This article originally appeared in the Fall 2021 print issue of Quench Magazine.
I have one of those tip calculator apps on my phone, and it’s there for two reasons.
The first is that when it comes to all things numeric, I’m basically a deer in the headlights. The mathematical genius gene possessed by my father did not choose to affix itself to my DNA. Attempting to calculate a percentage of a restaurant cheque in my head results in smoke emanating from my ears. The second reason I have the app is that I know I have no choice but to leave a tip. Sure, in theory tipping is voluntary, but who’s kidding who?
I realize these days that if you’re paying with a credit card, as most of us do, the handheld banking gizmo will do the calculation for you, but you still have to choose the percentage to add. That in itself can cause its own level of mini-distress. For most of us, tipping is likely the part of the restaurant dining experience we wouldn’t mind seeing go away.
Yet tipping on the tab is still largely obligatory in North America for a number of socio-economic reasons. How did we get to this point? How did we reach a state where it is the responsibility of the customer to essentially make a server’s wage livable?
When, where, and why the practice of tipping actually originated is a matter of historical debate and speculation. No matter what explanation you choose to side with, the reality is that in these parts today, leaving a post-prandial sum on top of the cost of the meal is not a voluntary gift to the server, it’s an expectation. And it really has nothing to do, in my opinion, with perceived level of service (if it ever really did in the modern world). In fact, the expectation/assumption that tips will be handed out is baked into the minimum wage structure of most US states and several Canadian provinces (without much consistency to be sure).
In all but seven states, restaurateurs are only required to pay a fraction of what would be a particular state’s minimum wage. For example, the federal minimum wage in the US is $7.25/hour. However, as a server, the restaurant can pay you as low as $2.13/hour. The understanding here is that the tips you receive will bring you up to at least the federal minimum. (Individual states are free to raise their minimum wage above the federal rate should they choose to…and a few do). The restaurateur can claim the difference between $2.13 and $7.25 as a credit. The flip side is that if there aren’t sufficient tips to reach the federal minimum, the restaurant owner has to top up the server’s wage.
In Canada things are a bit more balanced. Only Ontario and Quebec continue to maintain a tipped minimum wage, and the disparity between that rate and the provincial minimum is not as wide as it is stateside. That being said, some Canadian restaurateurs take little comfort in this.
“The concept of tipped minimum wage needs a rethink,” contends Ryan Donovan, co-owner of
Toronto’s Richmond Station. “You buy many things in a day or a week wherein the service is built into the product price. In some cases, the service is extraordinary [as is] the bulk of the experience. Have you ever tried on five pairs of jeans only to buy one – or none? Helpful sales people are part of so many of your purchase experiences, and in many cases you simply don’t think to tip because it is not cultural. Fair, insurable, pensionable wages for all is the best way forward.”
Practically everyone you talk to in the foodservice industry agrees that tipping is not the best – or even the right – way to compensate servers. Study after study and incident after incident conclude that tipping contributes to pay disparity (servers often earn double what cooks make), abets prejudice based on age, race, and gender and makes servers more vulnerable to sexual harassment from customers (better looking servers make better tips, but at what cost?).
Add in animosity between front-of-house (FOH) and back-of-house (BOH) staff, and even animosity between FOH and FOH to up the toxicity level a bit.*
Tipping doesn’t really even make good business sense. Assuming they both tip the now pretty much standard 20%, the diner who actually spends $100 on a bottle of wine is, in a way, being punished via the increased tip amount compared to the diner who gets a $50 bottle. It’s hard to argue that opening the $100 bottle takes twice as much effort as opening the $50 bottle. Obliging patrons to pay more because they chose to spend more is an odd way of showing gratitude for a larger cheque.
A foodservice professional for over a decade, and currently part of the Richmond Station team, Katarina Weltner has worked in both tipping and non-tipping environments. While she appreciated – and was incentivized by – the “…immediate gratification of receiving cash at the end of every shift,” she acknowledges the tipping environment does, in fact, impact service, but not in a good way.
