The biggest issue facing restaurateurs today is the cost and availability of skilled staff. To attract talent and pay fair wages to both servers (who often make tips that supplement their salary) and cooks (who almost never make tips), some chefs and owners are dashing the old business model and designing creative fixes tailored to their concepts.
Among the solutions currently on the table? Adding a tip line for kitchen staff, tacking a surcharge onto each check, and, in a few cases, sharing revenue with all or some of the staff.
Between the rise in minimum wages across the country and elimination of the tipped minimum — a lower hourly rate set for staff who earn tips — in several cities, the delta between what cooks in the kitchen take home and what servers pocket has never been greater. This discrepancy can result in a shortage of kitchen staff in some cities, primarily along America’s coasts according to NPR, and a general frustration in the industry about how and why workers with different skill sets earn such vastly differing salaries.
“We pay everybody, excluding management, on a single pay scale that starts above minimum wage,” says chef Josh Lewin, co-owner with Katerina Jazayeri of Juliet restaurant in Somerville, MA, “and after a sort of probationary period, during which several raises happen based on the number of hours worked — we don’t accept tips at the restaurant, the prices are set so everyone earns a fair wage — staff are put into a profit-sharing pool.”
When Lewin and Jazayeri were looking to open Juliet a little over a year ago they realized fairly quickly that the business model they had drawn up wouldn’t appeal to most investors. “The spacious, grand space we had envisioned got smaller and smaller as we explained [to potential investors] that we were going to share profits with our staff,” Lewin told Eater by phone. The restaurant that opened — a small, serene space with an open kitchen — was mostly self-funded, though a few silent investors who agree with the business model helped get it off the ground.
This month, the end of the first quarter of 2017, marks the first period in which Juliet’s profits will yield dividends for its staff, 80 percent of which have been at the restaurant since opening day on February 29, 2016. “Staff, regardless of experience, start at Juliet at an entry level. We run them through a series of promotions which come with raises over a period of time, depending on how long they’ve worked at the restaurant, the number of hours they work each week, and, they have to go through our training program,” Lewin explains. The training program includes “business-oriented classes” as well as cross-training in a variety of tangentially-related fields, such as dance, where, for example, a professional dancer speaks to staff about “keeping a healthy body while working a demanding physical job.”
It’s this type of added benefit — and the concept of ownership, in which each employee has a stake in the success of the business — that attracts staff to Juliet; the restaurant has not experienced a shortage of back- or front-of-house applicants.
Mamaleh's Delicatessen, a Jewish deli in Cambridge, MA., is experimenting with sharing five percent of food sales with its kitchen staff, who, according to at least one cook, are feeling the pressure of working long, hard hours without a tip. To make the system work, Mamaleh’s owners told NPR they would need to raise menu prices.
Raising prices seems to be the first step in guaranteeing an equitable split between employees who have traditionally worked for tips and those who have not — regardless of whether or not a restaurant allows tips on the table for waiters and bartenders.
NYC-based restaurateur Danny Meyer opened the doors for more creative solutions to rising labor costs in 2015 when he announced that Union Square Hospitality Group (USHG) would eliminate tips at all of its restaurants, pay its staff a merit-based living wage, and offer all of them benefits. Along with that announcement, Meyer suggested he would begin offering staff a cut of the restaurant’s revenue to keep the hiring offers competitive. Two years in, six out of the nine full-service restaurants USHG operates in NYC follow what the company calls the “hospitality included” model.
“All of our restaurants are like snowflakes,” USHG’s Chief Restaurant Officer, Sabato Sagaria told Eater by phone, “and as we’ve gone through this we’re in a little bit of uncharted territory.” Sagaria says that at all of the group’s no-tipping restaurants — the Modern, Maialino, North End Grill, Marta, Union Square Cafe, and Gramercy Tavern — front of house staff get a cut of the revenue. But at Gramercy Tavern and Maialino the back-of-house gets to share in that sales pool too.
“We’ve left it up to the leaders of each business to say what works for them and their business,” Sagaria says, “and we’ve learned that at some restaurants the back-of-house is more accustomed to a consistent hourly rate, while at others the team is more aligned if they all get a share.” Sagaria notes that being able to offer cooks a revenue share has made those BOH positions at Maialino and Gramercy Tavern, two of the group’s most popular restaurants, especially competitive.
In San Francisco, restaurateurs sometimes find that they’re competing with a far more lucrative industry for staff: Tech. "The first time I lost a cook to go to Apple, I thought, 'How am I supposed to compete against someone who’s going to pay $70,000 a year for a line cook?'" restaurateur Ryan Cole, of Trestle in the city’s Jackson Square district, told Eater SF last year.
Guided by a law passed in 2008, many SF restaurants tack on a surcharge to help cover employee benefits like healthcare. At Trestle and the other restaurants in Cole’s group, a 3- to 3.5-percent surcharge on each check pays not just for employee healthcare but for “customizable monthly benefits” (wine classes, movie tickets) in addition to paid vacation time.
Such programs are new and relatively untested, but Cole is confident he’s on the right track. “It can seem financially scary to start something like this,” he says, “but we’re trying to look more toward a long term vision and say, ‘If I make $1,000 to $2,000 less a month now, but I have a team built for the future, it’s worth it.’”
Several years ago, at Zazie in San Francisco, owner Jennifer Piallat did away with tips, raised prices, and gave both back- and front-of-house staffers a share of revenue in addition to a full benefits package. She also practices a system of total transparency: “Everyone sees what everyone else makes," Piallat told Eater SF in 2015. "There's no shadiness about it." Zazie turns 25 this year.
“It’s been going great, we’re really pleased, I didn’t loose a single server over it,” Piallat tells Eater by phone. “We had to learn some new tricks — we went from paying every two weeks to paying every week, and we increased the percentage of revenue shared, from 10 percent to 12 percent.” Back-of-house employees make $15 per hour plus 12 percent of the restaurant’s total sales; servers get that same hourly rate plus 12 percent of the sales they make.
“This is the one thing that I’ve done in my career that has made me extremely nervous,” Piallat admits, “but it’s been great. Our regulars love it, our staff love it. The only thing that has significantly changed, I’ll admit, is my income has gone down a huge amount. I couldn’t bear to raise menu prices as much as I should have. But it’s been worth it.”
Meanwhile in LA, chef Zach Pollack noticed the pay gap early on in his career. When he opened his first solo restaurant, Alimento, in 2014 he had the computers programmed to print checks with two tip lines: One, a traditional tip that would go to the server, and another that was labeled “kitchen.” Back then, Pollack also considered eliminating tips altogether. "The tipping system as it is now is flawed. Period," Pollack told Eater at the time. "This is a fix. Is it perfect? Of course not." Three years in that kitchen tip line is still going strong, as is Alimento.
Eliminating tips and evening out wages between service and kitchen staff hasn’t worked for all restaurants. In late 2015, two notable SF restaurants that had done away with gratuity decided to bring it back. "We haven’t been able to keep servers," Thad Vogler, the owner of Bar Agricole and Trou Normand said at the time. "We were hoping more restaurants would switch but, for now, it’s been impossible to compete with more traditional places in keeping front of the house staff who prefer the control and upside of the tip system." There’s no such thing as a one-size-fits-all approach; it’s up to owners and operators to create a system that works for them, tweak it when necessary — and ultimately see it through.
“We refused to take on any loan or investment that wouldn’t let us pay our staff fairly,” Lewin says of his original business plan. Though Juliet has only been open for a year, Lewin sees a future in his model. “We’d like to be able to scale this. It’s so far been proven successful,” he says. “Our plan is to make this into a replicable and scalable model.”