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How a Restaurant Tripled Its Profits by Eliminating Tips

The employees get paid vacation days, too.

Courtesy of Bar Marco

Things are working out quite well for Bar Marco, the Pittsburgh restaurant that eliminated tips and put their staff members on salary. In January, co-owner Bobby Fry told Eater that he planned to give his full-time employees a base salary of $35,000 a year, plus healthcare, paid vacation, and 500 shares in the company. Plus, employees would only be asked to work a maximum of 40 to 44 hours per week. According to Entrepreneur, the unconventional model is working quite well for Fry and his team — profits are have nearly tripled in two months. Weekly profits have jumped from about $3,000 per week to $9,000 per week.

Fry tells Entrepreneur that revenues "exceeded expectations by 26 percent" and that overhead costs dropped by eight percent. Other costs went down too: "Our water bill was cut in half, our linen bill was cut in half, our liquor inventory was lean." Fry mainly attributes this to "revived employee cognizance" thanks to the restaurant's new business model. He also notes that the restaurant introduced a "retooled menu comprising of cheaper, local ingredients," and more shareable plates, which has helped keep costs down.

The model has been so successful that the team has decided to implement it at Bar Marco's sister restaurant, The Livermore, when it reopens this week. Thanks to bonuses, Bar Marco employees are likely to take home between $48,000 and $51,000 this year.

Many cities and states have increased or are in the process of increasing the hourly minimum wage to $15 per hour. This has upset many restaurateurs who argue that they will not be able to pay their staff such high wages. Fry believes, however, that they should considering switching up how they do business considering that many restaurant workers currently live in poverty: "You cannot tell me that your business model relies on paying people below the poverty line." He adds, "Google is the best company in the world for how much money they make per employee and that’s because they put all their time and energy into their employees. It pays off for them in fistfuls."

Video: The Argument Against Tipping, Explained

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