*tip-pooling and other revenue sharing schemes can alleviate this disparity to some degree, but it can also be a source of discontent when servers are asked to give up the total of what they see as being justly earned and deserved. Also, in the US, the Fair Labor Standards Act (FLSA) dictates that tips can only be distributed among servers.
“I do think tipping culture negatively affects service for certain demographics. It causes servers to evaluate tables based on [potential]reward. I also think it gives some guests a sense of entitlement, which leads them to not treating their servers with common courtesy because they feel that the tip they will leave at the end of the meal is a reward…for which a server must jump through hoops and put up with abuse [to obtain].”
So if restaurant industry professionals, observers, and diners would all like to see the end of tipping, what is slowing the move away from it? In large parts of Europe and Asia, servers are seen as (and are) professionals and are treated as such. They are paid a living wage and tipping is out. If it works there, why not here? Wouldn’t simply replacing the tip with a flat service charge make life easier and possibly better for everyone in the dining out food chain?
“This is entirely psychology,” maintains Nick Kokonas, co-founder of The Alinea Group and a strong advocate and practitioner of the tip-free environment. “Humans like optionality; they’d rather pay $10 for a burger and feel like they can control the other 20% of the tip, instead of paying $12 for the burger. The reality, though, is that if you do the service charge, 98% of the people gladly pay it. The burger still costs $10, the bill is still $12, but the restaurant can legally control that $2 as ordinary income. The biz owner pays more in taxes and FICA but in my experience, it is completely worth it.”
Switching from a traditional tipping environment to what is generally referred to as a Hospitality Inclusive (HI) model is not something most restaurants can do without serious commitment, planning, and likely, at least initially, some monetary sacrifice.
“Most restaurant owners are not savvy business operators,” admits Kokonas. “I’ve talked to large groups that are generally well run, and they have no real idea how to replace tipping. Also, there is a significant ‘innovator’s dilemma’ involved. If they are making money, why change? I talked to a very prominent Chicago restaurant group owner who said – pre COVID – ‘hey, I made 18% margins on my restaurants last year; I just bought a summer home, and things are good.
Why would I risk changing the entire employment model?’ I replied: ‘Perhaps you can offer benefits, improve operations, retain more employees…and while they make more money, so do you! Maybe you can get to 22%.’ And he just looked at me like I was nuts.”
However, those who have made the switch maintain that, in the end, the benefit of having an equitable workplace leads to a happier, more dedicated workforce that in many cases reap benefits not available to their sub-minimum wage counterparts.
Kokonas’s The Alinea Group employees receive 50% health care (which gets bumped to 100% after two years), benefits offered under the Family and Medical Leave Act (FMLA), 401(k) with 4% matching, and a minimum hourly wage of $16.25.
Employees at the Restaurant Pearl Morissette (RPM) – the fine dining establishment connected to Niagara’s Pearl Morissette winery – are treated to a number of welcome perks. And all employees are treated the same.
“We don’t have a different system for front of house and back of house,” reports Chef Daniel Hadida. “Everyone gets health benefits – including dental and mental health – a couple bottles of wine per month, and something we call the ‘Wellness Box’ that includes local vegetables and produce. We have an RRSP matching program for those who choose to sign on for it, and we subsidize any educational or travel experiences if they are relevant to the work people do here.”
For Weltner and others working the floor, non-tipping systems typically provide more security in that all earnings are insured.
“I feel that HI provides a system that expresses more value to the front of house staff,” she also notes. “Instead of paying staff a low, non-liveable wage – and expecting our guests to subsidize wages through tips – we’re paying our staff what they are worth. I think this is especially important at a restaurant like Richmond Station where we expect a high level of professionalism from our FOH team. They are expected to study the wine list, beverage and food menus to be able to speak critically with tables about our offerings.”
