Can Small Restaurants Get Rid of Tips?

The idea of getting rid of tipping has reached a tipping point at some restaurants–most notably high-end dining rooms in big cities. But is the trend here to stay? And will it trickle down to smaller restaurants?

In many states, waitstaff at restaurants depend on tips to round out their paychecks. Minimum hourly wages dip as low as barely over $2 in some states, and so the hustle for that 15 or 20 percent tip is what makes waiting tables sustainable. But, the tip pool is unreliable. If there’s a night when the kitchen’s backed up and a table gets their food late, a waitress could easily kiss that precious extra good-bye. It’s also unbalanced, leaving some waiters making more or less than their equally hard-working companions on any given night—it simply depends on the mood of their tables. Furthermore, the waitstaff isn’t always expected to share tips with kitchen staff. That often leads to the front of the house being paid a great deal more than the people who actually make the food, which many seem as unbalanced and unfair. In addition, as rising minimum wage proposals hit the scene, restaurants are forced to experiment with new ways to increase the wages for their waitstaff.

These and other reasons are why some larger restaurants have done away with tipping as a system. This year, influential restaurateur Danny Meyer (founder of Shake Shack) announced that at his 13 restaurants, wages would be raised and tips would be forbidden. Bar Marco in Pittsburgh has jumped on the train, and Chez Panisse in Berkeley has been riding along since 2009.

As an owner or manager, you might be rethinking whether or not you should depend on customer tips to pay your staff.

Paying a higher salary could be better for your staff. Everyone will be better able to predict paycheck amounts, and employees may be better able to meet living expenses. This leads to reduced stress, and potentially, a more effective workforce. Of course, getting rid of tips also means diminishing a great waiter’s chance of occasionally landing a spectacular windfall.

For customers, not paying a tip may make them more comfortable with the listed prices, since they’ll know there aren’t expected to include a tip at the end of the meal. This may encourage some to become more frequent patrons. What’s more, some of your customers may be concerned with making sure the places they support practice fairness towards their employees, and the change may help win more of those customers.

Nevertheless, if you decide to stop tipping at your restaurant, you’ll need to find ways to pay the increased salaries—which could include raising prices. However, higher prices may alienate cost-sensitive customers.

One way around this was pioneered by Alice Waters of Chez Panisse. She instituted a 17 percent automatic service charge to customers’ bills. That way, Panisse has said, the money can go towards a general fund that helps pay waiters higher salaries and secure them better benefits.

This could be a happy compromise between higher food prices and choose-your-own-tip lotteries and maybe even a good starting point for smaller restaurants. That way, you can pay waitstaff a flat salary without assuming the uncertainty of how much patrons plan to tip. If this is your plan, make sure your customers know about it. Adding a small note at the bottom of menus to explain the service charge, as well as share why tips are now unnecessary, will go a long way to helping prevent sticker shock.

Do some calculations for your specific restaurant. How much do customers generally pay in tips? Is there a way to make the service charge equal to or less than that average number?

Whether or not tipping is here to stay, it’s certainly possible for restaurants of all sizes to try new methods to ensure everyone’s happy—cooks, waitstaff, customers, and you.