupcake shop Nadia Cakes and a former restaurant server, suggests that a different distribution of tips could solve the problem. “That would be a hard sell for some servers who might tip down to an expediter or busboy but aren't used to tipping back of house people,” she says. “But as a server, I was highly aware that my tips were the result of food made fast, correctly, and well, and I could definitely see why the kitchen staff deserves more.”
Overall, higher-end restaurants will need to look to price increases and service charges in order to maintain a talented kitchen staff, both of which will affect guest loyalty. They’ll also need to be diligent in keeping and rewarding only the wait staff, which works hard in order to maintain current customer-service standards.
And the mid-level restaurants? For now, they’ll have to ride it out until the legislative dust settles and wait for higher-end spots to pave the way priming diners with service charges and higher prices.