The days of frantically figuring a proper tip may be numbered.
Leaving a gratuity of 15 percent or more on your dinner tab is an American custom at sit-down restaurants. However, a trend is emerging to replace this system of gratuity and include the service on menu prices.
In Washington, the minimum wage is $9.47 per hour. Washington is one of seven states to require the same wage for tipped employees. In many other states, wait staff are paid as little as $2.16 per hour, making most of their income in tips.
In a no-tipping model, restaurants either add a flat service charge to the total bill, or just incorporate the cost of service into the price of each item on the menu. Staff normally compensated by customer tips, are instead paid more standard wages.
Three factors are pushing restaurants to rethink the gratuity based model of compensation: Local increases in minimum wage laws, the need to keep talent in the kitchen, and a desire for the employer to control performance incentives.
Seattle and other major metropolitan areas are raising the minimum wage to $15 for most employers. The minimum wage increase for tipped employees is rising at a lower rate, but employers must guarantee the minimum hourly wage. This rise in minimum wages increases employers cost for traditionally base-wage jobs like bussers and host services. Moving to a service inclusive model allows creates an income stream for the owner to offset these costs.
Additionally, as menu prices have increased, wait staff have seen a disproportionate rise in income versus skilled culinary staff. Collecting a service fee allows owners to spread the wealth between the front and back of the house. Retaining high-quality chefs and cooks improves the overall customer experience driving return business key to restaurant profitability.
Finally, in the gratuity model, compensation is not tied to employer evaluations or standards of service. For example, restaurant management wanting to push a particular item or level of service did not have a direct way to compensate wait staff for success. Additionally, a server might be incentivized to provide lower quality service to a table perceived as likely to tip less than one with a potential higher return. Providing salaried structures with employer-driven incentives and bonuses helps restaurants deliver uniform service and drive top line growth.
So, is moving your restaurant to a service included model a good strategy? The answer depends on your customers and business model.
So far, most restaurants moving to the no-tipping model are higher-end establishments as opposed to fast casual restaurants. At this price point, customers expect both high quality and innovative food along with professional table service and are far less sensitive to a few dollars difference in menu items.
Restaurants competing in a highly price-sensitive environment may not find this to be the best strategy. Increasingly, customers check menu prices online or on mobile apps and may choose your competitor without fully weighing the cost of the gratuity.
Additionally, if service staff and the atmosphere are your competitive advantages, you may not want to risk losing key staff providing the experiential part of dining out and motivated by high customer tips.
From fast foot to fine dining, restaurants operate in a highly competitive and volatile marketplace. As labor markets tighten and wage floors increase, the no-tipping option may make the days of mentally calculating that tip just a memory.
Ryan Davis is dean of business and applied technology at Everett Community College.
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