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How Does a No-Tipping Restaurant Work?

Everything you've ever wanted to know about Union Square Hospitality Group getting rid of all gratuities, and have demonstrably not been afraid to ask

Last week, Danny Meyer rocked the American restaurant landscape when he announced that his Union Square Hospitality Group would be entirely eliminating tipping at its 13 New York City restaurants. In a detailed, comprehensive feature for Eater NY, Ryan Sutton laid out the context underlying Meyer's decision, as well as more information on how USHG plans to execute the zero-gratuity system it's calling "Hospitality Included."

The facts of the plan are pretty straightforward: Starting with a trial run at its midtown Manhattan restaurant the Modern, USHG will roll out Hospitality Included to all its restaurants by the end of 2016. TL;DR: Prices go up for diners 21-25 percent, wages go up for non-tipped staff, and formerly tipped staff will see their take-home pay remain the same, if not rise.

At least, that's the theory. And wait, actually, it isn't quite as straightforward as it seems. Since Ryan's story was published, we've heard from hundreds of readers about this potential sea change in the way restaurant business is conducted. Here are answers to some of the most-asked questions, and clarifications of what seem to be the most common areas of confusion.

If we eliminate tips, and there isn't anything to motivate waiters, won't service quality plummet?

"Service quality" is a fascinating concept, and one worth unpacking. For better or for worse, many diners think of overall server pay as the sum of two different things: one, a waiter's paycheck from the restaurant, which she gets for doing the basic tasks of her job (showing up to work, taking your order, delivering your food to you, etc.); and two, a waiter's tips, a variable amount dependent on how well she performs those basic tasks in the eyes of the people she's performing them for.

People who are concerned that service quality will decline if servers don't have tips to motivate them are mistakenly looking at Hospitality Included as a matter of beefing up remuneration only for doing the basic tasks. In fact, what it means is that now it will be part of the server's job to do her job well. If a restaurant values that its patrons receive attentive service (and smart restaurants who are interested in keeping their patrons happy probably will), they will make attentive service mandatory.

Isn't a restaurant requiring its waitstaff to give good service kind of unrealistic?

In many ways, this is like any other job requirement: Part of being a good server is, well, providing good service. And just as an accountant can't say to his boss, "Hey, I've got a brutal hangover today, just pay me half my daily salary pro-rate 'cause I'm totally going to half-ass everything," a server wouldn't be able to say to his manager "Eh, I don't feel like working for it today." If he did say that (or if he demonstrated it through his job performance), under a no-tipping system, his manager would be empowered to drop the hammer, ensuring that restaurant patrons don't have to experience any sort of flagging service level.

More than that, though, there's the simple fact that there are many, many jobs out there that are just as service-oriented as waiting tables but are not tip-dependent. Flight attendants, store clerks, hotel staff — some individuals are surly, to be sure, but when part of the job description is to be attentive and thoughtful, as it is at airlines like JetBlue and Southwest, for example, employees who are well-paid and well-trained rise to the expectation.

Isn't being a waiter basically just a sales job? And isn't a tip basically just a commission?

Yes and no. In the sense that a tip is on average a predictable percentage of a server's total sales, it is not dissimilar to a commission. But there are two important differences between a waiter's tip and the commission received by, for example, a car salesman, or someone working at a high-end boutique.

The first difference is the variability of the amount: a woman working on commission who sells a customer a $500 blouse is guaranteed to see her share of that, regardless of whether the customer liked her, but under the current tipping system, a server who takes a four-top through a $500 meal has no way of knowing what his cut will be — it could be 20 percent, or if they're feeling generous it could be 35, or if they're feeling parsimonious (or if they "don't believe in tipping") it could be as low as five percent or even nothing.

The second difference is who the additional payment comes from. A commission-based salesperson is paid by her employer, and can do things like negotiate her commission rate, or see it increased as a reward for skills or good performance. A tip-based waiter gets his additional payment from the diners he serves, which leads to a whole host of complexities when it comes to things like tipping out bussers and bartenders, paying taxes, and making sure management is aware of good or bad performance. It also means that a restaurant can't protect its servers from the financial hit they could take from low tippers. It's additionally worth noting that a commission-based employee earns minimum wage or better — often much better — while a restaurant server, stripped of her tips, legally earns less than minimum wage.