In spite of these incentives, the HI environment isn’t for everyone. Kokonas admits he’s surprised that only about 20% of his employees actually take advantage of the benefits offered. “To the rest they don’t see value in the insurance or retirement benefits; they aren’t planning ahead. I’ve been really surprised how many employees don’t take advantage of the 401(k), for example.” In fact, staff leaving an HI establishment is probably the main reason why restaurants that have tried implementing such a system end up reverting to the tipping model.
The reason for this is likely that in North America, a job as a server is not seen as a long-term profession as per the European/Asian server mindset. The sub-minimum wage structure and reliance on tips creates an environment that leads to the transitory nature of the foodservice workers, with servers always in search of higher-end or busier restaurants where cheques – and therefore, tips – are the largest. It’s even led to situations where cooks, often having spent considerable time, effort, and tuition on a reputable culinary institute, decide to become servers since this is where the money is.
Be that as it may, most who are running HI establishments are not interested in taking on servers that are simply in it to make some fast cash between acting or modelling gigs. “Some servers are professionals,” Kokonas maintains, “and some don’t care about the quality of the establishment, the creativity of the food and service, they just want the most money for the least work or standards. I’m fine with losing those employees. The way we work to retain employees is to educate them on the value of the stability and benefits.”
According to Hadida the job application and hiring practices at RPM are transparent with respect to the working environment for servers. “People know exactly what to expect coming in,” he explains. “Those who have any apprehensions don’t typically come on board.”
As with any significant cultural/behavioural paradigm shift, the move to HI will be evolutionary as opposed to revolutionary. But some feel the shift is inevitable, and the impact of the pandemic might just be the catalyst needed to speed change along. Having the luxury – as Hadi-da did – of implementing HI from the get-go is one thing. For restaurants considering a shift from traditional tipping to HI mid-stream, it’s not so easy. Yet for restaurants who have experienced total dine-in shut down and laid off staff, the circumstances might almost be similar to starting from scratch. “For any organization, wholesale changes to the compensation model are difficult to implement when the business is moving and the staff are working,”
concedes Donovan. “There are legal issues that have to be considered, and there should be consideration for the emotional impact on workplace culture. The easiest transition to HI I could imagine is when a restaurant outlines their compensation model and welcomes employees to that model in the case of a new operation. So, if the pandemic has meant a restaurant has no staff and is looking to rehire a team, yes, I would say that presents a good opportunity to change to HI.”
Times are indeed unprecedented. For the foodservice industry – the survival of which has always depended on imagination, innovation, and adaptability – the time for unprecedented, or at least significant, change may be here.
Tod Stewart has been a beverage alcohol industry professional for close to 40 years. He is an award-winning journalist and published author who has worked as a consultant, trainer, and educator to the hospitality industry, the Ontario wine industry, and the beverage alcohol trade. He has traveled and written extensively about international food, drink, culture, and history. His book, Where The Spirits Moved Me is currently available on Amazon and Apple. His cocktail of choice is a classic martini and the best concert he ever attended was Jethro Tull in 1978.
Living in Japan for 16 years, I cannot enjoy a single meal out in Canada. The prices are outrageous and it’s such an irrational system to have tipping. Just figure out the price and charge it.
By the way, the service is outstanding almost across the board in Japan. There is no insincere befriending of you as a customer to drive tipping either. And dining out is generally way cheaper.
Great article Tod, and very timely too. I am recently shocked to notice that some restaurants are now embedding Tip selection on their hand-held machines as 20%, 30% and 35%! Gone are the 10% and 15% listings. It’s bad enough that the calculator puts the tip on top of not only the meal/drinks, but the taxes as well! Not only is there an increased feeling of entitlement in consumers, but now the government feels entitled to tips on their taxes. From now on when I see this at the cash register I simply pay with no tip using a credit/debit card, and pay cash tip. And believe me, to show my displeasure with this new trend (unless the service was outstanding), I leave 15% or maybe 20%!