Most Consumers Not Ready to Stop Tipping


NEW YORK, Feb. 2, 2016 /PRNewswire/ -- According to Horizon Media's latest Finger on the Pulse Survey — the agency's proprietary online research community comprised of 3,000 people reflective of the U.S. population — the majority of American consumers are not yet ready to embrace tipping bans, a phenomenon that is becoming increasingly popular in restaurants across the country. Millennials and Generation Z, however, are more open to change.

Tip banning - eliminating tipping in favor of paying servers a higher wage – is a becoming a hot issue as popular restaurant owners likeDanny Meyer of Shake Shack have begun instating the practice in their eateries. The change in practice isn't limited to the coasts. National chains like Joe's Crab Shack as well as independent establishments across the nation have also joined the ranks. This "service included" approach to the bill is already common in other parts of the world, including Europe.

Yet Horizon's latest Opinion Pulse data suggest these restaurants may be getting ahead of U.S. consumers' appetite for change: 81% of adult restaurant-goers are not yet ready to welcome built in tipping. These consumers want status quo -- the decision to tip within their control and dependant on a positive service experience. For over half of these restaurant-goers, the main drawbacks of built in tipping come down to expected effects on service: 55% say they would be forced to pay the same amount no matter how good or bad service is, and 52% say it should be up to them to decide how much to pay for service.

While older consumers are hesitant to embrace the change, Millennials and Gen Z are more ready for a tipping revolution: 29% of people aged 18-34 say tipping is an outdated and unfair practice versus 18% of people aged 35-49 and 13% of people aged 50-64. Just 44% of 18-34 year olds say they are against tip being built into an item price, versus 6 in 10 of the older crowd (61% of 35-49 and 59% of 50-64). But just because they are more forward-thinking on the practice doesn't mean they think the change will happen quickly. In fact, they are more skeptical: 70% of Millennials and Gen Z say they think tipping practices will be the same as they are now in 5 years' time (versus 60% of 35-49 and 53% of 50-64).


"There are real economic and life stage realities at play for the younger crowd," said Kirk Olson, VP, TrendSights at Horizon Media. "Many Millennials still face underemployment and Gen Z-ers who've begun working are often working service jobs dependent on tips. Considering the rising popularity of Bernie Sanders' "living wage" stance among the same group, it makes perfect sense that they show greater interest in seeing tipping evolve," continued Olson.  "They're also more global and connected. They know 'service included' is the way it's done elsewhere and think it would be better for the U.S., even if they're not convinced it will become a reality any time soon."

Regardless of age, those who are interested in switching to a built-in tip structure are passionate about the benefits – primarily as a way to better predict cost; those who prefer built-in tipping are over two and a half times more likely to say the cost of the entire meal would be clearer prior to ordering (70% vs. 26% who want tipping left as is). Fairness is an important motivator as well: 62% of those who welcome built-in tipping say it would ensure the servers earn a fair and liveable wage (vs. 32% who want things to stay as is), and 45% say the current tipping structure is outdated (versus 15% among those who want things to stay as is).

"While the research suggests consumers aren't quite ready to abandon tipping per se, it does portend that in the future convenience will likely trump control," said Rich Simms, EVP, Managing Partner at Horizon Media. "Tomorrow's restaurant-goers may find that not having to think about the tip is a core benefit of the whole transaction. Hospitality brands making the change now may be at the forefront of something that will become standard practice in ten more years."

How much more are they willing to pay per menu item to have tip built in? One third (34%) say they would pay up to 15% more per item, with an additional 1 in 10 saying an increase of 18-25% would be fair in order to change tipping practices.

Finger on the Pulse empowers the agency to connect directly with 3,000 consumers, diving beneath the surface of beliefs and behaviors to uncover critical insights.

About Horizon Media Horizon Media, Inc. is the largest and fastest growing privately held media services agency in the world. The company was founded in 1989, is headquartered in New York and has offices in Los Angeles, San Diego, and Chicago. Horizon Media was chosen as 2011 Independent Media Agency of the Year by Mediapost, 2010 U.S. Media Agency of the Year by Adweek, Brandweek, and Mediaweek as well as by Ad Age and as one of the world's ten most innovative marketing and advertising companies by Fast Company in 2011. In 2012, Bill Koenigsberg, President, CEO and Founder, was honored by Advertising Age as Industry Executive of the Year. Most recently, in 2014, Bill Koenigsberg was named 4As Chair of the Board and is the first person from a media agency to hold this prestigious position in the 100 year history of the 4As, the marketing industry's leading trade association.