But if I can't use a low tip to voice my dissatisfaction, how will I do it?

How do you voice your dissatisfaction with a rude mattress salesman, or a dirty hotel room, or a broken projector in the movie theater? By eliminating tipping, Danny Meyer is explicitly acknowledging that the transaction is not just the exchange of money for food, but the exchange of money for food and an overall service experience. If you don't feel you're getting what you're paying for, you can voice your dissatisfaction using your actual voice. (Or, if Danny Meyer's ideal version of the future comes to pass, through some kind of mobile feedback system tied to your meal payment, sort of an in-house Yelp analog.)

It seems like all this is a solution to the problem of low cook pay relative to server pay. Why can't Danny Meyer just pay his cooks more?

Well actually, that's the point of this whole thing. Paying cooks more isn't a simple question of just adding a few numbers to their paychecks, the money has to actually come from somewhere, and that somewhere is most likely to be the customers. Let's say Danny Meyer wants to give his cooks a mere five-percent pay increase — that means raising menu prices by five percent (or possibly more, to cover overhead). That increase means that diners pay more, and also that they leave bigger tips to reflect that increase, and then that servers also wind up making more. There's no easy way to raise cook pay without also raising server pay — unless you stop tying server pay to tips. Ryan Sutton goes into great detail on that in his feature.

Why are many servers so angry about this, even though Danny Meyer has clarified that his staff's overall pay will stay more or less the same?

A lot of this is just an entirely understandable fear of change. Serving isn't an easy job — you work long hours, you're on your feet, and you have to deal with people all day — but for all its downsides, if you work in a high-volume restaurant in a big city, you stand to make quite a lot of money doing it, especially when you consider that the annual amounts many servers make are not reflective of a full, 40-hour workweek. (There's a reason we have the cliche of the aspiring actor/writer/musician who makes ends meet by picking up a few shifts at the local red-sauce joint.)

Servers often make the bulk of their tipped income in cash, which is convenient for them (and, if a server is a little unscrupulous, also easy to ignore when it comes time to pay taxes). The low hourly wages a restaurant pays its servers (which are then made up for via tips) makes it low-friction for a restaurant to lose or add staff, part of why restaurant service is among the highest-churn professions. If a server doesn't like working somewhere, or wants to take three weeks off to backpack around the Southwest, he can just say goodbye.

Introducing regular, merit- and seniority-based pay to the front of the house pulls the rug out from under all that. It entirely upends the system. Pay will become predictable, but at the cost of a server's ability to come home some random night with a thousand bucks in cash, or to dismiss the notion of investing time in one steady position. In short, even if your overall pay remains the same on average, it's different in the fringes. It makes restaurant service a lot more like a conventional job.

Bottom line, how is this going to change my life as a diner?

At USHG restaurants, you're going to pay about five percent more than you used to, before tax. Yes, the menu prices are going up by 21-25 percent, but don't forget that you were already tipping 15-20 percent on the total bill, which now you no longer have to do. Here's a breakdown of two checks at the Bar Room at the Modern, one from this week, and one that might be what you see in the future: November 21, four weeks from now, shortly after Hospitality Included goes into effect. (Note that all numbers on the November check are estimated by Eater, with no input from USHG.)

Left, a receipt based on current prices at the Bar Room at the Modern. Right, an anticipated receipt based on an average menu price increase of 24.3 percent.

The same two diners having the same lunch at the Bar Room at the Modern will — if they're tipping about 20 percent — currently pay a total of $137.51 for two appetizers, two entrees, a shared dessert, and two non-alcoholic drinks (it's a weekday lunch, after all). Under the regime of Hospitality Included, where prices on our fictional check go up an average of 24.3 percent, they'll pay a total of $144.82, a proportional increase of 5.3 percent. (That's an absolute increase, in the case of this check, of $7.31. If they're splitting the bill, it's $3.65 each, plus an extra penny for one of them.)

Do you have more questions about what it means for a restaurant (or a restaurant group) (or all restaurants, forever) to switch away from a gratuity-based system? More concerns? More clarifications? Let us know — we'll do our best to address them right here.

Header photo: Shutterstock


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