In recent years, the national policy on restaurant tipping has changed significantly. Danny Meyer pioneered the idea of the no-tip restaurant, and many businesses quickly followed suit. This controversial tipping policy model increases prices and employee wages, making up for lost tips for servers. However, it’s seen considerable backlash around the nation.
Tipping the Scales
The most significant question about the no-tip model is: does it really help your staff? Excited restaurant operators hailed this trend as a way to bridge the gap between the front and back-of-house employee wages. By removing the X factor, every staff member can predict their take-home pay every week. Chefs and dishwashers can stop depending on servers to tip them out. Servers can make a living wage on paper, without having to track every cash tip they receive.
Despite these perceived benefits, there’s been a backlash among restaurant employees. When Meyer announced his new policy in 2016, 40% of his long-time staff left the company. This drastic change to the wages they could expect was clearly disappointing – perhaps because they relied on great tips for a job well done. This policy disincentivizes great service since servers make the same amount no matter what. It also fails to reward them for especially large orders, which may make them feel like their work is less valuable. “I think it would be premature to say we have it down,” Meyer said to The Wall Street Journal. “In retrospect, we were a little too overly ambitious.”
In recent years, no-tip policies have spread from restaurants to other businesses. This policy is true across industries – consider Uber and Lyft, for example – and notably for food delivery services. In recent months, Instacart encountered an internet backlash against its tipping policy. The company had been using tips to pay base wages to its gig-economy employees. They responded to this outcry by changing their practices. Other companies, like Amazon Flex and DoorDash, have yet to follow suit.
Since most restaurants accept cash tips – a practice that proves difficult for gig-economy apps – this issue has yet to surface in our industry. However, there’s always the possibility it will become a concern for delivery drivers. Whatever your tipping policy may be, make sure it’s clearly defined and communicated to your employees. Transparency improves worker loyalty and will help you guard against any bad publicity.
Tip of the Hat
Employee satisfaction is vital – and it’s just one kind of loyalty. The guest experience is another essential factor in your success. The customer response to no-tip policies is extremely mixed. According to Meyer, most guests are thanking the restaurant because they no longer worry that servers are being disingenuous in hopes of a larger tip. Instead, customers can relax at the end of the meal rather than worrying about calculating a fair percentage of the bill. This removes the stress of considering how good their service was and instead allows them to focus on the experience itself.
On the other hand, many diners seem disappointed by new tipping policies. Some have gone so far as to file a class-action lawsuit against certain restaurants. These customers seem to think that the increased prices of no-tip businesses do not accurately reflect the difference in staff wages. Instead of paying a higher flat fee, they’d prefer to calculate tips by themselves. This is just one more reason why it’s important to know your guests. Gather as much information about your loyal customers as possible, and you’ll easily be able to understand what their tipping preferences would be.
As tipping policies continue to change across the nation, restaurant operators have some unprecedented opportunities. Consider which policy would be best for your business – not just your bottom line – all while keeping your guest and employee satisfaction in mind. By implementing the system that works best for you, you can join Danny Meyer as a restaurant pioneer.