The company's mission is "To create the most meaningful brand connections within the lives of people everywhere." By delivering on this mission through a holistic approach to brand marketing, Horizon Media has become one of the largest and fastest-growing media agencies in the industry, with estimated billings of over $5.3 billion and over 1,200 employees.

The company is also a founding member of Columbus Media International, a multi-national partnership of independent media agencies. For more information, please visit

(via PRNewswire)

8 in 10 Diners are Against Eliminating Tips


Danny Meyer was one of the first restauranteurs to announce the elimination of tips at his establishments. The 'Hospitality Included' trend has been gradually picked up by other owners and operators in the industry as well.

Although restaurants are trying to change the status quo, diners seem to still prefer the standard practice of leaving gratuity.


Recently, Horizon Media surveyed 3,000 people about tipping. The study found that 81% of restaurant patrons aren't ready to forgo the "established" practice of tipping. Responders said that they preferred having the choice to tip based on the quality of service provided. They weren't very fond of the gratuity-included idea, which they believed would lead to poor service.

However, results showed that younger people were actually more accepting of the new trend. 29% of people ranging from the ages of 18 to 34 thought tipping was dated, as compared to 13% of those aged between 50 to 64.

The remaining 20% claimed to be supportive of the change. 34% said they would pay up to an additional 15% per dish. 10% percent were a little more generous and said that 18 to 25% would be a reasonable amount.

Kirk Olson of TrendSights at Horizon Media said younger diners were more welcoming of the change because they understand the challenges of financial burden. He said, "Many Millennials still face underemployment and Gen Z-ers who've begun working are often working service jobs dependent on tips. Considering the rising popularity of Bernie Sanders's 'living wage' stance among the same group, it makes perfect sense that they show greater interest in seeing tipping evolve."

Olson mentioned how millennials are more aware that tipping is no longer accepted in other parts of the world, like in Europe. They think that restaurants with service included into the prices of meals would just be a better practice in the US.

(via Eater)



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Economic Considerations of Eliminating Tips (Infographic)



Is the U.S. restaurant tipping model on its way out? Amid concerns over whether compensation for back-of-the-house and front-of-the-house employees is fair and how the push for raising minimum wage will impact cost-cutting measures, the tip reform movement is stirring up controversy. Earlier this month, Danny Meyer, CEO of Union Square Hospitality Group, made waves in the industry when he called tipping a “broken system” and announced that his restaurants would phase out tipping by January. The pros and cons of this consideration have impact from the board room to the dining room, and servers, cooks, owners and customers have a stake.

But what about the economic impact? Reporting tips for tax purposes is one of the most complex requirements for restaurants and their employees. Here is a look at the potential effects of eliminating tipping:

Owners Adjust for Higher Wages, Lose the Tip Tax Credit

Federal law allows restaurants to pay servers $2.13 per hour with the server’s tips expected to meet or exceed federal minimum wage requirements. Some states — like New York which will have a $15 minimum wage for fast food workers in 2016 —require a higher minimum wage. Additionally, there is a federal income tax credit (IRC 45B) that the restaurant can take for all tips reported by the server in excess of $5.15 per hour. This gives the restaurant an incentive for encouraging their employees to report all their tips. In a non-tipping environment, restaurants would have to pay higher wages and higher employment taxes, but would have a larger deduction for the increased wages and payroll taxes.

The federal FICA tip credit has been a significant benefit for a number of restaurants over the years. Restaurants that are considering changing to a no-tipping policy may be giving up a substantial tax benefit, and need to take that into account when setting menu prices or additional service charges to help finance the increase in non-tipped wages.

Some fine dining establishments who have eliminated tipping have added a service, hospitality or administrative charge, while others have raised menu prices to compensate. It's important to note that service charges do not constitute tips for the purposes of the federal FICA tip credit.

