To tip or not to tip? That is the restaurant industry question du jour.
So, we ask you: can we decide the following in this one conversation …
- Will service suffer if we eradicate tipping?
- Is tipping fair or does it perpetuate inequality among restaurant workers?
- Will guests welcome a menu pricing increase in order to forgo the extra steps (& a math problem) at the end of their meal?
- Why don’t restaurants pay servers and bartenders just like other employees get paid?
The short answer is “No” we can’t solve all this in one short conversation. But, we’re aiming here to peel back the onion to reveal the complex layers surrounding restaurant tipping.
The very same topic our co-Founder, Dan Simons, has been contemplating for the past three years. “A lot of us in the industry who are genuinely motivated by company culture and taking care of our people are really studying it,” he says. “This is a topic with lawyers and accountants and it’s a cultural topic in-house. You have to do a lot of work to be ready for this.” Dan continues, “And it shouldn’t necessarily be talked about as a industry-wide topic when it may be more applicable to fine dining than other segments.”
An industry topic so vast that it not only affects millions of restaurant & hospitality workers, but also the American consumer and the reported over $40 billion they give annually in restaurant tips. Here are some factors the tipping debate faces today.
Higher Wages vs. Job Creation. Opinions vary: conservative corporate operators tend to lean towards the stance that rising wages will lead to the destruction of jobs; whereas progressives speak to helping those who need wage increases in order to manage their cost(s) of living. The answer? Lies somewhere in the middle. Generally the forecasts of job destruction are as overblown as the prognostications that a couple of dollars an hour are a “solve” for making life affordable for the lowest wage earners.
The Big Picture. Operators must examine their business’s landscape in order to make an informed tipping vs. no tipping decision. For example analyzing: differences between tipped minimum wage and minimum wage; pros & cons of a 40 hour work week restriction to avoid overtime; payroll vs. sales taxes; immigration laws and realities; ROIs inspiring banks/investors to fuel company growth thereby creating more jobs; using career paths as stepping stones; and any other components (and their consequences) that could alter a final decision.
The Bottom Line. As with most business decisions, fiscal feasibility plays a critical role. Look at financial parameters such as: assessing customer demographics (i.e. fine dining guests typically are willing to spend more than casual/family diners); if you’ve investors, making note of their expectations; and examining your jurisdiction’s wage regulation(s) that either make eliminating tipping a must (i.e. when there’s a $15 or $20 minimum wage and no tipped minimum wage) or focus on additional cost to your customers of the increased sales taxes based on the increased pricing, and consider regulations governing overtime pay and tip sharing, knowing that our current “status quo” has been shaped by several outdated regulations.
Will Tipping Become a Thing of the Past? For now, a resounding maybe is all we can offer. Sure, some big restaurant companies are implementing no-tipping policies, but as the industry conversation evolves, operators need to listen – i.e. listen to and really hear the other side – before ultimately deciding what’s best for their business. Thinking through consequences requires discipline. Additionally, thinking through unintended consequences requires collaborative brainstorming with folks you may initially think you disagree with.