No-Tipping Restaurants: Do They Work?

Restaurant Tips

Will tipping soon be a thing of the past?

For a couple of major NYC restaurants, it already has. Momofuku founder David Chang recently opted to ban tipping at his ritzy Manhattan eatery, Nishi, in order to pay sous chefs, cooks, and dishwashers a living wage. To sustain these wages, he altered the menu prices to reflect the cost of the labor that goes into each dish, as well as the service.

In an interview with Lucky Peach, his food and lifestyle journal, Chang explained, “The real cost of selling food is not accurately reflecting the labor that’s going into it. In 2000, I got paid maybe $10 an hour. Inflation has definitely risen, but cooks’ wages haven’t. That’s one of our biggest issues. We want to be able to grow as a company so we can provide for more people.”

Union More Square Hospitality Group had the same idea when owner Danny Meyer announced that by the end of 2016, all 13 restaurants would be eliminating tipping. Menu prices will increase by approximately 21-25 percent, non-tipped workers will receive a pay raise, and the majority of previously tipped workers will see that their take-home pay remains the same. For years, cooks have complained of being overworked and underpaid. The new system aims to rid restaurants of the pay discrepancies you often see between front and back of the house workers. Servers will also have the opportunity to make the same amount of money on slow nights as they do on busy weekends. In addition to equal pay, Meyer noted that the move would make way for career advancement for the more than 1,800 workers currently employed by USHG.

When Amanda Cohen, owner of posh Italian bistro Dirty Candy on Manhattan’s Lower East Side, reopened her restaurant this past February, she started charging a 20 percent service fee in lieu of tips. The charge is automatically added to every bill, and the fee is evenly distributed amongst front and back of the house staffers, offering them a stable, consistent wage. She chose this method because she knew that raising menu prices could cause her restaurant to lose business. When hiring, she said that many services found that idea of a guaranteed wage enticing.

Although more and more restaurants are jumping on the no tipping bandwagon as of lately, not everyone has been thrilled with the change. For some, the idea of a tip motivates them to go above and beyond for their tables. If you lose the tipping model, you take away this incentive for them. Servers and bartenders who were previously making up to $40 an hour have found that their wages have significantly diminished, prompting them to find work elsewhere. Thad Vogler experienced this firsthand when he decided to eliminate tipping at his two San Fransisco restaurants, Bar Agricole and Trou Normand. Although employees initially seemed interested in the idea, he estimated that he lost about 70% of his staff in the 10 months that the policy was in place.

A high turnover rate such as this one will ultimately cost the restaurant more money. Consumers have also expressed their disinterest in the no tipping scheme. Not only do they feel that tipping is a way to show gratitude or dissatisfaction for their service, but in the end, they are actually being required to pay more for their meals. At USHG restaurants, diners will pay approximately five percent more than they used to.

This is still a relatively new concept, so it’s possible that with time, restaurants may be able to work out the kinks of this new business model. For now, it’s clear that there are definite pros and cons to using the no tipping system. However, Vogler states that he doesn’t plan on re-implementing the system at either of his restaurants, anytime soon.

"We couldn't compete in the market, we were faced with the options of raising prices more or bailing out."



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