How to Make Money

These Restaurants Just Banned Tipping. Would You Work at One of Them?

April 9, 2016
by Susan Shain
Senior Writer
No tipping restaurants

Sometimes, I really miss waiting tables: the camaraderie, the fast pace, the bundles of cash. And other times, I couldn’t be happier to be done — mostly when I witness horrifically rude customers.

But that’s the biz: a series of highs and lows, which are, for the front of the house, fueled by tips.

Whereas tipping is virtually non-existent in most countries, here in the U.S. it’s expected by everyone from taxi drivers to hairdressers.

And for servers and bartenders, tips aren’t merely a nice gesture; they’re your budget’s bread and butter.

For a select number of restaurants, though, that could change — they’re moving to a no-tipping policy.

How does that work? And would it be good or bad for the servers and bartenders who work there?

I decided to investigate…

What’s Behind the No-Tipping Movement?

In the majority of the world, restaurant staff earn an hourly wage that’s on par with their country’s other service workers. Some customers may leave the change, or more for extraordinary service, but tipping is rarely expected.  

But in the vast majority of American states, servers and bartenders earn a sub-minimum wage, with the remainder of their income made up of tips.

Most of us are familiar with the benefits of this practice: For customers, it’s the incentivization of good service, and for servers, the potential for huge cash rewards.

And restaurants, which usually operate on thin margins, are able to keep menu prices low, receive generous payroll tax deductions and entice staff to work on nights and weekends.

What about the downsides?

For diners and restaurant owners, there aren’t many.

For some employees, though, it’s a different story.

Servers who live in less-populated areas may not earn minimum wage even with tips — and though employers are supposed to make up for this in their paychecks, many don’t bother.

“Tipped workers are thus nearly twice as likely to live in poverty as are non-tipped workers,” according to a report from the Economic Policy Institute.

“Yet poverty rates are significantly lower for tipped workers in states where they receive the full regular minimum wage.”

Even servers who usually earn decent wages have to deal with a varied income that makes it tough to budget, and can leave them in dire financial straits during a recession or series of stingy customers.

When tipping is removed from the equation, so are inconsistent wages and the pressure to please dozens of different people each day.  

That’s not to mention employees in the back-of-house, who, due to federal regulations, aren’t allowed to share tips with servers and bartenders.

“The gap between what the kitchen and dining room workers make has grown by leaps and bounds,” Danny Meyer, CEO of Union Square Hospitality Group, told the New York Times.

In the past 30 years, he said, “kitchen income has gone up no more than 25%. Meanwhile, dining room pay has gone up 200%.”

Who’s Removing Tipping From Restaurants?

Meyer is phasing out tipping at his restaurants and introducing a policy he calls “Hospitality Included.”

He plans to raise his servers’ hourly wage to $9 per hour. To ensure they make as much money as they did before, he’ll also offer them a share of the restaurant’s revenue.

After Meyer’s announcement, Joe’s Crab Shack eliminated tips at 18 locations in the Midwest.

“If you make $14 an hour at Joe’s, you are making $14 whether you are [working] Monday lunch or Friday night, and now our servers can borrow against those earning[s] as real income,” explained CEO Ray Blanchette.

Though those are the two biggest restaurant groups to eliminate tipping, several other restaurants across the country have already done so.

“As a cooperative business, we do not want to favor one person’s role over another, but pay a fair wage to everyone no matter if they are waiting, tending bar, cooking or doing dishes,” explains Casa Nueva, one such restaurant in Athens, Ohio.

Would You Work at a No-Tipping Restaurant?

Though it’ll be interesting to watch how this plays out with Meyer’s and Blanchette’s companies, there are reasons more restaurants aren’t jumping on board.

For one, it’s way costlier for them — and for another, it doesn’t interest most servers.

Lahni Dangidang, who works at Denny’s on the Las Vegas Strip, said she’d leave her restaurant if it instituted a no-tipping policy.

If I were still in the biz, I probably would, too.

“I’d rather work on minimum wage and get tips,” she explains.

“Because then during our busy season, I’m not taking a pay cut. During summer, I make well over $14 per hour [the hourly rate offered by Joe’s Crab Shack].”

“I really enjoy having money in my pocket as soon as I leave work,” says Brooke Spencer, who works at Applebee’s in Saginaw, MI. “I’ve become very accustomed to having money on hand at all times.”

So though she’d enjoy “knowing you’d make the same amount every day” and not worrying about “someone not tipping you,” she doesn’t think restaurants should make the switch.

Tyler Hammett, a bartender in Saint Petersburg, Florida, agrees.

“I wouldn’t work at a no-tipping restaurant because the money wouldn’t be worth the stress of dealing with demanding customers on a daily basis,” he says.

Not only that, but he believes a no-tipping model would lead to poor service.

“I’m definitely not going to rush to grab your extra ranch if I’m not making any extra money,” he explains.

And that, right there, might be the reason our tipping culture will never fully disappear.

Not only are Americans used to tipping, we’re used to a certain level of service that accompanies it.

A level of service — I know from experience abroad — usually isn’t matched when tips aren’t a factor.

Our tipping culture isn’t perfect, but it’s certainly American.

Just like extra ranch.

Your Turn: What do you think of this movement? Would you work at a no-tipping restaurant?

Susan Shain, senior writer for The Penny Hoarder, is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.

by Susan Shain
Contributor for The Penny Hoarder

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