To Tip or Not to Tip: Does Tipping Still Make Sense?

8/30/16 7:00 AM Natalie Appleton

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The practice of tipping has been around for hundreds of years, and it has always rewarded front of house staff much more than their counterparts in the kitchen.

As restaurant operators work toward decreasing the disparity in pay for the first time, however, some eateries are experimenting with alternatives to tipping.

Canadian restaurant chain Earls made headlines this summer after introducing a pilot project at its 67th restaurant, a Calgary location where guests pay a 16 per cent hospitality charge instead of a tip.

All of the staff then share that 16 per cent—in the form of consistent wages.

“We have decided to test this method against the traditional tipping method as a way to compensate the entire team that worked to deliver our guests a great experience,” Earls.67 says on its website

“The 16 per cent hospitality will be shared with all staff through higher standard wages. This includes everyone from our highly trained chefs and cooks, to our servers and bar backs.” 

The company says the no-tipping model could become a commonplace answer to one of the restaurant industry’s biggest challenges: keeping kitchen staff.

“This is a prototype to test what we believe will be the future of wage scales in hospitality. In an industry that cries out for good kitchen staff, it seems the perfect solution.” 

Will a flat-rate tip model be the way of the future? 

The customer’s perspective

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To find out how everyday diners feel about tipping, the Angus Reid Institute conducted a survey that compared the traditional tipping method with the service-included model. Here’s what Canadians interviewed in the 2016 poll said:

  • 46 per cent of Canadians would like to keep the current tipping model
  • 40 per cent would be happy with the tip included
  • 13 per cent have no preference
  • The majority of Canadians set the standard tip expected in restaurants between 10 and 20 per cent
  • Canadians don’t really deviate from their standard tip because of the quality of service; only one in 10 says they do so “often.”

Do we, as consumers, actually tip based on the service we receive?

And how do both parties in that exchange feel about that relationship?

In his Tedx Talk Rethink Tipping at Guelph University, Bruce McAdams questions the effectiveness of tipping.

Just after Calgary’s Earls.67 implemented its controversial no-tipping policy, the Calgary Herald ran its own poll among readers. Seventy-nine per cent said they “don’t like the idea of a mandatory tip, and would prefer the freedom to choose whether to tip or not.”

And yet dozens of readers commented, saying it was amazing, and they were glad to know their tips would be shared equally among all restaurant staff.

The staff’s perspective

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When it comes down to it, it’s the staff who stand to gain—or lose—from the change.

The Herald received several positive comments from current and former back-of-house staff, including cooks who said they’ve worked for $14 to $17 an hour because they loved the work, but had to leave to make a better living.

What about the servers who are used to supplementing near minimum wages with wads of cash every night?

Nancy, a server at a popular chain restaurant housed in a BC airport says for her, tips are a driving force: “If this were to change, I think the drive would be gone and we’d lose a bit of ownership.”

In the Angus Reid poll on tipping, 79 per cent of Canadians said “tips are the only thing that makes some jobs worthwhile”—insinuating the possibility that taking away tips could take away one of the biggest perks of working as a server. The poll cited an Ontario study that found with tips, servers averaged $27.80 an hour, a wage they probably wouldn’t see at a no-tipping restaurant.

As a restaurant owner or manager, then, you have to wonder what impact moving to service-included would have on front of house staff.

The trend is going both ways

South of the border, restaurants are calling it quits on no-tipping.

At the start of 2015, a handful of US restaurants began raising prices 16-29 per cent to pay staff salaries and eliminate tips.

A lot of excitement was created for the restaurant industry when New York restaurateur Danny Meyer, the CEO of Union Square Hospitality Group, announced that his restaurants would be using a similar concept, Hospitality Included. This would mean menu items would be marked higher than previously to account for the higher wages.

The seafood chain Joe’s Crab Shack was also testing a service-included model at 18 of its 130 locations.

Thad Vogler eliminated tips at his two San Francisco restaurants—Bar Agricole and Trou Normand—and raised prices by 20 per cent to help bridge the pay discrepancy between the tipped servers and the kitchen staff.

A year later, it was a different story. Vogler reportedly found that staff turnover was high. He was losing them to restaurants where they could make more. To compete he would have to raise his prices around 40 per cent.

Joe’s Crab Shack also reduced its commitment to a gratuity-free model, cutting the number of outlets participating in the tip-free experiment from 18 to four.

NY Eater explains the reasons why West Village restaurateur Gabe Stulman will revert back to a traditional tipping system at Fedora, a New York restaurant that tried the experiment for four months.

"While we made the determination that a gratuity free system does not work for our business at this time, we continue to believe that it has the potential to change hospitality for the better," Stulman said in a statement to NY Eater.

"I hope our choice to try it gives some people some courage to try it," Stulman said of tip-free dining. "I hope our choice to go away from it doesn't discourage anyone. I hope that not only Fedora but all our restaurants at one point in the future can go back to the system, because I think it's the right system." 

Was it just too soon? Did they pave the way in changing attitudes for their Canadian counterparts to carry on the practice with success? 

In the meantime, Canadians are having an important discussion about balancing pay for one of the most underpaid trades, and it will be interesting to see how the industry shifts as the conversations and experiments continue.

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Topics: Restaurant Culture