Tip, please? Maybe not. A no-tipping policy could solve a restaurant’s problems with pay equity. It effects employees, customers and the bottom line. Restaurant Hospitality shows you the pros and cons. Find out more and decide what works for your restaurant.
Michael Lynn, a tipping expert, just released a study The Business Case for (and Against) Restaurant Tipping The study gives restaurateurs a lot of information. It boils down to five key questions.
1. Are servers overpaid by traditional tipping practices?
Although waitstaff may disagree, Lynn’s study gives a resounding “Yes!” “Replacing tipping with service charges or higher menu prices would allow restaurateurs to reduce the total payment to servers and to redirect the recovered over-payments to back-of-house wages or other purposes,” according to Lynn.
Benefits: No tipping equalizes front of the house and back of the house
2. Will operators be able attract and retain good workers if tipping is discontinued?
Another probable “yes.”
Paying less than minimum wage plus tipping appears less and less effective in keeping high quality staff. Even though some servers are used to pay for performance via tipping, the research seems to show that it’s on its way out.
Lynn refers to another study of potential restaurant workers. It examined different pay plus tipping strategies. It found tips plus regular minimum wage got the highest scores among those people responding.
Benefit: New strategies help restaurateurs hire and keep qualified staff. The one approach that does not work is paying less than minimum wage
3. Does the ability to tip raise or lower customer’s satisfaction with their dining experience? Lynn found plenty of data in previously published studies that address all or part of this question. His conclusion: “I believe that tipping has a net positive effect in most settings.”
4. Will customers experience sticker shock from no-tip menu prices? Lynn thinks it could happen.
“The evidence suggests that abandoning tipping will increase costs for, and decrease demand from, a substantial subset of restaurant customers. Unfortunately, it is impossible to accurately quantify this effect ahead of time. In addition, abandoning tipping will increase the perceived expensiveness of restaurants even among generous tippers who will see no real increase in their total costs. That effect will be stronger if tipping is replaced with higher service-inclusive menu prices than if it is replaced with automatic service charges.”
5. Are the net costs of doing business higher or lower with tipping than with no tipping? Lynn finds many positives to this approach, but each restaurteur has to make up their own mind.
Lynn does see a scenario where no-tip makes sense.
“The more that a restaurant’s servers are overpaid relative to the back of house and the wealthier and less price-sensitive a restaurant’s customers are, the more the owner of that restaurant should consider abandoning tipping,” he writes. “By this reasoning, many upscale, expensive restaurants (especially those in states with no or small tip credits) probably should replace tipping with one of its alternatives, because they tend to have a high pay discrepancy between front and back of house, have few small tippers who would face a real price increase, and have price-insensitive customers.”
Once you make that decision, you need to be consistent. All employees need to be clear that is the policy. You will also have to educate your customers that tipping is not allowed.