No-tip restaurants, which often charge higher menu prices to pay their employees higher wages, have been making headlines lately. New York restaurateur Danny Meyer made a splash when he announced his Union Square Hospitality Group would adopt the model, but the trend seemingly has lost some momentum in the last few months. A recent study indicates cutting tips could actually hurt servers, and Joe's Crab Shack, the first major chain to try the model, has significantly scaled back its trial run.
But, a new survey from American Express suggests the trend is still on the rise, reports CNBC. Of the 503 United States restaurateurs surveyed, 29 percent said they're planning to do away with tipping at their establishments. Seventeen percent said they would consider it if competitors follow suit, and 10 percent were undecided. Only 27 percent said there's no way they would cut tipping.
Patrick Connolly, owner and chef of Rider in Brooklyn, told CNBC eliminating tips is the wave of the future: "I think tipping is based on an antiquated notion that if one particular person waits on us while we're there eating and the food is really good, we'll take care of them. In a certain type of restaurant, the service is part of the product now."
When Bob Merritt, chief executive officer of Ignite Restaurant Group, announced Joe's Crab Shack would cut back it's no-tipping experiment, he said the move was a response to feedback from people on both sides of the transaction: "The system has to change at some point, but our customers and staff spoke very loudly." In the first quarter of fiscal year 2016, Joe's income dropped by 16.2 percent, year over year. That was partially caused by increased labor expenses that resulted from cutting tips.
Another blow to the movement, a study conducted by a UC-Irvine economics professor found restaurant servers often are not the "menial, low-income workers" they're painted to be. "Overall, the various arguments labor advocates make for abolishing tipping are probably well-intended, with the welfare of servers at heart," Richard B. McKenzie said of his study's findings. "The arguments certainly sound good, but they are divorced from the key economic realities of the server-labor and restaurant market economics they have highlighted."
Despite the negative press, Connolly believes it's only a matter of time before restaurants with higher prices and no tipping become more mainstream.
"I think that's just a reflection of where the industry is moving," the chef told CNBC. "Service, uniforms, how they present themselves, the language, the tables — all of those things, it's part of the product."