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Alternatives to Tipping

Sushi platter

Would you be more likely to patronize a restaurant if you knew you wouldn’t be asked to leave a tip at the end of your meal?

I have to admit that I would be. If you’ve followed our articles this month, you already understand why: We’ve written about how tipping is an inherently unfair and discriminatory system, and how senseless social pressure has pushed tipping customs into all sorts of inappropriate places in modern culture.

We’re definitely not here to point out problems without suggesting solutions, though. There are alternatives to the tipping culture that we’ve become used to, and we’re going to explore those alternatives today.

Two New York restaurants have been in the news recently for abandoning the tipping system. Per Se restaurant recently eliminated tipping in favor of a mandatory 20% service charge added to each customer’s bill. And Sushi Yashuda made headlines for abandoning separate service charges altogether and raising menu prices in order to pay waiters a full salary,more closely aligning themselves with Japanese customs.

Granted, these two restaurants are both high-end establishments in expensive New York neighborhoods. But I think their owners are on to something: By replacing discretionary tips with full wages or mandatory service charges, they’re making life better for both their customers and their employees.

Included in the Price of the Meal

Of the two solutions enacted by these restaurants recently, I like the Sushi Yashuda model the most. This restaurant owner has taken a common-sense approach to his product, treating it like any other product on the general market today. When you buy anything — groceries, a car, music, gasoline, etc. — you aren’t asked to pay the wages of the service workers separately from the price of the good you’re purchasing. Rather, the cost of service is included in the the retail price. Why should it be any different for restaurants?

The sushi guys don’t think that it should be. Instead of making their employees depend on the good graces of customers for their compensation, they provide a full salary — along with a benefits package — to their servers. This is a huge help for the workers, who can now make their financial plans according to a normal wage, instead of having their income fluctuate according to their shift assignments or customer moods. It also makes the servers more accountable to the management, which helps the managers to hold them to a higher standard of service. And it obviously works out well for the customers, who can base their buying decisions on menu prices alone.

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Unfortunately, there are problems with this model. If low-end restaurants across the country were forced to implement it, they would very likely pay their servers close to minimum wage, creating a “race to the bottom” in terms of employee competence and server quality. Companies that count on low prices to attract customers would probably struggle to find good servers who would work for low wages. But restaurateurs willing to pay a fair wage for good workers would earn a reputation for great service that would probably help them grow their businesses.

Mandatory Service Charge

As much as I like the model of employee compensation being included in the menu price, I think that the Per Se model is probably the most pragmatic for today. This restaurant is adding a mandatory service charge to all checks — just like many restaurants do today for large parties of diners — and then doesn’t let the customer get away with tipping more or less than that amount. In effect, this charge becomes less of a tip and more of a commission that is paid directly to the servers by the customers.

This method is probably much more likely to catch on than the one above, because it allows the restaurant to set its servers’ pay structure without raising menu prices. It’s not as beneficial for the servers — their compensation is still going to vary according to how much they sell on any given day, as any salesperson’s does. But it does spare them from the whims of unhappy, uniformed or otherwise lousy tippers. And it’s good for customers too, because it takes the guesswork and social pressure out of the tipping ritual.

In the end, either of these systems is much better than the current tipping culture. And it’s not just these two restaurants; these companies are part of a movement that appears to be growing (if ever so slowly).

I’m no fool, and I don’t realistically expect these ideas to catch on nationwide anytime soon. Still, can you imagine how much better off everyone would be if they did?

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Photo by Zoe Shuttleworth. Used under Creative Commons License.

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  One thought on “Alternatives to Tipping

  1. July 22, 2013 at 12:51 pm

    Tipping is an interesting issue that is being brought to light more and more. I recently listened to an NPR program that pointed out many of the points you made. All in all it seems that depending on tipping seems to be a poor way of a company rewarding their best workers. The radio program also showed that pretty ladies and blonds get more tips regardless of the service. Thanks for sharing this.

    • July 22, 2013 at 1:02 pm

      Thanks for your comment, Vincent. I think the radio program you heard was the same Freakonomics show that I referenced in the previous post in this series.

      • July 22, 2013 at 1:05 pm

        Yip it was Freakononics. Great site you have here. This topic is if great interest to me. I will read through a few more posts when I have a chance.

      • July 22, 2013 at 1:11 pm

        Glad to have you as a reader!

  2. July 25, 2013 at 8:51 am

    Brian,

    I’ve read tons of your posts over the past couple months and this one has to be the most “controversial”. Two points/questions:
    1. Way to stand up for something you believe in that goes against the grain. Love it, especially your responses to some of the negative feedback. Well done.

    2. How would we replace the incentive-factor that tipping creates? There’s a reason you (usually) get treated better at Chili’s than McDonalds (let’s leave out CFA, they’re an outlier).

    It seems like the burden to create that incentive to provide good customer service would fall on the employer (now look at CFA for a job well done) or on the employees themselves (wanting to go above and beyond w/o direct monetary compensation) – OR the incentive would fall away entirely and expectations of the customer would have to change to adjust to ‘meh’ service like that I experienced abroad, where you don’t tip (sometimes it was seen as disgraceful, like I was giving them a handout b/c I thought they were poor).

    (Apologies if you answered this in an article I didn’t read yet.)

    Anyway, interesting stuff, Brian. Love your blog. Any speaker engagements anytime soon? (I could Skype in!)

    Matt

    • July 25, 2013 at 8:57 am

      Thanks for your kind words, Matt. I agree that a non-tipping system would put the burden on the employer (in this case the restaurant manager) to train his staff to give good service, and then to hold them accountable to that standard. People sometimes act like that’s unreasonable, but I disagree — it works that way in almost every other sector of the job market. Why should it not work in restaurants?

      CFA is a great case study, because they have created a corporate culture that emphasizes great training and high quality service. As a result, they’re very successful. If tipping were to disappear, I think we would see some restaurants excel in services, and other restaurants fall behind. The ones that had great service would probably be more successful in the long run. That’s all part of the free market, and I would welcome it.

      No upcoming speaking engagements on the calendar right now, but I’m always open. Hope you guys are doing great!

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