A number of high-profile restaurants and restaurant chains have rolled out a "no tipping" policy, bringing publicity—and scrutiny—to the unbalanced way that restaurant employees are compensated. The results have been mixed, with some restaurateurs going all in on this new popular policy and others retreating. If you're wondering whether it would work for you, here are some tips and some points you should be considering.
Benefits to No Tips
Before you begin, make sure you understand what your goals are. Proponents of the no-tipping model (or "hospitality included" model, which is the more marketable phrase) cite a number of reasons to switch, including:
- It reduces the pay gap between the front and back of the house: Production staff in the kitchen—often culinary grads with a mountain of student debt—typically earn much less than servers, fueling the traditional division between the front and back of the house.
- It makes it easier to recruit and retain staff: Finding and keeping employees will likely be one of your biggest challenges. Providing employees a stable pay at a higher level than other operators in your area can improve your chances of keeping a full kitchen staff.
- It increases loyalty from diners who appreciate you doing the right thing: The current push for higher minimum wages has broad support, and a subset of diners—often those who also push for local, sustainable ingredients—could gravitate to your establishment if you're a fair-wage pioneer in your community.
Going with a no-tipping policy offers a number of potential rewards, but it also carries some predictable risks. People are often resistant to change, especially if it appears to hit them in the wallet, and pushback from your staff or clientele can torpedo your good intentions. Some negative results you might see include:
- Losing servers: Servers tend to out-earn their colleagues in the kitchen substantially. Many will see the implementation of a no-tipping policy as a direct threat to their income, and could potentially leave your establishment.
- Sticker shock from diners: Diners are used to mentally separating the cost of the meal from the dollar amount of the tip. Switching to a "hospitality-included" model raises the base price of your menu items. This creates the perception that you've become a more expensive place to dine, and could scare customers away.
- Diners feeling a loss of control: Customers tend to feel like they can use their tip to reward or punish a restaurant worker based on the level of service they've received. Taking away tipping takes away that sense of control, which some diners may not appreciate.
- Additional administrative costs: Labor legislation is different in every jurisdiction, but as a broad rule, your staff's tips probably don't cost you much. If you switch to a hospitality-included model, those dollars now become wages and are subject to payroll taxes (and may require you to offer specific benefits, as well).
Managing the Process
None of these problems is insurmountable, but each requires some thought and management. When you're deciding whether to switch to a hospitality-included format, the time and effort required to make the transition should be part of your calculations. Here are a couple things to consider:
- Staff buy-in: Your kitchen staff would benefit directly from this change, so they should be on your side from the start. To earn buy-in from your servers, explain that they can also benefit. For example, their income will be more stable and predictable, and they won't be fighting for the most-profitable shifts anymore. After all, every once in a while, it's nice to have a Saturday off.
- Guest buy-in: You'll need to prepare your guests for the transition, as well. Danny Meyer of New York's Union Square Hospitality Group, one of the highest-profile "no tipping" advocates, hosted town hall meetings to explain and introduce the format. You may want to do the same, or engage with your clientele through social media or on-site signage. Make sure they understand that your price increases are more apparent than real, and cope with their perceived loss of control by giving them different ways to provide feedback.
Is It Worthwhile?
The hospitality-included format has been a winner for some restaurants—Meyer is rolling it out to all of his establishments— but a flop for others. As with any major change in your operation, this new trend requires careful planning and preparation, and having your staff and guests on board with the change is a must. Do your diligence, read all you can about other operators' experiences with the format, and make sure you understand any regulatory issues you'll face. After that, the final decision is up to you.