Employees gain predictability, but not guaranteed higher earnings

Servers are required by law to report all tips, but the IRS has suggested that as much as 40 percent of restaurant tips are not reported. If this is true, many employees are paying less income and employment tax than they should in a tipped environment. In a non-tipped establishment, employees receive wages which may or may not be as much as they earn in a tipping situation. Ideally, the non-tipped wage would create more predictability in employees’ income, eliminating the uncertainty associated with fluctuating tips from shift to shift. However, some will do better and some worse under a no-tipping model. Bonuses may be necessary to retain servers.

Calculation: Let’s take a look at a simple example of how the FICA tip tax credit works.

It remains to be seen whether the tip elimination trend will be a mere crest or a tidal wave of change in the restaurant industry. It is clear, however, that the business impact could be substantial, and restaurants would need to adapt practices accordingly. Even if restaurants and employees can thrive on a no-tipping model, how will customers react? Stay tuned to our blog in the weeks ahead as we explore the potential implications for players throughout the industry.

(via Fast Casual)


Danny Meyer's Hospitality Included Program Begins



In early October, Danny Meyer took the restaurant and hospitality industry by surprise, and announced that he would be getting rid of tips at all of his Union Square Hospitality Group's restaurants, such as, Union Square Cafe, Gramercy Tavern, Blue Smoke and more.

Today, his initiative will officially go into effect. The first restaurant to undergo the change is The Modern, located within the Museum of Modern Art in Midtown, New York City. Meyer hopes to stop accepting tips at the rest of his eateries by the end of next year.

Diners will expect to see increased prices on the menu. For example, lobster sausage, previously priced at $33, will now cost $44. However, customers in actuality won't be paying any more than before, because they no longer will be paying an additional tip. (The menus at The Modern have already been updated with the note: "The Modern is a non-tipping restaurant. Hospitality Included.")

Tipping has always been a hot button issue in the industry, but lately, the tide seems to have shifted towards being tip-free. Joe Crab Shack, a national chain, recently began testing no tipping at 18 of their restaurants. Others that have adopted the gratuity-free policy include, Per Se in New York City, Chez Panisse in Berkeley, Bar Marco in Pittsburgh, and Alinea in Chicago.

The practice has also been picking up in pace due to the growing demands of restaurant workers, especially, back-of-house staff. By dropping tipping, wages potentially will be more evened out across all employees.

Meyer stated in an interview: "We believe hospitality is a team sport, and that it takes an entire team to provide you with the experiences you have come to expect from us. Unfortunately, many of our colleagues—our cooks, reservationists and dishwashers to name a few—aren't able to share in our guests' generosity, even though their contributions are just as vital to the outcome of your experience at one of our restaurants."

See: Danny Meyer Eliminates Tipping from USHG’s Restaurants

(via Zagat)

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Danny Meyer Eliminates Tipping from USHG's Restaurants



On Wednesday, October 14th, Danny Meyer revealed that he would be eliminating tipping from his Union Square Hospitality Group restaurants. This huge announcement created shockwaves throughout the restaurant and hospitality industry.

The blank tip line will be gone, and patrons will just see one total. Meyer explained that service charges will already be accounted for in the menu prices.

The policy would first be instated at The Modern, which is housed inside the Museum of Modern Art, in November. The chef, Abram Bissell, had previously pushed for the change because it meant a rise in salaries for his employees, an increase from $11.75 to an expected $15.25. Higher wages would attract more qualified culinary professionals too. Meyer agreed and mentioned, "If cooks' wages do not keep pace with the cost of living, it's not going to be sustainable to attract the culinary talent that the city needs to keep its edge."

Meyer has been a part of the restaurant scene for 30 years now, and he, too, realized that the wage gap between front-of-house and back-of-house members have dramatically changed since he first started. He stated, "The kitchen income has gone up no more than 25 percent. Meanwhile, dining room pay has gone up 200 percent."

He plans to roll out the gratuity-free practice in the other restaurants within his empire, including Gramercy Tavern, Union Square Cafe and 11 more, by the end of 2016.

Meyer is not the first successful restauranteur to do away with tipping. Last month, Top Chef judge and fellow restaurant owner, Tom Colicchio, decided to stop taking tips during lunch service at his Flatiron flagship, Craft. It seems that both the customers and staff have been taking the new system pretty well. Colicchio said, "None of the waiters has quit yet, so that's a good sign."

(via NY Times)

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