Is tipping on the way out?Is tipping on the way out?

Bret Thorn

NRN senior food editor Bret Thorn says eliminating tipping won’t be easy.

Nancy, I’d like to get your opinion on the subject of tipping, or more accurately, doing away with it.

Chatter about this practice had been increasing over the past few years, as labor advocates have complained about what they see as the unfairness of the tip credit — legally paying servers below minimum wage under the assumption that tips will make up for it. (If for some reason the tips don’t make up for it, their employers have to make up the difference.) That’s the law in all but seven states.

But the volume of the conversation got louder last October, when prominent New York restaurateur Danny Meyer said he would do away with tipping at all 13 of the full-service restaurants that are part of his Union Square Hospitality Group. Since then, around a half dozen other New York restaurant groups have followed suit, following Meyer’s rather radical “Hospitality Included” model, in which restaurants raise menu prices and remove the tip line from their credit card receipts. There is no service charge or other added fees, except for tax. Essentially, the price on the menu is what you are expected to pay. 

It might be easier for restaurant goers to accept a switch to an automatic service charge rather than to look at a menu and see that an entrée formerly priced at $25 is now $30. After all, there is a reason why more menu items are priced at $8.95 than at $9: People aren’t rational when it comes to menu prices, or gas or grocery prices, for that matter. Expecting them to do any kind of math while reading a menu seems foolhardy.

But the New York City Department of Consumer Affairs made it clear to Meyer’s lawyers that it wasn’t OK with service charges being distributed to anyone but front-of-the-house staff. 

Besides, as Meyer has said, a menu price that reflects the actual, all-inclusive price of an item, except for tax, is more transparent to customers.

He has also said that a major motivation for eliminating tips is to make the server’s position more professional. Rather than people assuming that servers are only pleasant to customers and good at bringing them food and drinks because the customers tip them, the new model shows that servers provide good service because they’re proud of their job. 

But from a restaurateur’s perspective, there are other reasons to get rid of tips. Most notably, they can gain control of the roughly 20 percent of income that is currently in the hands of front-of-house staff. That would allow them to pay cooks more and shrink the income gap between servers and all other restaurant employees. Meyer said that servers who want to move into management often receive a substantial pay cut under the current system.

Nancy Kruse and Bret Thorn discuss how now might be the right time to do away with tipping

Considering the shortage of capable cooks in many large cities, it seems like a good idea to find the money to pay them more. 

A number of New York operators said they need to take action sooner rather than later. As food, labor and other costs continue to rise, menu prices will increase and the wage gap between front- and back-of-house staff will widen even more, since as menu prices go up, so do tips. 

But this change isn’t easy. To get rid of tipping, you have to change two cultures: that of servers, who like getting tips, and customers, who like tipping. 

New York operators who have phased out tipping say they have largely succeeded in getting buy-in from their servers, partly by convincing them of the more equitable nature of a Hospitality Included system, but mostly, I think, because they have implemented a top-line revenue sharing system with their servers, and some have promised that, at least for the short term, their wages won’t go down. 

Getting customer buy-in is more of a challenge. At a recent panel I attended of restaurateurs who had implemented the Hospitality Included system, Union Square Hospitality Group chief restaurant officer Sabato Sagaria said consumer feedback at The Modern, the first USHG restaurant to do away with tipping, was extremely positive. At that fine-dining restaurant, customers didn’t balk at higher prices for food.

However, Sagaria said they were more hesitant to buy a $100 bottle of wine that didn’t require a tip than they did to buy an $80 bottle for which they would have tipped $20. (The Modern’s customers are generous tippers, he noted.)

But Gabriel Stulman, operator of a less pricey restaurant, Fedora, reported more resistance to the higher menu prices, no matter how often and clearly he told customers that they were no longer expected to tip. I think anyone who has studied how menu price changes affect consumer behavior could have predicted that. 

Meanwhile, San Francisco restaurants Bar Agricole and Trou Normand, which eliminated tipping at the end of 2014, brought it back last October because they couldn’t keep servers. 

On the other hand, casual-dining chain Joe’s Crab Shack has been testing a no-tipping model at 18 of its roughly 130 restaurants since last fall, and has expressed cautious optimism, noting that the first location to make the change, in Indianapolis, which went tip-free in the summer, was showing improvement in both server and customer response.

