A few years ago, stories about restaurants adopting a no-tipping format started to blanket the news. Instead of having dinner guests tip, menu prices were increased to pay employees higher wages.
Even Danny Meyer made an announcement in November 2015 that tipping would be eliminated from all his restaurants.
And Meyer had always envisioned a world without tipping–
“The American system of tipping is awkward for all parties involved: restaurant patrons are expected to have the expertise to motivate and properly remunerate service professionals; servers are expected to please up to 1,000 different employers (for most of us, one boss is enough!); and restaurateurs surrender their use of compensation as an appropriate tool to reward merit and promote excellence … Imagine, if to prompt better service from your shoe salesman, you had to tip on the cost of your shoes, factoring in your perception of his shoe knowledge and the number of trips he took to the stockroom in search of your size. As a customer, isn’t it less complicated that the service he performs is included in the price of your shoes?” wrote Meyer in a 1994 installment of Union Square Cafe’s newsletter.
But now that the no-tipping format has been tested by several restaurants, we are seeing many of these establishments ditch the adoption of this model.
Why is that?
The Cost of No-Tipping Was More Than Restaurants Anticipated
In the case of Joe’s Crab Shack, guests and staff did not approve of the switch to no-tipping.
"Our customers and staff spoke very loudly [about the policy], and a lot of them voted with their feet," said Bob Merritt, CEO of Joe's parent company Ignite Restaurant Group in May 2016 during the company's first-quarter earnings call. "We tried it for quite a while and we tried communicating it different ways.”
Apparently, the chain lost a lot of workers over the policy. In order to increase retention, most of the Shack stores involved in the pilot program were force to discontinue it.
The pilot restaurants lost an average of 8-10% of customers during the no-tipping test. However, there were four units that had success during the test. The chain said they would continue to use the model at those locations and try to determine why it was successful in those restaurants.
The no-tipping policy is often introduced by operators as a solution to the minimum wage increase in many cities.
"There are a number of city mandates that are expensive, and the imminent $16 minimum wage is among those, so it's been very much on restaurant owners' minds how to compensate differently. So I'd been at a number of meetings with other restaurateurs in the city and there was a sort of sense that a number of us were going to make this shift, and I thought I would go first,” said Thad Vogler, owner of Bar Agricole and Trou Normand to NPR, who recently decided to no longer maintain the no-policy.
Like Joe’s Crab Shack, Vogler was forced to drop the policy because the restaurants were losing staff. “We were losing staff, servers mostly. Kitchen was of course happy and turnover was nonexistent. And senior staff in the front of the house were happy. We were continuing to hire young, new people, train them, and then they'd get the set of skills necessary, and they would generally give notice and move to other restaurants in our community who were still on a traditional tip economy."
After switching back to traditional tipping, his team was happy. The transition was a lot of work, but he still thinks no-tipping is the direction the industry is going. But Vogler learned that increasing the menu prices by 21% wasn’t enough to accommodate the wages. He has seen other restaurants making the switch increase their menu prices to as much as 40%.
The problem with the spike in menu prices is the sticker shock. Customers are going to inevitably notice and they may then decide to visit one of the many other restaurants with the traditional tipping format. So in order for the format to be successful, a large number of restaurants have to make the change. Only then, will customers be able to adapt.
So what does the future hold? Will operators who were previously considering transitioning to the no-tipping format now be swayed to reject the idea due to the number of restaurants ditching the policy?
Here’s What the Recent Surveys Say
In June, American Express released a new survey that showed that out of the 503 operators that were asked about the no-tipping policy, 29% said they were still planning to do away with tipping at their restaurants. 17% said they would follow suit if their competitors ditched the tipping concept, 10% were undecided and 27% said they would not be cutting tipping at their establishments.
We decided to ask our social following. According to our poll, the majority (50%) think that the no-tipping policy is bound to fail.
So we will just have to see what the future holds for the industry. Will the minimum wage spike eventually force restaurants to switch to no-tipping? Will it be a slow transition with major cities paving the way? Foodable readers, what do you think?