So, what do you think, Nancy? Can tipping be eliminated in American restaurants, and should it be?

Time may be right to overturn tipping

(Continued from page 1)

Nancy Kruse

Kruse Company president Nancy Kruse responds to NRN senior food editor Bret Thorn’s take on the state of tipping at restaurants.

I’m not surprised that you’ve zeroed in on the issue of the moment, Bret, one that has truly galvanized the restaurant industry. The discussion around tipping and its possible elimination has generated endless press and sparked spirited discussion. 

But did you know that this is not the first time the subject has ignited a firestorm? A major anti-tipping movement swept the country in the late 1890s and challenged the practice on the basis of its “anti-democratic” nature, charging that it created a “servile class” dependent on the kindness of well-heeled strangers. It was derided as anti-American and the province of aristocrats, which may have been a backhanded slap at the English, who originated the custom — the term tip is likely an acronym for “To Insure Promptitude” — in their taverns back in the 17th century.  

Throughout the 1910s, a number of states here in the U.S. launched unsuccessful initiatives to make tipping illegal. Those efforts obviously failed, but it’s interesting that this current controversy is actually the continuation of a long-running debate.

Nancy Kruse discusses how objections to tipping date back more than a century

And it’s not just impacting restaurants. Every December, newspapers and magazines around the country run stories on the etiquette of the tip — who rates one and who doesn’t — in order to provide guidance and reassurance to insecure holiday tippers. 

Their quandary is only increasing over time, as the ranks of potential tippees continue to swell. “A Tipping Guide to the Sharing Economy” popped up recently in MEL Magazine, a digital publication that targets Millennials, and tackled questions Miss Manners has never addressed, like tipping standards for Postmates, UberEats, Instacart, GrubHub and other delivery service employees, as well as for Lyft drivers, Airbnb hosts and TaskRabbit taskers. The article did a fine job of parsing the actual amount of labor involved in each particular activity and suggesting reasonable recompense for each of these new-age service providers. 

From the restaurant perspective, the emerging consensus has been that any attempt to revolutionize tipping must necessarily start with high-end, independent operators to be successful, that chains could never take the leading role. I’m in the minority here, Bret, but I flatly disagree with this assumption for a number of reasons, starting with the fact that any fundamental change to the tipping economy will require massive amounts of education and marketing, challenges that are more easily met by the cross-media reach and superior spending power of major chains.

Nancy Kruse explains why she thinks doing away with tipping will start at chain restaurants

What’s more, chains cater to the mass market, which has been impacted most dramatically by the lingering effects of the recession and the housing crisis. The question of fair wage and labor practices may resonate more directly with this audience than it does with, say, the aggressively generous tippers at The Modern. Issues like shrinking the income gap and treating back-of-house employees more equitably impact many middle- and lower-middle-class chain patrons on a personal level.  

Timing is always a critical factor, and now may be the right time to overturn old-fashioned tipping protocols. First, because this endless and endlessly noisy election cycle has uncovered deep-seated anger at political elders and elites, and served as a reminder that we are more amenable to change when it bubbles up from the grass roots, rather than when it’s imposed from the top down. Secondly, there’s a major demographic cohort coming of age that, as the MEL article implied, is perplexed by the practice of tipping. Millennials have had a profound influence on our business, with their technological fluency and their demands for cleaner, less processed food. It’s not unreasonable to think that they might have similar sway on the outmoded institution of tipping.  

I don’t know where all this will net out, but I hope that we can come to some consensus on how to address a topic that is a centuries-old source of angst. The New York Times revisits the issue regularly, and a few years back its estimable food writer and restaurant critic Pete Wells pronounced tipping to be irrational, outdated, ineffective and even prone to abuse. He said that the people who take care of us in restaurants deserve better, and so do we.

Kruse tries to compliment Thorn, who ruins it for her

Contact Bret Thorn at [email protected]
Follow him on Twitter: @foodwriterdiary

Nancy Kruse, president of the Kruse Company, is a menu trends analyst based in Atlanta. As one of LinkedIn’s Top 100 Influencers in the U.S., she blogs regularly on food-related subjects on the LinkedIn website. E-mail her at [email protected].